Last Updated on October 5, 2020
Who Are the Distributors
In a Free Enterprise System, a distributor is usually the person, or firm, that sells products. The products are sold for the manufacturer in a specific sales territory.
Manufacturers usually appoint distributors for their products in exclusive territories. The distributors appointed must be able to show that they can represent the product (make sales) in that territory. This capability is usually shown by good past success. And often, the ability of the prospective distributor to buy a specific initial quantity of the product for distribution.
In other words, distributorships can cost money and involve risk. But, if you are interested in how to become a distributor that gets any distributorship without putting up any money at all, follow the instructions below.
How to Start a Distribution Company
The first thing you have to do is decide on a distributorship you want. To do this, read over the many “Distributors Wanted” Ads online and in various business publications. The whole purpose of Trade Fairs is to find buyers and distributors. Attend a few of them.
When selecting the products you want to distribute, it is a good idea to stay in a field where you are knowledgeable. For instance, if you have spent time working in a textile factory, you will know the machinery and equipment you worked with.
The same holds true for any other field where you were involved. Another point to consider when selecting the product you may want to distribute is its price. You can easily pick-up distributorships on less expensive items, and make the correspondingly small amounts of money.
Focus on Distributing the Necessity Items
The recommendation is to select higher-priced necessity items, such as equipment and machinery. If you noted, I italicized the word “Necessity”. This is the key to the success as a distributor.
Stay completely away from any item that would be “nice to have” but isn’t really necessary. Once you have selected a number of products that you may want to distribute, write to the companies requesting information on their distributorship offers.
When these companies send you their material “READ” it thoroughly. One of the bigger mistakes made by the vast majority of people (even those in the upper echelons of business) is that they do not read carefully.
Then select the one that you want to handle and study it carefully. While reading the material on the one you have selected, study the product. Determine what it does, how it does it, and (most importantly) who would really need it.
Try to think of someone you know, personally, who could use it. Also, while reading, note the price of the product and the amount you will make, per item sold, as your commission. Figure your profit (commission) first in dollars per sale and then as a percentage of the selling price.
Don’t forget to check the Freight costs, etc. Now, look at the “bottom line”. How many units you must buy in order to get a distributorship. Once you have determined your initial cost factor for the distributorship, divide the dollar figure by the dollar commission per item on the product. This will give you the number of units you must sell in order to pay for your distributorship.
Armed with this information, and figures, you are ready to earn your way to a distributorship (rather than paying for it).
How Do You Earn Your Distributorship?
Simple. Get out and pre-sell enough units to “earn” the cost of the distributorship in commissions. Let’s pretend that in order to acquire a distributorship the company requires that you purchase 6 air conditioning and heat pump units for display and sales.
Your commission is, say 25%, and the items sell for $1,000 each. You must sell 24 units at $1000 each to earn $6000. If you can do that, you will earn your starting inventory worth $6000 at retail.
Now the manufacturer will take you seriously and will probably deliver all the units you think you can sell on credit. You can also make any deal that you and the manufacturer agree upon. If you can sell his units in quantity, you become the most important person in his organization. You write your own ticket.