There’s nothing quite like starting your own business to enrich your life personally and financially. The road from start to finish is sometimes a bumpy one. The first two years of the wholesale distributorship’s existence will be the “learning” years, when you experience the ups and downs of being a new business owner in a new industry.
On the positive side, there are already plenty of entrepreneurs that tried the wholesale distributors that and are now overflowing with advice and inspiration that will help you reach your goals. Here are a few thoughts to keep you going through the startup phase.
Because every wholesaler plays the middleman position between manufacturer and distributor, the real challenge lies in leveraging that position to your best advantage. While it may appear that you’re powerless being stuck between the two, there’s also a “glass is half full” way to look at the relationship. As a wholesale distributor, it’s up to you to make the other two businesses work in sync: You’re helping the manufacturer get its products to market, and you’re helping the customer obtain the products he or she needs to run a business.
While playing that important role, one of the major mistakes a wholesale distributor should avoid at all costs is the overextension of credit to customers. This tends to occur when one or more of your customers demands extended payment terms on their invoices, yet your manufacturers are demanding their own payment terms on the other end. You can avoid this by being diligent about checking credit references, meticulous when explaining your payment terms to new customers, and careful about not letting your receivables become too old, or “aged.”
The other part of the credit issue is the customer who buys too much and leaves you “overexposed” (meaning one particular customer owes too large of a percentage of your receivables). You can avoid this by setting an appropriate credit limit upfront, then reviewing the customer’s account on a twice-yearly basis (or whatever time frame works best for you). Credit limits can then be increased based on the customer’s payment history.
Clearing the hurdles
One of the biggest challenges of distributors is minimizing the time between receipt of a customer order and receipt of the goods from the manufacturer or supplier. Not getting product from our suppliers on time is a constant challenge, particularly on popular items that her customers buy in bulk. To work through it, you not only pressures suppliers to fulfill orders faster but also provides realistic time frames to customers.
You really drill it into our staff, teaching them how to handle both satisfied and difficult customers.
Last bit of advice
Pay attention to consumer tastes and buying shifts—both of which can quickly derail even the best laid business plans. Keep tabs on economic changes, what people are willing to spend, and other trends that could significantly impact your business.