Q&A for How to Start a Distribution Business

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Question

What is paid up capital and what is working capital?

Wale Adams

Community Answer

Paid up capital is simply the amount of money a business received from its shareholders as investments. Working capital is the difference between current liabilities and current assets.

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Question

How many items should be offered in the first catalog?

Community Answer

It depends on the customers' demand. Don't try to purchase unnecessary inventory.

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Question

What is the usual arrangement with suppliers or manufacturers? Does the distributor pay first, or will products be on consignment and be paid to suppliers when sold?

Sailesh Kar

Community Answer

If you are starting a business for the first time, usually you may have to pay upfront. This is done to ensure your seriousness regarding the business. If you have some relationship with the manufacturer already, then it's possible you may be able to pay later.

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Question

How do people decide to get into this business initially?

Community Answer

Reasons can vary widely. For me, I was seeking a solution to a problem, and no one seemed to have one. After a considerable search I was able to locate only one solution which worked exactly as it was advertised and solved my problem. After purchasing some of this solution for my existing business I was contacted by the manufacturer asking if I was interested in becoming a retail distributor for my region.

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Question

How can I start a business without money?

Dale Gatlin

Community Answer

Hold a fundraising event. Invite business owners and potential investors. Make the event all about the products you want to sell. Information packaged up with a unique twist will get you the attention of investors.

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Question

Can the distributor get a monthly fee for the leg work of bringing in new retailers?

Community Answer

That depends on the way the distribution business is set up.

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Question

How do I survive a tough market?

Community Answer

In a tough market, you need to offer superior value to keep surviving. For instance, you may decide to lower your operational cost which will impact directly on your pricing for competitive edge. Additionally, you could offer free delivery and insist that there should be a base quantity say 100 cases for retailers to use the facility.

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