When it comes to starting a business as a wholesale distributor, or scaling a business to include it, it’s essential that things be ready to start running as soon as operations begin, which is where a wholesale business plan comes into play. Wholesale plays an important role in the supply chain of a retail business. Starting operations without the right preparation can cause major problems to pop up almost immediately.
Most prospective business owners usually understand that a business plan is essential for starting a business. However, it’s often treated as a tool for acquiring funding for the business. The US Bureau of Labor Statistics indicates that 1 in 5 businesses doesn’t make it past the first year of operations. Another 10% fail after the second year. Some of the commonly cited reasons include a failure to properly assess the market, not enough financing, and even business plan problems. Here, we’re going to help you gain every chance of success with a comprehensive guide to your wholesale business plan.
Business plans are commonly used for acquiring funding when starting a business. Although there are alternative options, such as micro-lenders and peer-to-peer lending platforms, most wholesale business owners are going to look to banks for their initial loans. They are a little less flexible than alternative lenders, but they are often able to lend more than you might find elsewhere. Having a proper business plan, stating the goals, mission, and functional operation of the business is essential. But what else does a bank look for when giving a loan?
Banks aim to lend to business owners who have sensible and realistic goals for the funds they plan to borrow. As such, stating how much you want to borrow and how you intend to spend your finances is key. This makes it easier for the bank to assess the chances of seeing their funding repaid.
That isn’t the only factor that banks are going to take a close look at, however. Business owners should also take a look at their credit report and score, to ensure there are no false reports negatively affecting their chances of borrowing. Furthermore, if the business is already in operation, the bank is going to want a close look at any existing financial records. They will always look to check your cash flow statements, balance sheet, and income statements to see the existing financial stability of the business.
Like any plan, the business plan should set the road ahead for your business, highlighting the goals and objectives that can ensure you’re always on the right track for growth. It’s much easier to successfully build something when you know what it is that you’re trying to build. Your objectives and goals should be based on the vision you have of where you want your business to be, laying out specific steps to help you get to that point. Goals are the long-term indicators of your success, while objectives are the detailed steps in place to help you reach those goals.
Effectively, your goals tell you where you want to go, and your objectives will teach you how to get there. Both should be SMART (specific, measurable, attainable, realistic, and time-bound) to ensure that you can realistically reach them and to clearly define when they have been met. Goals and objectives can be set in all realms of business, including revenue, profitability, customer service, customer retention, and more.
Examples of some objectives and goals you might set for a wholesale business might include:
Your business plans are going to demand a much closer look at your market, what is financially necessary for the success of your wholesale business, and a mission statement that aligns with the type of business you intend to run. You want to create a road map for the company’s future that can ensure you’re making the right decisions and using your energy and funding in the most strategically viable way possible, so sitting down and seriously considering your objectives and goals is essential.
For an initial business plan, it’s easy to keep the scope of your objectives and goals relatively modest. Many will focus on what comes in the next year or two years after starting a business with the intention of giving themselves the healthiest beginning possible. However, your short-term goals and objectives should be supported by and consistent with a long-term strategy based on the kind of business that you want to run five, six, or seven years down the line.
To that end, you should make sure that you have a strong mission statement before you start laying out your goals and objectives. Your mission statement should answer the questions of what your company does, how it does it, and why it does it. From that statement, you can derive your long-term goals, as well as the objectives that help you meet them. If you can’t find long-term goals that fit your mission statement, then it’s time to rethink what your business is about and rewrite it accordingly.
While short-term goals and objectives tend to look more at the individual indicators of growth and success, the long-term plan should look at what you want the business to look like in five or more years. Think about what business model you want to be running, how much revenue you will have, what your supplier relationships will look like, what market you want to be established in, and more. Cover every area of the business that you have a specific vision for, then start laying out the SMART objectives that can help you reach that in the long-term.
A business plan does a lot more than dictate where you want to go, it also lays out the business structures and processes that will help you get there. The organizational structure section of the plan is going to look at the organization and management of the business, members of that structure and their duties, and where they belong within certain teams and chains of command. It’s effectively a summary of how a business is run, who does what, and who they answer to. The structure itself is going to focus on the hierarchy within the team, but you should also open with a description of who is in the management team and what their qualifications are, especially if you want to use your business plan to source funding.
Main divisions of wholesale businesses may include the following organizational departments:
Needless to say, the organizational structure of a wholesale business can change drastically from business to business.
