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If you’re an entrepreneur who wants to start a business and make a profit, getting into wholesale distributorship can be a great choice As a wholesaler, you’ll provide products to other companies for a profit. It can seem overwhelming, though, to think of everything that goes into how to start a wholesale business: financial planning, a clear business plan, sourcing items, and finding space are just the beginning steps you’ll need to figure out.
If you’re wondering how to start a wholesale business, don’t worry! We’re going to go over the early steps for starting a wholesale business. There’s a lot of planning involved and it might take some time, but in the end, you’ll be happy you took the time to do things right.
Before we get into how to start a wholesale business, let’s take a look at what exactly a wholesale business is. If you’re starting a wholesale business, you’re essentially starting a business that buys items in bulk directly from the manufacturer, keeps them in a warehouse, and then sells those products to other businesses. Then those businesses take what they bought from you and sell it to customers.
You might be most familiar with companies like Costco or BJ’s. While they’re not traditional wholesalers, they get to sell home items in bulk or at low prices specifically because of the wholesale model. Starting a wholesale business can be lucrative if you’re thoughtful about what you’ll specialize in, your costs, and the lifecycle of your market.
Now that we’ve clarified what a wholesale business is, we can get into the first steps you should take when starting a wholesale business.
There are many directions you can take your business in when you’re researching how to start a wholesale business. You’ll probably want to be a wholesaler that focuses on one group of products or another, instead of trying to manage wholesaling different types of goods. There are plenty of options out there and you might already have an idea of what you want to sell.
Some options include being a wholesaler of building materials, deciding to sell home goods and food items, or maybe you’re interested in wholesaling electronics like televisions. Whatever it is you want to sell, you should do some research to nail your product offerings down before moving on to the other steps.
The second step on our how to start a wholesale business list is to come up with a business name and to choose a business entity. You want to make sure that your business will have a unique name that isn’t already taken by another business out there. To do this, you can usually check with your state’s Secretary of State business search page. Many allow you to search business names online to see whether the name you want is available.
You should also choose a business entity. Different entities or business structures have different benefits they offer. Some wholesalers operate as an LLC, which shields them from personal liability while providing the option to be taxed either as a sole proprietor or corporation. Some might find it beneficial to register as an S-corp for tax purposes. Whatever you choose, first consider whether you want your personal assets protected from any legal action the business might face. You may want to consult a business attorney or an accountant to help you figure out which entity will be most beneficial come tax season.
This step includes much of the heavy lifting of how to start a wholesale business, but if you completed Step 1 and Step 2, you’re probably pretty prepared for this.
When you’re writing a business plan for your new wholesale business, there are some things you should be sure to include. Your business plan can be written from scratch, using a business plan software program, or come from a business plan template.
Whatever you choose, be sure that your plan includes a summary, an overview of the company and structure, and an in-depth market analysis. The market analysis is key because it shows whether or not you’ve done research to figure out if there is enough of a demand to keep your business running. A lack of market demand is one of the biggest reasons small businesses fail.
Also, list some manufacturers you might be working with and their prices. This is important for you creating a cost analysis and estimating when you might turn a profit to start making money.
When it comes to how to start a wholesale business, licensing and permits will be an important part of your research process. Laws about this vary by state. A wholesale license can have different names in different states; some call it a “resale license” instead because it allows you to resell goods.
Check with your state’s tax office, which you can find here, about how to obtain a wholesale license. You can also check with your Secretary of State’s office for any other types of business licenses or permits you may need.
You’ll also want to apply for an employer identification number. If you’re starting a wholesale business, you’ll need it to file taxes among other things.
You can apply online directly on the IRS website, or you can apply by fax or mail. Applying online is quick and you can get your EIN in a matter of minutes. Not all entity types are required to have an EIN (sole proprietorships that don’t have employees file taxes using their social security number) but it makes running your business easier and will be necessary to do things like open a business credit card.
While the steps above are helpful, they’re just a start and there’s plenty more you’ll have to do when you’re learning how to start a wholesale business. This is where planning will get specific, since the logistics you’ll have to figure out before starting your wholesale business will vary depending on the specifics of your business plan, location, budget, who you’re doing business with, and what you intend to provide. These include, but are not limited to:
After you’re done looking into how to start a wholesale business, you should still try to think of more lucrative ways that you can continually grow your operations. If you’re complacent with your business goals, it’ll be easier for a competitor to swoop in and overtake you.
Here are five ways to ensure you can flourish after starting a wholesale business:
If you want to increase sales and grow your overall business when starting a wholesale business, you can think about expanding your product lines or who you serve.
For example, if you’re a specialty wholesaler that specializes in providing retail products, you could start offering items to different types of merchants. Or, if you’re a general merchandise wholesaler that primarily offers electrical supplies, you could start selling other resources, like plumbing materials.
These are just a few examples of how you can increase your wholesale business’s product lines to include new options. Ultimately, you’ll need to listen to your customer base and see where you could better meet their needs. By doing this, you can develop your company and ensure that you’re taking into consideration what your existing customers care about.
Another way to grow your wholesale business is to invest in new small business marketing efforts. If you don’t promote your business’s services, you can’t expect your customer base to grow. Similarly, you also aren’t going to benefit if you keep trying the same types of marketing, only to end up with no results. Instead, conduct deep research about your ideal customer demographics, and determine the types of marketing efforts that will attract them.
Think about these kinds of tactics when you’re starting a wholesale business:
If your wholesale business location is small, with limited room for necessary equipment or technology, or is an inconvenient area, it might be time to move to a better location. In addition, you could even open an additional location. By having a new operating location for your wholesale business, you’ll likely be able to produce more wholesale goods, which can, in turn, lead to more sales.
To expand your wholesale business, you should consider hiring additional employees. This could be done by hiring more individuals for an existing team, or creating a new position that will likely lead to improved productivity and increased sales. Below, we’ll list a few different types of wholesale positions that you could consider hiring:
When you’re hiring your first employees, you should ensure that the roles you’re looking to fill are necessary and will help your business grow. For example, if you’re hoping to attract more customers, expanding your sales team makes the most sense; but if you need to generate more orders faster, you might need to recruit additional truck drivers instead.
Having state-of-the-art technology to help improve business processes is imperative. Your business will benefit a ton from having up-to-date tech that can help you grow:
Whether you’re just learning how to start a wholesale business, or you’re looking to expand your existing operation, these tips should help you establish a solid base for your company, and give you ideas about what you can invest in to increase profits. Although it can be daunting to take these steps, you’ll be thankful you did once your wholesale business is thriving!