In this guide (14)
- What does a wholesale business actually do?
- Is wholesale the right business for you?
- How do you choose what to sell?
- How much money do you need to start?
- How do you find suppliers and get good terms?
- How should you price wholesale products?
- Should you give customers credit from day one?
- What do you need to register before you trade?
- How do you find your first customers?
- How do you control stock from the start?
- Which systems do you need on day one?
- What should the first 90 days look like?
- How EasyTaskr helps
- Questions people ask
Key takeaways
- Start narrow: a few dozen product lines you know well beat hundreds you do not.
- Your real start-up cost is the cash tied up between paying suppliers and being paid by customers.
- Price on margin after landed cost, not on a markup of the supplier's price.
- Give credit only after a customer has paid on time for a few orders, and always with a limit.
- Tax registration rules depend on your country, so check them before your first sale.
What does a wholesale business actually do?
A wholesaler buys goods in bulk from makers, importers or bigger distributors and sells them in smaller trade quantities to shops, restaurants, salons, workshops and other businesses. You earn the gap between your landed cost and your trade price, many times over, on volume.
The value you add is simple but real. Your customers cannot buy a full pallet from a manufacturer, and they do not want to deal with twenty suppliers. You break bulk, hold stock close to them, deliver on fixed days and often give them a few weeks to pay. Each of those services costs you money, so the business works only if your prices cover them.
Is wholesale the right business for you?
Wholesale suits people who like routine, numbers and relationships more than shop-floor selling. Before you spend anything, be honest about these points:
- You are comfortable holding stock worth more than a month of sales.
- You can visit or call customers every week, because repeat orders are the business.
- You will chase money politely but firmly. Most trade customers expect credit, and some will test you.
- You can live with thinner margins than retail and make it up on volume.
- You have, or can get, a vehicle, storage space and time for early-morning deliveries.
If most of these sound fine, keep going.
How do you choose what to sell?
Pick a narrow range you already understand, sold to one type of customer. A focused range is easier to buy well, easier to explain and cheaper to stock.
Good starting ranges share a few traits:
- Steady, repeat demand. Things your customers reorder every week or month, not one-off purchases.
- A gap in service. Local shops complain about late deliveries, high minimum orders or missing lines.
- Shelf life and size you can manage. Long life and compact cases are easier than chilled or bulky goods.
- Room for margin. If every competitor sells the same branded line at the same price, you will fight on price alone.
Start with 30 to 80 product lines. Talk to ten likely customers before you buy anything and ask what they buy, from whom, how often and what annoys them. Their answers shape your range better than any market report.
How much money do you need to start?
The biggest start-up cost is not the van or the shelving. It is the cash tied up in stock and in customer credit before money comes back. Work it out with the cash cycle:
Cash cycle (days) = days of stock held + days customers take to pay − days your suppliers give you
Worked example. You expect monthly sales of 40,000 at trade price, with a 20% margin. Your cost of those goods is 32,000 a month, about 1,070 a day. You plan to hold 6 weeks of stock (42 days), customers pay in 30 days, and your supplier gives you 14 days.
- Cash cycle = 42 + 30 − 14 = 58 days
- Cash tied up = 1,070 × 58 ≈ 62,000
So at that size you need roughly 62,000 of working capital, before rent, a vehicle or wages. If you sell cash on delivery instead, the cycle drops to 28 days and the cash needed falls to about 30,000. That is why credit policy is a start-up decision, not an afterthought.
A simple start-up budget might look like this:
| Item | Example amount | Notes |
|---|---|---|
| First stock order | 45,000 | About 6 weeks (42 days) of goods at cost |
| Customer credit (receivables) | 32,000 | 30 days of goods at cost waiting to be paid for |
| Less supplier credit | −15,000 | 14 days you do not yet have to pay for |
| Storage deposit and racking | 4,000 | Lock-up or small unit, second-hand racking |
| Vehicle (lease deposit or used van) | 8,000 | Must take your largest regular load |
| Software, phone, card machine | 1,500 | Stock, invoicing and customer balances |
| Insurance and registrations | 1,500 | Stock, vehicle, public and product liability |
| Cash buffer | 10,000 | For a late payer or a supplier price rise |
| Total | 87,000 |
The first three lines add up to the 62,000 from the cash cycle. Your numbers will differ. The point is to include the receivables line, which first-time wholesalers often forget.
How do you find suppliers and get good terms?
Go as close to the source as your volume allows: the manufacturer or importer first, then larger distributors. Trade fairs, industry associations, product packaging and your future customers are the quickest ways to find names.
When you talk to a supplier, ask the same questions every time and write the answers down:
- Minimum order quantity, per line and per order.
- Lead time from order to delivery at your door.
- Price per case and what breaks lower the price.
- Delivery charge, or whether delivery is free above a set value.
