The definition of success as an Australian wholesaler in 2020/21 is likely to be quite different to what it’s been in previous years. For some businesses, the upheaval in manufacturing, retail and shipping around the world means merely surviving might count as success.
If your wholesale business manages to thrive beyond that in taking advantage of the current market demands and opportunities, great. For many though, the goal will be simply to get through this period of significant change intact.
Regardless of your definition, you need to focus on several important factors to successfully run a wholesale business in 2020.
Success = cash flow control
Even at the best of times as a wholesaler, it’s easy to feel stuck between the financial demands of your suppliers and retailers. Your suppliers have their hands out, wanting to be paid upfront. Meanwhile, your retailers want you to extend their credit terms. And you’re left trying to juggle your cash flow between the two.
Of course, in the current environment with so many struggling companies, the pressure is even worse. Troubled retail businesses either want to avoid paying their bills to hold on to their own cash flow, or simply can’t pay them. Then, on the other hand, suppliers want their money even earlier to pay their own bills.
As a result, your wholesale business feels even more of the squeeze from both sides.
A large part of your success will depend on how well you manage that cash flow juggle. Success won’t just happen on its own though. You need to put the right structures in place to support it.
Here are four ways to take control of your wholesale business and your cash flow.
1. Be agile and adapt
It’s more important than ever to be able to quickly and efficiently change direction and tactics to take advantage of sales and growth opportunities as they surface. With trading conditions evolving rapidly around the world, moving fast can make a big difference to your business success.
So how can you structure your business to be agile?
The more responsive your business is to your customers, the better off you’ll be. Look closely at processes such as order fulfilment to see if they could be more efficient. Are there unnecessary, time-consuming steps that you could remove or consolidate?
How much does your business rely on manual processes? You might not be able to eliminate every manual step in your distribution procedures, but automating wherever possible will make responding to change easier. Consider if it’s an option to invest in automated sensor and tracking innovations or new robotic processes as suggested by Trade Gecko. Removing time-consuming manual steps allows you to quickly take advantage of new opportunities, whether they’re new products or new sales options.
Invest in your team
Give your team the tools and training they need to succeed. This may mean investing in technology such as Business Intelligence software to give them the data they need to do their jobs. Or it might involve signing up to a platform like Octet’s Supply Chain Management tool to make your business finances more efficient.
2. Diversify your trading partners
Putting all your eggs into one basket can be a risky move, particularly in the current environment. Diversifying your trading partners can help to lessen the risk of being caught without a supplier or retailer.
You might have relied on a single, trusted overseas supplier previously. However, with multiple suppliers, you can more easily adapt to any disruptions in your supply chain. You get greater stock level certainty, so you can ride out those disruptions and continue to meet your customers’ needs.
Additionally, many overseas supply chains are currently experiencing interruptions in both manufacturing and shipping. That makes right now a good time to diversify and seek out local suppliers to meet your needs. Take, for example, a wholesale coffee cup company. Prior to COVID, they were manufacturing all their cups and lids offshore. Now they’re exploring creating eco-lids with a local recycling plant and manufacturer to add to their product range.
This will protect them from losing sales due to supply issues with their offshore manufacturer. Even once things go back to normal, the business will have the peace of mind of a local backup. This gives them another option if they need to source extra goods quickly during times of peak demand, and a new product set to their range.
Diversify retailers and sales channels
In the same way, depending on a single retailer can be risky. Wholesale companies can go under if they unexpectedly lose their biggest client. Selling to a larger array of retailers helps to spread the risk.
This can also be a good time to differentiate your business by exploring other ways of getting your goods to market. Perhaps consider selling to smaller or boutique retailers under different branding, or even go online and sell the goods yourself via marketplaces such as Amazon or platforms such as Shopify.
Another idea is to follow companies who stock similar products to yours and get in touch with them. If they’re finding it hard to get stock from their regular wholesalers, maybe you can help? Perhaps even attempt to talk to your competitors to see if you can help them to fill gaps in their supply chain, and if they can help to fill gaps in yours (while keeping well within competition law guidelines of course).
At the end of the day, relationships can either make or break your business. Strengthening connections with all of your trading partners can pay off when you run into challenging times. If you’ve built a good rapport with them, they’re more likely to go out of their way to help you than if you hadn’t put in that effort.
In fact, this is true for any business you deal with, including your:
- suppliers and manufacturers
- financiers – both traditional institutions and non-traditional financiers, like us
- accountants and financial planners.
Maintaining open communication and building strong, lasting relationships with everyone involved in your business can significantly increase your odds of surviving the current conditions.
4. Manage your money
This one might seem obvious. After all, you know that tracking what you spend and earn, and keeping on top of your receivables is vital at any time.
But now you really need to take control of the ‘cash flow squeeze’ we mentioned earlier. Remember that the suppliers hounding you for payment and the retailers wanting longer credit terms are all just trying to stay afloat too.
Controlling your cash flow enables you to take advantage of those new opportunities we discussed – and, just maybe, turn surviving into thriving.
One way you can take control is with Octet’s range of innovative working capital solutions.
A popular option for wholesale businesses is Octet’s Trade Finance. This allows you to pay your suppliers now and then gives you up to 120 days to repay Octet. This not only eases your cash flow squeeze, but also potentially lets you negotiate early-payment discounts because you can now pay upfront, or at the very least earlier.
Alternatively, you could try an invoice factoring solution like Octet’s Debtor Finance, which works in the other direction. It turns your accounts receivable into assets, enabling you to get money from your retailers now, while also potentially giving them longer to pay.
Our third solution, Supply Chain Accelerate is essentially a combination of Trade Finance and Debtor Finance. It’s a fast, flexible working capital solution that makes transactions safe and easy, and lets you spread the costs of the finance between suppliers and buyers.
Using any of these Octet finance solutions (or Trade and Debtor Finance, ‘back to back’) frees up your money to flow through your business, which can only be a good thing in today’s unsettled commercial climate.
Survive and thrive
There’s probably never been a more uncertain time than 2020 for wholesale businesses. But the uncertainty also offers an excellent opportunity to look closely at your business and cash flow structure. The changes you make to help your business survive now can lay the foundation for it to thrive in the future.