Currently set to Index
Currently set to Follow

Starting a Wholesale Business in 2022: 7 Tips for Success

July 2, 2021

Wholesaling is the backbone of the consumer market in the US and in general, the entire world.

It is a business opportunity that presents infinite potential, huge amounts of money changing hands, and a level of scalability rarely seen in the world of business.

Sound interesting? 

Good, because only the most ambitious wholesalers can really hope to scale, make millions, and tap into that unlimited potential.

But how exactly does it work?

I’m Ippei, a master of all things online business, passive income, and local lead generation

And I’m going to take you through my seven step roadmap to starting a wholesale business in 2021.

Plus, I’m including the realistic startup costs and pros and cons of the wholesaling industry.

Let’s dive right in!

How to Start a Wholesale Business in 2021

4.5/5

Considering Starting a Wholesale Business in 2021? Here's What You Should Know:

Like a lot of business models, wholesaling is actually pretty straightforward. To get started, you will need to invest in large quantities of goods from a manufacturer, find retailers that need these goods, and sell them at a rate that is both affordable and allows you to turn a profit.

Start Up Costs

While this list is not a comprehensive compilation of every you need to start a wholesale business, it provides a snapshot of what you need to add into your business plan.

  • Licensing: $3,000-10,000
  • Franchise: $20,000-200,000
  • Office Space: $300-$3,000 per month
  • Telephone/Fax/Internet: Landline: $42 per month // Fax: $3-35 per month // Internet: $35-100 per month
  • Computer: $632-$733 
  • Warehouse/Storage Space: Warehouse: $6.53 per square foot // Storage: $190 per month
  • Vehicle for Deliveries: $8,500 
  • Marketing: 7-8% of gross revenue
  • Accounting: $150-$400 per hour  
  • Software Packages: $1,000
  • Automation Programs: $30+ per month 

Total Cost to Start Up:

Average: $113,956

Low: $13,882

High: $214,030

Annual Revenue of Established Tutoring Business

According to bizbuysell.com, the average annual revenue of this kind of business is: $22,000 - $14,000,000

Profit Margins of Established Tutoring Business

According smallbusiness.com.chron, the average Profit margin of this kind of business is: 15% - 100+% 

7 Step Quick Start Checklist: 

1. Other Forms of Wholesaling and Pulling the Trigger

Not everyone is meant for entrepreneurship.

But considering the fact that you’re here reading this article, I’m going to skip that conversation.

However, it’s important to note that not everyone is meant for wholesaling.

To put it simply, there are business opportunities that even the most talented businessmen shouldn’t pursue…

Start a Wholesale Business Wholesale Definition

So the first step in starting a business should always be deciding if it’s a match for your abilities and preferences.

But before we do that, let’s look at some other ways that you can enter this industry (sort of):

Manufacturer’s Representative:
  • Find manufacturers and work out a deal where you get a commission on bulk orders that you arrange.

For instance, a few cents on the dollar per each item sold is given to you if you approach the manufacturer with a good bulk order.

This is often done freelance.

Retailer’s Representative: 
  • Same thing but the reverse. You can approach a retailer and offer to get them a deal that works for them but that is cheaper than current options. Connecting the retailer with the cheaper manufacturer or distributor will give you a commission.

This is often done freelance but it is less common and more difficult than being a manufacturer's representative.

Manufacturer: 
  • Of course, you could also be a manufacturer yourself and sell your products in all different quantities to different retailers with different needs.

This is pretty rare simply because many manufacturers produce so much stock that it’s a waste of time to sell it in such low quantities, but it’s possible.

Start a Wholesale Business Manufacturing

I’m not gonna talk about any of those, but if they sound more interesting than regular wholesaling, look into them yourself. 

Now about wholesaling…

Wholesaling will require a good amount of capital, a warehouse or somewhere else with enough storage space to put your inventory…

And preferably some sort of mass cold-call outreach system. 

It will also require a knack for sales: more than is needed for many other startups.

Sales skill is required both to get good deals from manufacturers and to get the highest price possible from retailers.

