Fast moving consumer goods distribution business is really lucrative. If you are considering the possibility of starting a FMCG distribution business then you’re in luck! Distribution business simply involves buying goods from a producer and then reselling or redistributing to smaller retailers for profits. The distribution business is one of the most profitable SMEs that you can venture into and be sure of huge revenue, because product distributors make a lot of money on a daily basis. And YES you can start your distribution business with little money and experience.
Before you can comfortably start up this business, you will need to develop some key skills either through training or reading/research. Granted the whole concept of the wholesale distribution business may revolve around buying and selling; and yet this buying and selling routine can be quite tricky if you don’t have certain skills. For example; wholesale distributors know how to manage stocks which are about to expire in a way that they do not lose their money. That being said, there are a lot of things that a wholesale distributor would know about sustaining the business, which a novice may not know. That is why it is imperative that you get some training and acquire some basic skills for the business.
#2. Register your business
Most manufacturers would rather work with corporate bodies than individuals. So you want to make sure that before you start your FMCG distribution business; you get your business registered with the CAC. This way your business name is secure and you can then become a legal entity. Read the article about how to register your business with CAC in Nigeria or contact email@example.com for more insight.
#3. Write a detailed business plan
Every business regardless of the size; needs a business plan. Your business plan is a pointer to your company, its goals and objectives, your target market and how you plan to reach them. With a good business plan in place; you can easily get funding for your business; because within your plan; there should be certain financial projections, estimates and budgets. The business plan is more of a document that will help you determine whether or not your business is meeting targets ( that is, based on your company’s goals and objectives). It will give investors an idea of the profitability of your business. So before you start out, you need to draft out a good business plan. I strongly recommend that you get professional help for this.
#4. Secure an office space and a warehouse
You need a storage room or warehouse to get into this business. This is because most companies will request to know that you have a facility to store their products. However, if you’re an entrepreneur with little money; you can first start by storing your goods in your house( provided you have sufficient storage space), or in your truck if you have one. Of course the truck has to be well secured. As a new startup, you don’t necessarily need a big office space; you can easily turn a section of your warehouse into an office. If you will be using your house for storage, then turn your garage into an office space so as to reduce your start up capital.
#5. Start up deposit
A lot of big and established manufacturing companies will require that you first deposit some amount of money with them before you get registered and start receiving their products. While some others may require that you start with a half trailer of their products. That is why I recommend that if you have just a little money; you work with newer manufacturing companies who are still in need of distributors. All you need to watch out for is; taking out time to select products which are higher in demand before you sign up with them.
#6. Source and register with manufacturers
Next is actually looking for and registering with manufacturing companies that can accommodate to your peculiar financial capability and working budget for your distributorship business. And this is because becoming a wholesale distributor for manufacturing companies that already have lots of distributors could be difficult for a new entrant. So to counter this problem; you can easily look for new companies that ate still looking out for more wholesale distributors for their products. Generally, manufacturers need a distributor to be registered with their company, as well as meet some criteria for gaining distributorship rights.
So, what if you don’t have money? Can you still register with a manufacturing company? The answer is YES!
All you need do is have a well drafted and winning business proposal in place.
Once drafted, submit it to the company. Usually the company will request for a guarantor or surety who will stand for you and if you can satisfactorily meet up with that; you can then become a distributor with the company.
For details on how to write a winning business proposal; you can send an email to firstname.lastname@example.org
#7. Have a means of transportation
Next up; to fully establish your FMCG distributorship business you will need to acquire a vehicle: a van or a big truck to be used to convey your goods to other sub distributors or retailers. For a start you can hire a truck if you don’t already have one or even the means of acquiring one, without which you can’t successful run your distribution business. This is because your truck will be needed to convey your goods from the production company to your warehouse and from your warehouse to retail stores and sub distributors around you. You should never wait for your customers to come get products from you; but rather always take it to them, otherwise you may end up losing your customers. So ensure that before you fully start; you have a reliable means of transportation.
#8. Understand your market and customer base
Of course before you set out to launch any business, you need to have a sound grip on the market and also your customers. Try to identify the retailers you hope to be selling your goods to and get them to register with you as their main supplier. For a new start up like you; you may have to employ market penetration strategies like making your goods much cheaper than that of other distributors around you. This way you are sure to get a lot of customers for your business and while at it; try your hands on other marketing and advertising strategies that will accelerate the growth of your customer base for your distributorship business.
A major key to this type of market is to clearly define your target market. This should be the basis of your marketing and advertising strategies.
#9. Building lasting relationships with your customers
Your ability to resonate with and build a strong relationship with your customers is pivotal to the success of your business. Making profits shouldn’t be your business goal for now. Now is the time to find and connect with potential customers to build a lasting relationship with them. You should prioritise customer service, adding value to the businesses of your sub distributors and retailers, and making faster order fulfillment your number priority. Do not underestimate the power of strong customer relations and customer loyalty. You need to focus more on that in this phase of your business; money will come. But first things first. Ok?
Be genuinely interested in the upward and forward movement of your customers’ businesses. The happier your customer; the merrier your business _ that’s my line! Ok. But seriously, just tone down your hunger for money for now and hunger instead to show love to your customers and their businesses.
And if your niche is saturated in your area; you’ll understand what I’m saying.
- Focus on your customers
- Focus on creating and adding value
- Focus on problem solving
- Focus on every other thing, but your projected profits
Keys to a successful FMCG distribution business
To be successful in your FMCG distribution business; here are a few things to consider
- Try to maintain a good customer relationship at all times
- Build a large customer base. Distribution business is a game of numbers, the most important thing to be considered is not the products to sell; but rather be concerned about getting buyers for the wares you are distributing
- Concentrate more on the turnover rather than on cost. Distribution business is a game of volume
- Be good at networking
- Reach out and maintain strong connections with your customers.
- Have a good knowledge of the market. Do a market survey to know who needs your wares and how best to market it to them.
Profitability of FMCG distribution business
As a FMCG distributor you can comfortably make between N500,000 – N1000000 per month. Like stated earlier the business is quite lucrative. At the end of the year’s sale, the company may still pay you commission. For new entrants however; profits may not come in just immediately, but as your customer base grows it surely will.
So here’s to your success!