Basically, being a distributor means that you get your supplies directly from the manufacturer, and then distribute those products to various dealers in your business territory after adding a profit margin to those products.
Running this type of business can be very lucrative and rewarding. However, there are a few points that you should consider before you start your distributorship business.
- Check out the manufacturer.
Look into the details. Their reputation should be clean in the market and their products should have a good reputation.
Talk to people who have dealt with them. They should be prompt when providing services.
- Know the market for the products.
They should have good demand in the market, and the profit margin on the products should be high enough to sustain your business over time, not just in the short term.
Check the sales figures of other distributors over previous years. Are their sales increasing every year? You may earn less margin on certain products, but your average profit over the whole product line should be decent.
- Read the terms and conditions.
Make sure you scrutinize the terms of business with your manufacturer. It should not be a one-sided agreement and should have certain points in your favor.
If one of you should choose to opt out of the agreement in the future, then there should be a clause that will allow you to do that after serving a month’s notice.
- Know the rejected-goods policy.
Your manufacturer should accept rejected goods and should also be willing to issue a replacement or credit.
They should also allow you to provide replacements to your customers immediately, so as not to hold their money hostage money if a dispute between you and the manufacturer should arise.
- Find out if the manufacturer offers training programs.
If the products are such that you will require technical training before you can sell them, then the manufacturer should provide that training for you and your employees.
The manufacturer should also hold regular distributor and dealer meetings so that everyone is always up-to-date about the manufacturer’s latest products and services.
- Know your competition.
Know your competitor distributors and observe their style of selling the products.
Find out their weak spots and come up with ways to exploit them. Know what prices they offer and offer lower ones or value-added services.
- Your office and warehouse location.
If your dealers are spread over a small area, then ensure that your office and warehouse are centrally located to facilitate delivery to your customers.
If they are spread out in several states, then ensure that your warehouse is situated near transport facilities so you can pack and send the materials as soon as possible.
If you make local deliveries, you may also need to maintain a small truck fleet.
Starting a small business as a distributor isn’t rocket science, but it does take work, efficiency and knowledge to become profitable. Keep the above tips in mind, and you’ll be running a successful distributorship before you know it!