You’ll also need to be on the phone constantly, as you’ll have a TON of different options between retailers and manufacturers to choose from.

In addition, you will need to do endless amounts of research to find clients and vendors in the first place, especially if you are tailored to one specific product or client.

Start a Wholesale Business YouTube Videos

The upside of this business is the big money you can make and the freedom that it can give you…

Considering you won’t be driving around to see people all that often, and most deals can be worked out over the phone.

No matter how strong you are or how good you are at sales and research, there will be times where it feels like there’s no end (to the sales process) in sight. 

There is, but it will take a lot to reach it and keep your momentum.

If this sounds like a major chore to you, then consider other options. 

It may not be that entrepreneurship is too much, just that wholesaling is too much.

There are other business models that are highly scalable, very profitable, and won’t require you to do nearly as much research or take nearly as many “no’s”. 

Lead-gen is one that I have personal experience with, and it’s freaking awesome in my personal experience, so you may want to check that out here.

2. Decide How You Want to Start

Still here? Great!

Now let’s get things going.

Almost all business models that you can possibly think of can be started in these next three ways, but for wholesaling, I think the decision is even more important.

Before I get into these three different startup techniques, I want to tell you why this decision is so important for wholesaling especially:

  • High amounts of initial capital are usually required.

  • People are wary of others in this space as so much money and product are switching hands. Even if your prices are the best, people will be suspicious - so becoming a trusted name can take a lot of effort.

  • Relationships are hard to find and develop in this space.

Start a Wholesale Business Initial Capital

Now remember those points and take a look at your options for starting up your company...

Build Your Own Company From the Ground Up: 

Starting from the ground up will cause the most stress by FAR.

Nobody has a profit motive to help you succeed, so you won’t really be getting much help.

It will be fairly expensive, and you’ll have to work your ass off to get things in motion.

In the long term though, if you do everything right, it’s also the most rewarding.

It’s the most stressful because it’s the most risky, but that also makes success the most meaningful.

Franchise Model: 

franchising takes the least amount of investment and is also usually the least risky.

The franchise that oversees your operation will have a profit motive to help you out so you will always have support that you can trust.

Franchising is basically paying to use a bigger company’s name and resources.

You’ll also run under an established name in the industry, so building relationships will be easier.

Start a Wholesale Business Wholesaling Definition_opt (1)

Each franchise is different, but they’re the same in a couple ways.

You will have “superiors,” you won’t be able to make your own rules, and you’ll have to give the franchise a certain amount of cents on each dollar you make.

Here’s a list of franchises if this sounds interesting.

Buy an Existing Company: 

This is the middle ground in a lot of ways, but it usually will be the most expensive. 

As opposed to building everything from scratch, or potentially using the franchise model, you’ll be buying the entire infrastructure of a company.

This means property, employees, and warehouses.

This also, however, means relationships, contracts, and assets/recurring revenue.

This can be a great option as you will suddenly own a company that has proven it has what it takes to make it as far as it did.

Pro Tip: 

Some people are serial entrepreneurs and will form a company just to sell it and move on to their next idea. Some people just get bored and some people want to retire without any business-related headaches. There isn’t always something wrong with the company at all.

But be warned - people don’t just sell companies on a whim. You’ll need to do a lot of research before handing over the cash.

Check out this page for a couple businesses currently for sale.

3. Choosing Your Niche and Defining Your Customers

When starting any business, you should always apply some degree of specialization.

Specialization is basically just narrowing your services, offerings, and target market down into something more bite-sized. 

While this is the key to procuring and maintaining relationships with clients (and becoming even more of an expert in your chosen sector), there are considerations:

You Can’t Get Too Specific:

If you run a wholesale business and you want to narrow yourself down into medical supplies, you may have a good chance of getting business…

But niching down further into something like PPE, syringes, or tools like scalpels would be better to start off with.

Start a Wholesale Business PPE Supplies

However, you may not want to get too specific - for example, only selling syringes that hold exactly 30mL of fluid and exclusively have a 2-inch needle.