- Payment terms. New accounts often start on payment up front; ask what it takes to move to 14 or 30 days.
- Returns policy for damaged or short-dated goods.
Never rely on a single supplier for a core line. A second source protects you when the first runs out or raises prices.
How should you price wholesale products?
Start from the landed cost (purchase price plus freight, duty and handling per unit), then set the price that gives the margin you need. Margin is profit as a share of the selling price; markup is profit as a share of cost. Mixing them up is one of the most common pricing mistakes. Read markup vs margin or use the markup and margin calculator.
Worked example. A case costs 100 from the supplier, plus 4 for freight. Landed cost is 104. You want a 20% margin.
- Price = landed cost ÷ (1 − margin) = 104 ÷ 0.80 = 130
- Profit per case = 26, which is 20% of 130 (and a 25% markup on 104)
If you had added 20% to 104 instead, you would charge 124.80 and earn only 16.7% margin. On 40,000 a month of sales that gap is worth hundreds every month.
Set two or three price levels at most, for example standard trade, larger accounts and cash-and-carry. More levels than that become hard to control.
Should you give customers credit from day one?
No. Sell cash on delivery or payment before dispatch for the first few orders, then offer credit with a firm limit to customers who have proved reliable. Credit wins business, but one bad debt can wipe out a month of profit. The full method, from credit limits to when to stop supplying, is in customer credit for wholesalers.
What do you need to register before you trade?
You will usually need to register the business itself, open a separate business bank account, arrange insurance and check whether your products need a licence. Food, drink, alcohol, tobacco, medicines and chemicals are the common ones.
Tax registration depends on the country you trade in, and the rules differ a lot, so read the guide for your country rather than relying on a general answer:
- Trading in the United Kingdom: VAT for small businesses in the UK.
- Trading in Sri Lanka: VAT in Sri Lanka.
Whatever your country, keep every purchase invoice and every sales invoice from the first day. Tax authorities expect records, and your own margin reports depend on them.
How do you find your first customers?
Visit them. Trade customers buy from people they trust to turn up, so a printed or online price list, a few samples and a clear delivery promise will do more than advertising.
A simple plan for the first eight weeks:
- List 100 likely customers within a route you can cover in a day or two.
- Visit or call 15 to 20 a week. Bring samples of your three strongest lines.
- Offer something concrete: next-day delivery, a lower minimum order or a line nobody nearby stocks.
- Ask for one small trial order, not their whole business.
- Deliver exactly when you said. Reliability is what gets the second order.
- Visit again the following week, on the same day, so it becomes a habit.
Expect most visits to end without an order at first. A steady stream of second and third orders from the same customers matters more than the size of any first order.
How do you control stock from the start?
Record every movement from day one: goods in against a delivery note, goods out against an invoice, and any damage or loss as an adjustment with a reason. Count your fastest-selling lines every week. Set a reorder point for each core line so you reorder before you run out, not after. The stock control guide covers the full routine, and the reorder point guide shows the maths.
Which systems do you need on day one?
Keep the set-up small but make sure it can grow with you. Spreadsheets work for a few weeks; they break down once you have several customers on credit and stock moving every day.
| Job | Simple start | Upgrade when |
|---|---|---|
| Stock records | One product list with cost, price and quantity | You have more than one storage location or lose track of counts |
| Invoices | Numbered invoices from day one | You send more than a handful a day |
| Customer balances | A list of who owes what | Any customer is on credit terms |
| Orders | Phone and messages, written up the same day | Reps or customers place orders without you |
| Cash | Daily count of cash and card takings | You have more than one person handling money |
What should the first 90 days look like?
- Weeks 1 to 2: confirm suppliers, set prices, set up your product list and invoice numbering.
- Weeks 3 to 6: visit customers, take trial orders, deliver on fixed days.
- Weeks 7 to 10: offer credit to customers who have paid on time; set each one a limit.
- Weeks 11 to 13: review margin by product, drop lines that do not sell, add lines customers ask for, and check how many days your customers really take to pay.
Review three numbers every week: sales, gross margin and how much customers owe you. If sales rise but cash falls, your credit or stock is growing faster than your profit.
Questions people ask
Can I start a wholesale business with little money?
Yes, if you start with a small range, buy little and often, ask suppliers for credit terms and sell cash on delivery at first. The less credit you give, the less cash you need.
Do I need a warehouse to start wholesaling?
Not always. Many wholesalers start from a lock-up unit, a garage or a shared storage space and move to a warehouse once volume justifies the rent.
What profit margin do wholesalers make?
It varies widely by product and sector. Wholesale margins are usually thinner than retail margins because you sell in bulk, so control of costs, stock and bad debts matters more.
Do I need a licence to sell wholesale?
It depends on what you sell and where. Food, alcohol, tobacco, medicines and chemicals often need extra licences or registrations, so check with your local authority before you buy stock.
