Building Your Business Plan: Part 1 – Introduction
Building Your Business Plan: Part 2 – Business Overview
Building Your Business Plan: Part 3 – Products and Services
Building Your Business Plan: Part 4 – Studying the Market
Building Your Business Plan: Part 5 – Identify Your Market
Building Your Business Plan: Part 6 – Competition and Industry SWOT
Building Your Business Plan: Part 7 – Business Environment
Building Your Business Plan: Part 8 – Product Sourcing
Building Your Business Plan: Part 9 – Pricing
Building Your Business Plan: Part 10 – Product Development
Building Your Business Plan: Part 11 – Distribution and Sales
Building Your Business Plan: Part 12 – Advertising Plans
Building Your Business Plan: Part 13 – Purchasing Equipment
This article is written to provide you with the tools required to assist with developing your Business Plan as it applies to Product Sourcing.
In part 7 of this series, we discussed economic environment and conditions, and why it is important to understand the economic environment that your business is in. In this part of the series, we are going to discuss product or material sourcing as it applies to your business.
Please keep in mind while you are completing the downloadable form below that you are not restricted by the spaces provided to write in, these can be easily readjusted as needed.
Section 7.0 – Product Sourcing
It may go without saying, but knowing which companies are going to supply your business’s products/materials is incredibly important, and in most cases selecting suppliers based on location is equally important. You want to ensure whichever company you select is reputable, provides service in your location, and is going to provide you with the quality products/materials your business requires for a reasonable cost.
If there is one thing to remember, it is that there is more to business than profit and loss. If you want your business to start on the right foot, it begins with selecting the right supplier for your business. Starting a business is not an inexpensive venture, however, your investment in the time, energy, and costs can have a higher Return on Investment (ROI)!
A. What products does your business require to run?
Please keep in mind when sourcing and receiving quotes, the lower or cheapest option is not always going to be the best option. We recommend dedicating time to detail what products/materials your business needs, researching the various companies that supply such, and conducting a comparative analysis on these suppliers relating to the quality, service, and availability.
It would be worth the Google search to find out what most businesses in your marketplace generally require for products/materials to run successfully. You can always reach out to other local business owners to get advice as well! Networking and making connections are vital; other business owners (even though they are competitors) are familiar with starting a business, and generally will be open to giving advice.
B. Who are the suppliers that can provide you the products/material you require, where are they located?
When you are in search for the right supplier for your business, you need to think critically and look at what your business needs, what your goals are, and which supplier type corresponds closely to those needs. The key consideration is that you need to understand your industry’s distribution channels. There are 4 types of suppliers:
1. Manufacturers: These are factory businesses who produce the product and sell the goods to consumers, wholesalers, distributors, retailers, and other manufacturers wanting to create more complex items. The one advantage to this is that you have better control over the goods and negotiating costs.
2. Distributors: These suppliers buy wholesale from various manufacturers and warehouse products to resell to other smaller businesses, distributors, or wholesalers. This option offers much easier communication than with direct manufacturers.
3. Importers: These suppliers purchase their products/materials from a one location or country, and then sell those same products/materials in another. This option is more like a domestic wholesaler.
4. Dropshippers: This option is usually considered online businesses. When you choose these suppliers, they will deliver the product to your buyer directly. An advantage to this is that it will cut down on your storage costs.
At this point you will want to establish whether you are taking the domestic approach to selecting suppliers or not, as this decision is crucial to which supplier you select for your business.
Domestic Suppliers: taking this route makes the process of shipping and receiving quite easy and painless, not to mention the line of communication is more efficient. You may also find that the manufacturing quality is higher, and it is easier to verify reputable companies. The one disadvantage is that the manufacturing costs are generally more expensive and there may be less choice when it comes to products/materials.
International Suppliers: taking this route has its advantages such as lower manufacturing costs and more choice when it comes to products/materials. The disadvantages are that the manufacturing quality may be lower, there could be communication barriers due to language and time zones, it is more time consuming to verify reputable companies, and the process of shipping and receiving is more cumbersome due to importation and customs clearance.
You can make the use of Google or other major search engines. Start exploring different keywords such as “vendor,” “wholesale,” or “supplier” in combination with your desired product name, such as “wholesale clothing.” You can also make use of Canada’s Supplier website or INCORP Pro website, attending trade shows, or joining industry websites such as LinkedIn. Some platforms you can also consider are ThomasNet, Maker’s Row, MFG, Kompass, National Association of Manufacturers List, Shopify, AliExpress, Indiamart, and Sourcify.
C. Who are your preferred suppliers?
Now that you have identified who your preferred suppliers are, it would be beneficial to meet with them to find out more about their company, and ensure they provide you with a Supplier Certificate. You want to make sure that your suppliers have a good rating and are eligible to conduct business and provide services. In addition to this, you may want to know about their Minimum Order Quantity, Product Samples, Unit Prices, Payment Options and Terms, or Shipment Options, to name a few.
D. What are your preferred suppliers’ costs?
After you have met with the suppliers, it is time to request a quote. This is generally done by providing a list of the products/materials you need, the quantity, and your location. Be careful to analyze costs vs quality as it will influence your business.
Pro Tip: Document everything you have learnt about your preferred suppliers including their quotes to ensure that you made the right decision. Make sure when answering these questions that you remain open minded and do not automatically rule out suppliers. Aim to remain unbiased as you want to keep your options open just in case your shortlist of suppliers do not work out.
E. Do you have alternative sources? How do they compare to your selected?
In this question, you are going to compare your preferred suppliers to those who didn’t make the initial shortlist. You will likely use the comparative analysis you completed previously to answer this question.
F. Why did you choose these suppliers?
You may want to provide further details to the comparison and why you selected who you did. Remember if your preferred suppliers do not work out, it is always best practice to have a backup plan.
G. Will you sell your products in a particular location?
Switching gears, you will want to determine whether you are going to sell your product in a particular location. This question also relates to understanding your business’s economic environment and conditions.
H. Will you sell your products privately, online, or in retail outlets?
Now it is time to finalize your decision on how customers will come to you. What decision best fits how your business will sell its products to the public. Keep in mind everything you have learnt thus far throughout this series.
With all the questions you have answered, as they relate to your business, you will have a great indication of your business’s products and who your suppliers are going to be. Please stay tuned for part 9 of this series when we discuss Pricing.