Just selling syringes would be a great place to start for this example…

But only offering syringes that hold a specific volume with a specific needle length might present you with so few potential clients that you won’t make money.

You Can’t Be Too Generic:

As you can guess, finding your niche is a Goldilocks-type situation: not too narrow, not too broad; you want your niche to be just right.

Sticking with our medical supplies example…

You shouldn’t start out by offering syringes, scalpels, all types of PPE, plus X-rays and sanitary wipes. 

Start a Wholesale Business Niche Down

Some companies can offer everything under the medical sun, but it takes a long time to build the reputation and the capital required to move in that direction.

Offer Related Products:

It’s simple. 

If you sell syringes to hospitals, you shouldn’t also invest in selling tinted glass windows for 2013 Dodge Avengers to auto glass companies.

Networking will take longer (mechanics don’t usually know hospital administrators), and you will be forced to split your payment between two completely separate manufacturers…

Raising the per-item cost for each product you offer.

Analyze the Competition:

No matter how specific you are, you are not going to be the first person to see an opportunity. 

If you want to innovate, or to sell a manufacturer’s innovative product, then so be it (high risk, high reward).

Start a Wholesale Business

But always take a look at your potential competition. 

You can call them up and act like a buyer to see their prices, and you can research them and determine the scope of their operation, etc.

Competition signals a viable market, but in some cases, it may be smarter to just go down a different road.

4. Finding Your First Products and Understanding Paperwork

Once you have your niche and your ideal customer picked and have decided how to start your business, you have a clear vision and all it takes now is paving the path towards that vision.

This path can be paved in a number of ways, but the first step is always to find your first product and to understand all the licenses, regulations, and other necessary paperwork.

Start a Wholesale Business Wholesale License

Firstly, the paperwork. This is the boring stuff so I’m just gonna run through it as quickly as I can:

  • Register your business. Even if you are part of a franchise, you NEED to register your business. If you purchase another company, then you will need to make sure you are given full ownership.

  • Research, study, and complete all necessary licenses, permits, etc. Some things you’ll need are a state tax ID, a seller’s permit, a wholesale license, etc. Do your own research, as where you live can change your requirements.

  • Study the laws and regulations: this will usually impede your business, but it’s something we all have to deal with when running businesses. Study municipal, state, and federal laws regarding wholesaling to make sure you are setting up, organizing, and operating your business correctly.

  • Study contracts and contract law: this business will require you to draft, sign, and sometimes even notarize contracts. It’s important to come into the business already read up on how this all works if you don’t have prior experience. Bad wording in a contract can screw you over big time.

Remember that neither anything in this step nor anything else in this article is legal or financial advice.

Now let’s talk about picking your first product!

Finding your first product will involve a lot of price shopping.

Start a Wholesale Business Alibaba

You’ll need to contact dozens (or better yet, hundreds if possible) of manufacturers or larger wholesalers to find all of their different prices…

As well as how their price per-item decreases down as order quantities increase.

You can also visit places like AliBaba.com to view the prices and minimum order quantities (MOQs) of hundreds of different products from various manufacturers.

Pro Tip: 

Nearly every manufacturer that you can find on there will send you a free sample. They will almost always put your branding on their products as well and they’ll usually do this on the house, for a minimum order quantity, or at worst, a small fee.

You can also use directories like Dun and Bradstreet or more specific directories like this one.

5. Setting up the Infrastructure

Setting up your infrastructure is key for any business, but wholesaling has a lot of moving parts… 

So it’s not only important, but it’s easy to screw up.

Five Aspects to Wholesaling Infrastructure:
  • Shipping: cheapest, most sensible methods of shipping different products. You may want to find multiple options for the different types of deals you work out e.i air shipping, ground shipping, freighting, etc.

  • Labeling: the process of correctly labeling each package so that it reaches the recipient with as little hassle as possible. You can get creative here if you want to be appreciated even more, but this is more of a focus for retail companies (thank you cards, etc.).

  • Stock Keeping: having space to keep your stock before it’s sold. This also includes organization within your warehouse or wherever your products are kept.

