My Precious Kid

As a business you may need to both BUY and SELL wholesale. I often get asked questions about how to start wholesale buying and selling. So this article will outline what businesses need to do in order to BUY wholesale. It will also discuss how to SELL wholesale if you make your own products.

BUYING WHOLESALE

NEW IN BUSINESS: If you are a new business that wants to BUY wholesale I suggest you do the following:

1. Register your business name with your state. I did mine online at OREGON.gov.
2. Get a tax resellers number so you can collect sales tax in your state.
3. Get a free EIN#. It is free and you do not have to have employees to get it. It gives you a number to use in business rather than giving your social security number out.  http://www.irs.gov/businesses/small/article/0,,id=102767,00.html
4. Get a separate business checking account. Keep business separate from personal money.
5. Get a separate credit card to use only for business product purchases. Find one that gives reward points.
6. Check to see if your city requires a business license even if working from home. MOST do now.

With those things done most all manufacturers and distributors should sell to you. Be aware that if your business is in your home some will not sell to you. A few require a brick and mortar store front. UPS will not give you business rates for shipments to your home either. I worked from home for 7 years then found I could not comply with the city home business rules any longer so moved to a retail location. Our city limits the amount of square footage a home business can use plus limits how many deliveries and pickups for business in any given week for a home based business. Now I get true business UPS rates and can buy some products wholesale that had not been available to me before. Make sure you business is legal with your city and county. It is not worth getting closed down if you do it without the right licenses and permits.

SELLING WHOLESALE

PRICING: Rule of thumb is if you want to sell wholesale then your cost plus labor times 2 equal WHOLESALE. Wholesale times 2 equals RETAIL. So if an item costs you $5 to make including if you paid labor to have it done. Then the wholesale price should be $10 and the retail price should be $20. However the only way to do that is to get your own supplies at the best wholesale price and to make large enough batches to keep labor costs reasonable.

MANUFACTURER vs DISTRIBUTOR: Most manufacturers sell at 50% off retail. A distributor that does not make the product sells at 25-40% off retail. Drop shippers usually sell at 10-30% off retail. Manufacturers usually have higher minimums and requirements to buy from them. Distributors are usually easier to get an account with if you are a small retailer. Some manufacturers require a brick and mortar store to get an account with them.

PACKAGING: If you are selling both retail and wholesale then the packaging should NOT include your website URL. That becomes a conflict for other retailers. Some manufacturers do it but it hurts the retailers you are selling to. I recommend having your company copyright and business name but not your URL.

WHO DO YOU SELL TO: When I sell wholesale to others I do my best to make certain that they are legally eligible to buy wholesale. If you do not set some parameters then you find individual customers trying to buy from you for personal use at those prices. Wholesale is for those buying product to resale in their business.  So require them to give you a business name and address, plus either a tax resellers number or EIN#. Check with your own state to see what they require if you sell wholesale. Many manufacturers will require proof of business and tax number be faxed in with their application.

MINIMUMS: Most all manufactures require minimum orders to keep individual from buying for personal use. You can either set a minimum dollar amount per order ($100 or more), or minimum per item (buy in case lots), or both. Some of my manufacturers have a $500 minimum each order plus a case minimum for each item. Distributors usually have lower minimums.

Since I am the manufacturer of my Child ID Kits I sell those wholesale at 50% off retail. My other 100 plus products I am a distributor. Those itmes I sell wholesale at 25% off retail. I charge a minimum of $100 per wholesale order but do not have a per item minimum. That way, small retailers can buy only a couple of each item to use and trial samples when deciding which of my items they want to sell. I recommend looking at manufacturer/distributors best sellers list when deciding which items to carry from their stock.  My wholesale program is described at http://www.mypreciouskid.com/wholesale.html

I am not an expert in this subject. And you will find businesses who buy and sell wholesale differently than outlined above. These are simply my best practice suggestions after 8 years in business both buying and selling wholesale. I hope they will be helpful to you in yo9ur business journey.

Written by Kay Green, founder of http://www.MyPreciousKid.com since 2001.
Copyright 2009

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