One of the toughest things to do in business is to survive in the wholesaling industry. When you're selling goods at their lowest possible price point, it's going to be difficult to make a steady profit. Your margins will always be razor thin, and one bad interaction with a customer can have a seriously negative impact on your business.
The goal should be to prepare for the challenge of making a profit in wholesaling and overcome it.
There's no reason to hide from these difficulties - the challenge you face in wholesaling is a fact of life, and you might as well be honest with yourself about it. The goal should be to prepare for the challenge of making a profit in wholesaling and overcome it. The price crunch is coming; you need to have a plan.
It's tough to find profit margins
There are many inherent challenges you'll face in wholesale finance, but the primary one is this - profit margins are tough to come by. According to The Business Bakery, there's usually not much of a gap between how much it costs to make your product and how much you can make selling it.
"I told them I sell my pieces for $150, and they said they'd buy from me for $75," one jeweler said of a wholesaling arrangement she made. "How does that work? Each piece costs me $75, so I won't make any money. I'd like to sell to the retailers, but how do I make it work for me?"
Strong customer relationships are key
Even if you do manage to find a slight profit margin, either by making your products more cheaply or selling them for more, there are still challenges. Dynamic Business emphasised that if you have trouble managing client relationships, that will hurt you financially. That's why wholesaler David Schwartz says he keeps detailed records on all communications.
"Every contact we have, such as telephone or fax, is monitored," he said.
By keeping in close contact with customers, you can ensure steady business and remind patrons about the importance of paying debts on time. This should minimise your need for alternative finance solutions.
Need some help getting capital?
With all of the above said, there will still sometimes be situations in wholesaling where you have trouble making ends meet. Maybe you're not making enough sales, or perhaps those who are buying aren't paying you on time. In either case, the challenge is to get the working capital you need another way.
At Cashflow Finance, we have a suggestion for that. We offer debtor finance solutions that can help your company overcome rough patches with cashflow. If you've got money tied up in your debtors' books, talk to us today about getting an advance of the cash you need.