  • Administrative Duties: this isn’t necessary when starting out, but having people to set up appointments, draft contracts, deal with paperwork and other headaches, crunch numbers, etc., is required if you want to grow.

  • Online presence: websites, directory listings, advertisements - basically everything that has to do with the internet.

All of the first three parts of your infrastructure can be taken care of by third party companies like Shipbob

Outsourcing services like this can be lifesavers to startup wholesale businesses but will cut down your profits.

Start a Wholesale Business ShipBob

Admin duties can be taken care of by you, especially when starting out…

But once you can afford it and once you feel it’s time to grow, you should definitely start to outsource your “headache” labor or hire employees to do it.

Online presence can be done by yourself or you can hire someone to do it. 

The look of your site isn’t as important as it is for many other businesses, but you always want to make sure it works and won’t strain anyone’s eyes to look at.

This tutorial that I wrote will help you with building your site and upgrading your online presence.

6. Taking a Sliver to Deliver

In order to keep your business running and to keep your income evolving, you need to keep customers happy.

To keep them happy, one key step to take is making sure that you aren’t overcharging.

But to keep yourself happy and to keep your business thriving, you also cannot afford to sell yourself short.

Finding that balance is just like niching down: a Goldilocks moment where you need everything “just right”.

Start a Wholesale Business

This will highly depend on:

  • Where you live

  • Where your business is registered

  • What you offer, who you sell to

  • How many people you sell to

  • What your competition looks like

  • Your operating costs

However, you could research the average profit margins for the industry through online resources or by speaking with other wholesalers.

Start a Wholesale Business Wholesale Business Ideas 2021

Here are two fool-proof ways to get the most out of your products:

  • Ask your manufacturer/vendor what their prices and margins are. The goal here is to take their profit and to increase it (since you’ll be a middle man, often selling smaller amounts).

They should be willing to give up this information because it can help you make money, which in turn will make them more money each time you run out of stock.

  • When selling your products, start high! Don’t start so high that you’ll insult the man or woman that you’re speaking to, but high enough so that you’ll be surprised if they go for it. If they continue the conversation, you should go closer and closer to a fairer number.

You’ll be able to gauge how reasonable your price is based on their response to it.

Each person is different, and many people expect to buy things for way too low than is fair, but this is a good method for reaching a fair price...

As long as you apply this method to multiple people.

I do think it goes without saying that you’ll need to have a number in your head that you absolutely cannot go below, though.

This will be based on how much you spent, plus a minimum profit that you should make.

Just remember that you have less leverage to negotiate when first starting out.

7. Finding Clients and Expanding Your Influence

Finding clients can be done in many ways. 

You can run PPC ads, do local or regional lead gen, write blog posts, and run mass cold-outreach programs. 

Start a Wholesale Business
PPC (Pay-Per-Click) Ads: 
  • Facebook, Youtube, Google Adwords, etc. These are always effective when done correctly. Unfortunately, you will have to pay a certain amount per client and competitors can waste your money by clicking your ads over and over again.

You also need good training or to hire someone with training to get results.

This can cost a lot in either time or money.

However, national ads for manufacturers/wholesalers may be very cheap depending on the industry.

Lead Generation:
  • As I always say, lead gen is your best bet. It’s so effective that it’s a good business model on its own. It’s all about making a site and ranking it locally or regionally for keywords.

With this, your demographic is perfectly targeted, once you are ranked you will get results permanently and without any more investment...

And you can pick and choose where to market based on competition.

The downside is you can spend weeks or months working on your site without results.

Learn how to do this here.

Blog Posts:
  • You can write posts for blog websites that will either discreetly or not-so-discreetly market your business and drive traffic to your website.
Start a Wholesale Business Woodpecker Cold Email
Mass Cold Outreach:
  • Cold emails are killer, plain and simple. You can use something like woodpecker to send thousands of emails per month for as little as 30 dollars monthly.

This is a really good fit for wholesalers. Just get your copy down and work on getting appointments and you’ll see results.

Copywriting is difficult though, so refer to this article if you have questions.

