7 Things To Consider Before Starting A Distribution Business

It’s no secret that over 3 quarters of all start-ups fail within the first three years of operation, so how do you ensure you end up in the lucky quarter?

Here are 7 things optimistic entrepreneurs need to consider before they leave their conventional 9-5 jobs and venture out on their own to start a new business.

1. Work Towards A Clear Objective

Starting a new business is one of the most stressful and frustrating things you’ll ever have to do in life. You have to put in long working hours for the first few years, deal with major financial problems around every corner,  and face plenty of setbacks and anxiety with the fear that your plan might not work. 

It’s certainly not everyone's cup of tea. 

Before you start building your entrepreneurial empire, ask yourself if this is what you want to do for the rest of your life. Make sure you have a clear plan mapped out in your head of how the business is going to work, where it’s going to be in the next 10-15 years, and how you’re going to manage your finances.

2. Understand Your Customers

You’ve decided on a product you want to sell, but is there any demand for it in the market? More importantly, do you know what your ideal customer looks like?

Every business needs to have a clearly defined target market so that its marketing team knows what kind of content it needs to produce. If you don’t understand your customers, your products/services won’t be very effective.

You’ll also need to consider other factors during this process, such as your desired location, the general demographic in your vicinity, average income levels, etc.

3. Analyse The Competition

In today’s competitive world, you’re always going to face some level of competition no matter what niche you decide to operate in.

Instead of seeing these competitors as a threat and avoiding them as much as you can, it’s actually beneficial if you analyze their business tactics. These businesses have managed to find success selling the same kinds of products and services that you want to deal in, so they must be doing something right.

Visit their stores, browse through their websites, and see what they do well. While you won’t be copying any of your competitors’ idea, this research helps you get into your customers’ heads and understand what they are exactly looking for. 

4. Get Past Legal Hurdles

You cant operate a business until you’ve completed all the legal requirements, such as trade name registration, business license, payment of fees, etc.

For this purpose, we highly recommend that you hire a lawyer who can also manage insurance once the business is set up.

Keep in mind that legal requirements vary in each country. You’ll need to familiarize yourself with all the local rules and regulations to avoid any unneeded complications.

5. Create A Reasonable Pricing Structure

One of the biggest mistakes first-time business owners make is not charging enough for their products. In their minds, the low prices give them an edge over competitors, but this practice does more harm in the long run than good.

Yes, the lower prices will certainly help you attract a large number of customers, but you’ll face a lot of problems when your costs start to rise and you can’t charge more for your products because you’ve developed a reputation for being cheap.

Instead, survey the market thoroughly and price your products based on quality alone. It’ll be harder to attract new customers during the first few months, but you’ll benefit in the long run.

6. Work On A Marketing Strategy

At the end of the day, it won’t matter if your products have exceptional quality and a fair price, if customers don’t know about your business in the first place.

You’ll need to create a concrete marketing strategy that clearly details how you plan on getting customers to both your online and physical stores.

Ideally, we’d recommend investing in a solid marketing strategy long before you spend even a penny on other things. What most new business owners don’t realize is that it isn’t the quality of the product that generates sales but how well it’s advertised to the masses.

7. Finance Smartly

Contrary to popular belief, there are other ways to finance your business than just through bank loans or self-investment.

While these two methods are the most popular, new options like crowdfunding and product presales have gained a lot of traction in the past few years. Crowdfunding, is particularly popular amongst tech-savvy entrepreneurs who understand the power of the Internet community.

If you’re unfamiliar with the practice of crowdfunding, optimistic entrepreneurs basically post their business ideas on websites like KickStarter or GoFundMe and set a financial target they need to reach to make their dream a reality.

After that, it’s entirely up to the community on these websites to decide if they want to fund in the business or not.

The great thing about crowdfunding is that all the money you receive is yours. You won’t need to share ownership or pay anyone back.