How to Start a Wholesale Business: Vital Things to Consider

Posted 4 years ago by Max Komonov

Do听you dream of听leaving your current job? If听so, you鈥檙e not alone. found that 37% of听those currently employed are thinking about quitting their job or听are already actively looking for听another role. are quitting their jobs to听start their own business.

Generally speaking, over 48% of听small businesses are in听the听retail industry. One of听the听ways to听take advantage of听this trend is听to听start a听wholesaling business. This type of听business model allows you to听sell goods in听partnership with a听company that sells large quantities or听other supply chains.

Can a听Wholesale Business Be听Successful?

released a听wholesale industry sector profile that clearly shows wholesalers can be听successful. What鈥檚 more, they found that small businesses saturating a听local or听specialty market have the听highest sales (outside the听50听retailers that make up听about a听quarter of听industry sales totals. In听total, there are a听little over 400,000听wholesale retail outlets in听the听US. That is听far from a听saturated market.

Wholesale businesses offer much more stability than retail establishments. The average profit margin for听wholesalers has been for听well over a听decade, showing the听validity of听the听industry. According to听one survey, the听vast majority of听wholesale businesses are optimistic, while only just over 26% of听them claimed the听pandemic had a听significant negative impact on听their business.

Wholesalers also have fewer start-up and听operations costs, as听much of听the听process is听initiated and听completed by听the听buyer. That gives you time to听dedicate to听growing your customer base, retaining customers, and听simplifying your supply chains to听increase profits.

Things to听Consider Before You Start a听Wholesale Business

There are a听lot of听things to听consider before starting a听wholesale business. The first and听most important is听deciding what products you will sell and听how you will sell them. Ask yourself these questions before jumping into business plan development.

Will you sell a听variety of听products, one specific product category, or听will you be听a听specialty wholesaler with a听smaller, local target market? Keep in听mind that specialty wholesalers have bigger profit margins but fewer potential customers. But the听Dun and听Bradstreet report suggests that specialty wholesale businesses are the听most profitable.
Who will be听your target market? Will you market wholesale prices directly to听end consumers or听supply local businesses?
How will you be听shipping goods to听your customers? An听easy and听accurate order fulfillment process is听vital to听a听successful wholesale business.
Will you maintain warehouse space or听look into dropshipping? (require different start-up requirements.)
Where will you sell your products? On听an听online store, social media, a听brick-and-mortar location, or听a听combination? 51视频 offers fully integrated online stores for听wholesale businesses from small to听large.
How will you sell your products? Will you use online marketing, local marketing, or听both? The nature of听wholesale businesses makes it听easy to听build a听customer base. 51视频 offers a听variety of听solutions for听small and听large wholesalers that integrate with your websites and听other media.
How will you attract new customers and听encourage them to听buy large quantities?
How will you track inventory from supply chain to听end-user? 51视频 integrates with your inventory system to听keep it听up听to听date, even when sales are not completed through your online store.
Will you buy from wholesale suppliers or听directly in听bulk from manufacturers? The higher up听you are on听the听supply chain, the听bigger your profit margins.

Starting a听Wholesale Business Step-by-Step

While it听can be听tempting to听jump feet first into building a听website, setting up听a听supply chain, and听marketing to听customers, you have to听do听the听real work of听business planning first. Starting with a听business plan outline from SCORE or听the听Small Business Administration. The business plan will help you work through the听process of听preparation for听opening your online store successfully.

Your first task will be听to听determine how you will organize your business. The Small Business Administration has some great information on听the听differences between different business models such as听sole-proprietorships, LLCs, and听corporations. This may determine what you have to听work with when it听comes to听wholesalers.

Then, follow these steps you will be听able to听start a听successful wholesaling business.

Step 1:听Make sure your wholesaling business idea is听viable

Different products are needed in听different parts of听the听country, and听as听such you need to听make sure that your business will be听able to听compete and听take part of听the听market share. And there are some industries in听which specialty wholesale will be听difficult to听achieve.

For example, unless you live in听a听fast-growing area, you鈥檙e not going to听get much of听the听market share as听a听specialty wholesaler for听commercial kitchen equipment. Established restaurants already have supply chains in听place, and听it听can be听impossible to听sway them toward using your company. Make sure that your local industry isn鈥檛 an听already oversaturated market.

To听validate that your wholesale business idea can be听successful, you鈥檒l need to听do听some solid market research. Market research will tell you demographics and听other information about your target market and听their needs. What target market is听more likely to听buy larger quantities at听a听higher price? This research will also tell you if听the听industry you want to听serve locally is听already an听oversaturated market.

Step 2:听Research wholesale distributors and听choose a听wholesale supplier

There are a听lot of听wholesale distributors out there to听choose from, and听it听can be听overwhelming to听think you have to听research them one by听one. If听you are better able to听gauge business relationships in听person, you might consider attending local trade shows to听get in听touch with manufacturers and听suppliers.

When evaluating wholesale dealers it听is听a听good idea to听check reviews from other wholesalers to听verify their reputation for听customer service and听order fulfillment. You should also make sure that the听wholesale distributorship you choose offers quality merchandise at听a听fair price.

Step 3:听Determine start-up and听operating costs and听how you will cover them

Your start-up costs will include fees for听licensing, insurance, and听other legal requirements; lease terms for听warehouse space, your initial inventory, your initial marketing, and听business launch efforts, and听hiring employees. Don鈥檛 forget start-up marketing costs, including your online store and听advertising, as听well as听ongoing marketing costs.

Once you have that number, move on听to听your anticipated operating budget. Operations should include shipment of听goods to听retailers or听consumers, cost of听goods sold, employee wages and听benefit programs, ongoing warehouse space rental or听maintenance, and听anything else that you need to听operate your business. SCORE recommends that you set aside at听least one year of听operating expenses before launch.

Next, you will need to听figure out how long it听will take for听you to听break even. Part of听this depends on听your current financial situation, but sales forecasts also play an听important role. When you forecast reasonable sales targets you will have a听plan for听success as听well as听an听idea of听how much capital you need to听find to听make your wholesale business a听reality.

Step 4:听Meet legal requirements

Legal requirements for听your wholesale business will vary depending on听what states (or countries) in听which you will operate, where you will ship, and听what type of听products you will be听selling. As听a听general rule, you will need to:

Establish your business legally by听registering your business name (DBA) and听applying for听an听employer identification number. If听you are setting up听an听LLC, S-Corp, corporation, or听nonprofit, there may be听other legal requirements before you can launch.
Get your local business license, wholesaler license, and听other licensure or听insurance requirements in听the听states in听which you will operate. Also, check for听local tax responsibilities on听retail products.

Step 5:听Implement your operations and听marketing plans

During your business planning stage, you should have developed operations and听marketing plans that describe exactly how you will operate and听what marketing methods you will use. That information informs your start-up, operating, and听marketing budgets, all of听which are important to听determining the听financial situation of听your business.

Implementing these plans and听launching your business is听the听final step to听getting started. 51视频 makes it听easy to听take your business from idea to听launch and听beyond. Once you have everything set up, your business should run fairly seamlessly.

So听there you have it! How to听start a听wholesale business. We听hope our words to听the听wise have helped you get started, or听at听least find some inspiration.

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About The Author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.

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