Close on those client contracts... sales are hard, man. 

It’s a process that you’ll learn over time, but I have three tips:

  • Be tough, but don’t be mean.
  • Make your prices fair.
  • Don’t talk too much.

Harvard knows what they’re talking about. Refer to them!

Start a Wholesale Business Salesman Harvard Business Review
Maintain relationships: 

Keep being respectful to your clients, keep offering them a killer service, and add in some extra flavor, like holiday wishes, business anniversary gifts, etc.!

Expand Your Influence: 

Get more space for more products, find better relationships, keep finding customers, start branding a little bit on social media like Instagram, get more salespeople, admin workers, etc.

Increase Your Profits:

Buy higher quantities, stop using third-party shipping services, and start expanding your selection of products.

Pros and Cons

of starting a wholesale business

Pros

High Value Deals

With wholesale contracts, there is a potential for extremely high-value deals. If you find a recurring client who needs to purchase consistently from you… That is a steady stream of reliable income. And this is one of the greatest appeals of the wholesale business model.

Manufacturing Partnerships

You may be able to find amazing manufacturers who go unnoticed by most of the competition.

Leverage Your Niche

You can compete with larger companies by starting out more specifically tailored to one product or type of product. Your niche will give you an edge! By leveraging an innovative niche product and close long-term, high-value deals with ease.

Cons

Low Profit Margins

This one really speaks for itself. Because you are a middle man between the manufacturer, and your customer who also has to turn a profit from their retail price… Your profit margins will typically be pretty small.

Lack of Control

Because you yourself are not responsible for the manufacturing of your products, quality control can be an issue. Which can lead to issues with customer satisfaction. Which is why high quality manufacturing partnerships are so crucial.

Eliminating the Middleman

Although not all manufacturers will sell directly to a retail store, it is becoming more common for larger retail companies to eliminate the middleman (aka you). Especially if they can afford to buy greater quantities directly from the manufacturer, rather than purchasing from you as a wholesale distributor.

High in Risk and Competition

The wholesale industry is not one to jump into lightly. It can be highly risky and highly competitive.

A Wholesale Business Can Work, but Lead Gen is Better... Here's Why:

I’m gonna be honest…

Wholesaling can be AWESOME.

While you do need to have space to hold all the stuff you’re about to sell, you can do everything from the comfort of your own home.

And while some people would prefer to meet you in person, most deals can be closed within a few phone calls.

Your duties as a wholesaler are also very straightforward and closing deals is largely price oriented.

So most clients won’t need to have much faith in you in order to move forward, but instead just need to know your price.

Start a Wholesale Business

You’ll no doubt have late nights, but you won’t be putting in much, if any, manual labor to get things rolling.

However, the harsh reality of the wholesaling industry is that it requires a considerable amount of startup funding, the profit margins are slim, and it’s a high competition business.

Without a shadow of a doubt, I can tell you that there are much more profitable and worthwhile business endeavors to consider.

And how can I say this?

You see, when I quit my 9-5 job in search of sustainable passive income, I tried everything from drop shipping to affiliate marketing.

But when I landed on the local lead generation business model, I knew I’d hit gold.

Local Lead Generation Online Property

Not only did it allow me to create a steady stream of viable new business leads for other small businesses…

It also took me from barely being able to pay my bills, to bringing in well over 50K per month in less than five years!

And one my online lead generation “properties” are established, they are virtually a self maintaining source of monthly income.

Limo Lead Gen

But I haven’t even gotten to the best part…

Anyone can learn how to do this!

And the startup costs and profit margins are much more appealing than the wholesale business model ever will be.

Trust me.

So if this sounds like it’s more your speed…

Click here to learn more about how we can help you get started with your local lead generation business model today!

Follow Me
Ippei Kanehara
Founder/CEO

$52K per month providing lead generation services to small businesses

Ippei.com is for digital hustlers, industry leaders and online business owners.

His #1 online business recommendation in 2022, is to build your own lead generation business.

Share your experience with us.

Use below if you want to remain anonymous.

Leave a Reply

Your email address will not be published.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}