How to Run a Distribution Business
The distributor or merchant wholesale distributor facilitates trade by assuming a product's title and legal ownership from its wholesale source for sale to resellers or to institutional or commercial users. Products can include durable goods, such as apparel and furniture, or nondurable goods, such as groceries. Those with sales and negotiation skills and a head for finding hot products can run a successful distribution business.
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Instructions
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Create a business plan that includes a thorough financial evaluation. Distribution company startup and operational costs will vary depending on the product sold. The business plan will identify a customer base of resellers as well as local vendors and suppliers.
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Contact the Service Corps of Retired Executives (SCORE) to find a retired distributor. He can provide a wealth of insight and resources on entering the business and may help you find a profitable niche for the new distribution company.
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Obtain appropriate business licenses from local and state agencies as required. State agencies will require licensing for distributing products in regulated industries such as bottled water, pharmaceutical, or agricultural items. For instance, the Kansas Department of Agriculture issues a Dairy Processor and Distributor License. Obtain appropriate general liability insurance to cover associated business risks.
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Consult an attorney or tax professional to address questions regarding the law and tax requirements applicable to your particular business situation.
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Buy an existing business or start from scratch. Both options entail a level of risk that is worth securing a business lawyer to provide expert assistance with the startup process.
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Secure a facility for operating the business and storing inventory. Keep costs low by securing an inexpensive facility "off the beaten path," or find a warehouse park that leases spaces at affordable prices. While distribution businesses are not found in shopping areas, choose a location that is close to the market being served.
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Purchase business office and warehouse necessities. Depending on the product, warehouse tools will include such items as pallets and forklifts. A delivery van(s) will also be needed. The standard office equipment will be desks, chairs, computers, printers, and file cabinets. Specialized software may be needed for such tasks as inventory control, client management, accounting, and bar-coding.
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Buy goods to sell to retail stores or other wholesale companies. Look for manufacturer closeout sales. Join distributor associations. They will publish newsletters and magazines that can serve as a great resource for finding merchandise and to meet other distribution business needs.
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Hire employees or plan to spend time on back-end operations, such as the warehouse setup and organization, shipping and receiving, customer service, and finance and accounting.
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Establish relationships with at least a couple of shipping companies like FedEx or the U.S. Postal Service. Most of the business may be local deliveries that can be made with your business truck. The Internet, however, enlarges the market and can mean obtaining orders from anywhere in the world.
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Tips & Warnings
Join the National Association of Wholesaler-Distributors.
