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How to Start a Wholesale Distribution Business?

 

Product distribution is a big industry, and getting into it requires lots of extensive research and brains. In the United States, there are roughly 300,000 distributors that recorded a combined annual revenue of $3.2 trillion. Despite the competitive nature of the industry, it still allows the new entrants to enjoy having a profitable business venture. With proper planning and strategizing, you too can hone your entrepreneurial spirit and become a successful distribution business.

 

If you want to start out as a wholesale distributor, this is the right time. Whether you’re a 9 to 5-er, a manager at the brink of downsizing, a white-collar executive who is looking to set his feet in the wholesale business, this is the right choice for you. You will be trading goods for profit, just like the other businesses. Modern-day wholesale distributors had evolved from the medieval times when it was customary to stand on a dock in the dead of night negotiating over a shipment.  

 

1 - Decide on what type of distribution business you want to run: 

 

Distributors are of two types; they are divided into two categories based upon the target market they serve. The first type is retail distributors who buy from wholesalers and manufacturers and sell directly to the end-user. The second type is wholesale merchant distributors who buy products from manufacturers and resell the products to retailers or other distributors. Choosing the right direction depends solely on the business environment and your goals. 

 

2 - Decide what product you would like to distribute: 

 

You could decide on a specific product, its variations, or offer a variety of products. Your passion and business goals will help you shape the decision, or it could be based on your experience. There are distributors who do not serve smaller, more specialized businesses, and there are some distributors who cater to both small and specialized businesses. This depends on your business goals and target market.  

 

 3- Mapping out a business plan:

 

This is one of the most intricate and vital parts of starting a distribution business. Without mapping out a business plan, you do not know your objectives and goals; thus, you cannot make important decisions. It is important to layout a business plan for your distribution business as it will allow you to follow a direction towards your goal. This plan involves the type of distribution you will be doing, your target market, shipping method, and a general one-year strategy.

 

4 - Contact manufacturers or wholesalers for sourcing products: 

 

You will need to find sources from where you will buy your product. To locate the manufacturers and wholesalers, contact the National Association of Wholesaler-Distributors, or you can take the help of an online B2B source. Once you've found a suitable source for the desired product, it's time to place the first order. Do not purchase a lot of inventory in just the first month; keep the risk of loss to a minimum. Products with short shelf life should also not be purchased in a big amount. 

 

5 - Estimate your startup costs:

 

In addition to a well-thought-out business plan, you are also going to need some idea of how much money you are going to need to get your business up and running and how you will get that money. As a wholesale distributor, your biggest expense will be in buying inventory. Your startup costs vary depending on what your business is intending to sell. You will also need finances to invest in a physical space for the office and warehouse if needed because heavy machinery like forklifts can’t be parked in your parking lot. The start of online-based businesses has created a vast number of opportunities for distribution businesses like drop shipping. 

 

6 - Make it official by getting your business licensed and registered:

 

You will have to register your distribution business with the name of your company, the name of your city or county business office. Other legal steps may vary based on your country’s laws. To get your business started, contact your local SME Business Administration office for more assistance.

 

7 - Form your company legally:

 

If you're planning to operate your company as a corporation, LLC, or any other type of company, you will have to legally create the company before starting your business. Check with your country’s regulations and check if you need to create an operating agreement or another type of document. Gather any partners you need to start your wholesale distribution business for this venture and have them sign any legal documents. Legalizing your company is for your own benefit. The main advantage of forming your company legally is that your finances will be considered separate from your company. This reduces the risk of being sued or when/if your company goes into bankruptcy.  

 

8 - Figure out a way to sell your products:

 

This, too, entirely depends on who you are targeting and what kind of products you’re selling. In both these cases, your end goal is to brand your business to potential customers who will buy your products. From marketing, branding, and advertising, leave no stone unturned. Whatever it takes from meeting store owners to search engine optimization, every technique will take your business to new heights of success. Put together a marketing plan so that you can promote your goods to potential businesses. In the initial years, you are going to have to spend a lot on marketing to establish a reputation for your business. 

 

9 - Funding your business:

 

With a relatively low startup cost, you may be able to purchase inventory with whatever little you earn in the initial days. More expensive startups require business loans. However, smaller businesses can sustain well with little funds. At the start, you might have to cover the expenses from your own pocket. Once the business starts to generate enough revenue to cover the cost that occurs, you can consider your business to be a running and successful one. The struggle does not stop there, but once a business starts to cover its own cost, it is considered a big leap in the right direction. 

 

10 – Go Digital: 

 

Nowadays, when customers are thinking of making a purchase, they look the business up on the internet. The legitimacy of a company mostly depends on its online presence. The quicker you digitalize your company, the better. Once you have registered a website in the name of your company, your business will start to gain traction in the name of branding. The website can also display your product catalog along with prices, location of the business, contact information, and other features relevant to your business industry. 

 

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