As mentioned, when it comes to seeking funding, your bank (or lender of any kind) is going to want to know how you plan on using their funding. It is often a key question in determining whether a bank will lend to you or not. As such, you should have a clear idea of how much money you need to borrow and where it’s going to be spent before you make the application.
As you write your business plan, you should be developing a key idea of where you plan to invest. Try to simplify the priorities of the funding. Rather than detailing a laundry list of what you want the funding for, try to allocate percentages of funding levels for different aspects of the business (inventory funding, hiring, and fleet purchasing/leasing) for instance. Have reference materials breaking down the costs incorporated in each that the bank or investors can take a closer look at, too.
As well as writing why you need the funding that you’re applying for when starting a business, you should also consider putting down plans for how you’re going to repay the lender you’re applying to. Including a strong repayment plan in your business plan gives them peace of mind that fulfilling your financial obligations to them is a serious consideration for you, which can increase your chances of funding success.
A part of a larger supply chain, wholesale distributors rely on a healthy ecosystem of partners to drive their own success. This can include the potential buyers they end up forming a relationship with but should also include their own suppliers and manufacturers providing them the goods that they sell. If you’re serious about starting a business in wholesale, you’re going to need to find these partners early. If you’re planning on applying for funding from your bank or investors, you’re going to want to find some before you’ve finished writing your business plan.
You don’t need to have formally made any agreements before your application and, indeed, you will have a tough time doing so before you’ve had the opportunity to establish your operations. However, showing that you’ve had meaningful conversations with some of your potential partners is a good indicator to lenders that you have an idea of how you’re going to find both suppliers and buyers when things are up and running.
Research will play a key role in finding retail clients and partners. Making a note of the potential partners in your market who aren’t yet served by someone providing what you do (which is easily done by looking at their inventory) is a start. Reaching out with pre-emptive questions about their potential interest in the products you plan on selling could help open an early line of communication. Building relationships and correspondence through networking and past industry experience can also help establish the potential partnerships that most lenders are going to keep an eye out for, as well.
Your financial data is important for more than showing potential lenders how you plan to use your funding and to repay any loans. It plays a key role in determining the financial viability of the business as a whole. It can help you determine where you need investment, identify key costs of running a business (which could be reduced in future), and gain a better understanding of your cash flow and aspects that could affect it, such as whether your business will have seasonal cycles. Simply put, a business plan without a financial plan isn’t very useful.
There are four key steps to preparing your financial data, as well as statements you should have to summarize them. They are as follows:
Naturally, the financial data for an already established business is going to be much more detailed than for one that is just starting up. However, regardless of what point your business is at, currently, this is an essential step for making applications with funding institutions as well as helping you understand the financial needs and liabilities of your business.
The more proven your business idea, the better it is for you. Not only do potential lenders look for an established idea that they can reasonably expect to pay off in time, but it’s much more effective to have a solid idea of your own business’s viability before you start investing too much time and effort in it. This is exactly what market research is all about: finding the evidence to support your business’s existence and purpose.
There are multiple steps to take when conducting market research for your business. The first is in customer profiling, thinking about who your customer base is, what demographics they fall under, and where you’re likely to reach them. The next is to carry out competitor analysis. Who else in the market offers what you do right now? What signs of growth and success they show and what differentiates your business from theirs enough to offer you a space in the market? With that information in mind, next, you should carry out customer surveys, asking them about what they’re looking for in the market, whether current providers offer what they’re seeking, and what they feel like is currently lacking amongst their choices. Business advisors, trade bodies, and other industry researchers should be able to provide more details on market size, industry benchmarking reports (to compare with your own plans and objectives), and location demographic details. All of this data should be included in your plan specifically to show evidence that there is room for your business in the market.
At R+L Global Logistics, we have the experience of serving global supply chains in all kinds of specialized and general wholesale distribution fields, so we’re in a prime position to offer consulting to business owners getting into the market. We can provide the experience, insight, and data that can help support and transform your plans to offer you the best chance of success you could hope for. From determining your potential customers to helping you understand the best way to sell products within your market, we can lend the proven expertise to match your vision and efforts.
In addition to providing you with knowledge expertise in business development, we can fully manage your supply chain. Getting your products to and from where they need to go, can be one of the most costly and time-consuming aspects of running a wholesale business. Having reliable partners to manage this process can save time and money and improve business efficiency.
No matter what stage of life your business is at, we’re here to help you with your order management and everything in between. Contact us today and we’ll get you to your next steps.