Sadie Keljikian, Express Trade Capital
Running a wholesale business is financially and logistically complex. There’s a lot to monitor and numerous variables can force you, the business owner, to think and act quickly to effectively manage unforeseen difficulties. Fortunately, most of these difficulties fall into a few categories of common problems that come up for small to mid-sized businesses.
Since these issues are common, solutions are readily
available, though perhaps not obvious to less experienced business owners.
Addressing them is just a matter of having enough experience to know how best
to do it. Here are a few examples of common hiccups for which new businesses
might not be prepared and what to do if they come up:
- Problem: you’re a clothing designer and you
decide to start producing and selling your designs independently. You have your
designs and samples ready, you’ve sold some pieces direct to customers online, and
you’ve even had promising discussions with local boutiques that would like to
sell your pieces. There’s just one problem: you’re running this business by
yourself and there’s no way you can produce the quantities the boutiques want
in the given time frame. How can you get
your business off the ground and establish a sustainable production structure?
Designers and inventors consistently run into the same
problem: how can I produce the required amount of my product by the time my
customer needs it without overextending my resources? There are a few ways to
handle this. One is to simply turn down orders you can’t reasonably fulfill using
your current production processes, but that means you’d miss out on
opportunities for growth.
Another approach is to hire a team to manufacture your
products on-site. This is an expensive option since it involves hiring new
employees and acquiring new equipment, but it allows you to control product
quality and directly and provides a foundation for increased output. As long as
the business doesn’t grow more quickly than your overhead can accommodate,
manufacturing on-site is a perfectly viable option.
Alternately, many designers and inventors choose to
outsource their manufacturing processes, which removes the need for additional
employees and specialized facilities. Some creators aren’t comfortable handing
their designs over entirely, usually because they worry that their design will
be plagiarized or that product quality will suffer. While quality and security
concerns are valid, sufficient research and vetting will indicate whether a
production facility is trustworthy. As long as you do your homework,
outsourcing is an effective and efficient way to increase production.
- Problem: a buyer at a big-box retailer contacts
you to place a huge order. Your production line is ready, but you soon realize
that the cost of fulfilling such a big order will leave your operational funds
severely depleted. You don’t want to pass up the opportunity to gain bigger
customers and expand your business, so how
can you fulfill the order without dipping into funds you need to run your
Many flourishing wholesalers lose traction because they pass
on big orders from influential retailers out of fear that they’ll lose equity
or acquire unmanageable debt. What a lot of new business owners don’t realize
is that there are ways to supplement business-related costs that don’t involve
expensive traditional-style loans.
One way to approach the issue is to apply for a line of credit with a bank or private financial institution. Just like a credit card, a line of credit allows you to defer expenses that might be prohibitive. As long as you and/or your business is creditworthy and you are able to pay on time, there is very little downside to securing a line of credit on behalf of your business.
Another option is to use alternative lending (or “alt lending”). Alt lending is a growing and thriving field in which lenders use creative financing methods, meaning that you don’t necessarily need perfect credit to receive funding. Private financial institutions who offer alt lending solutions can offer funding against purchase orders, invoices, equipment, and even unsold inventory. Most importantly, this method allows you to borrow small amounts as needed, rather than borrowing a lump sum and worrying that you’ll accrue excessive interest.
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