Does Wholesaling Require Heavy Initial Capital Investment?
Many businessmen think of starting those businesses which have highest profit earning ratio but once they start it they forget to actually pull it off through proper planning and management. Similarly, starting and managing a wholesale business is not an easy thing as this business involve a number of parties to deal with and is operated on large scale. Launching a wholesale business requires extensive efforts to arrange for its finances, facilities, logistics, and marketing.
When a wholesaler makes a decision to enter into the wholesale business, he comes across many questions like choosing the right supplies, business scope, target markets etc. One of the issues which capture his mind is to know how much initial capital investment is required to fulfill all these needs.
A lot of up front capital is required to start a wholesale business as wholesalers have to arrange for resources to build the facilities where they will be conducting their business. Secondly placing orders to the suppliers also require a lot of investment. In wholesale business profits are earned late as it requires series of steps which include outsourcing the manufacturing, then waiting for it, selecting the retailers and then selling to them. Once the wholesale supplies are delivered to wholesalers, they have to pay for them. This requires a lot of money as large quantities are involved. Wholesalers have to arrange for warehouses for the storage of wholesale merchandise before they are shipped to the retailers. This also requires heavy initial investment. But wholesalers can reduce this cost by taking a warehouse on rent.
Sometimes wholesalers are reluctant to take the risk regarding the damage of goods in transit so they take insurance policies which also require big money as the quantity is large. Besides that, wholesalers are required to pay heavy taxes and other fees to their government which also requires money. Wholesalers have to apply for licenses or other essential documents which again needs a good investment.
In addition to that wholesalers need marketing or advertising costs to bring their business in front of their targeted customers. If they don