Problem: You believe you could improve your cash flow if your vendors lowered their prices.
Solution: Don't forget, your vendors have businesses to run, too. There are a couple of different financing methods that might induce your vendors to lower their prices for you or to help you improve your cash flow. Here are some ideas:
- Fixed price: By buying the vendors' products outright and paying for them immediately, you may be able to negotiate lower purchase prices. There is no risk to the vendors, who receive the payment immediately, thereby improving their cash flow. In exchange, they may very well be willing to lower the total prices of the products or services you're buying, producing a savings for you.
- Incentives: If you need to improve your cash flow, you may find it worthwhile to pay your vendors a little bit more for their goods-if the vendors will wait until you have completed your sales and received payment from your customers for them. Such an arrangement costs you a little more, but it improves your cash flow, while the vendor gains some extra money in exchange for delaying the due date of your payment.
Excerpted with permission from Roger Fritz's The Small Business Troubleshooter (Career Press, $16.99,1-800-CAREER-1).
Q & A
Q: I'm looking into starting a mail order catalog for wakeboarding. Are there books that can help me design and distribute catalogs? Also, my funds are very low. Is there any way I can start this without a large inventory?
A: Provided by John D. Schulte, chairman of the National Mail Order Association (NMOA).
First, determine how to reach potential customers. Are there wakeboarding magazines, events or clubs? These are the places you should advertise your catalog. You can also get their mailing or membership lists, for a small fee.
Next, find manufacturers of the products you want to sell. Look in the Thomas Register of American Manufacturers in the reference section of your library or on the Web here.
Because you don't want to stock inventory, you must have manufacturers drop-ship orders. Drop-shipping means you pay the manufacturer wholesale and shipping costs and it sends the product to your customer with your mailing label on it. Some manufacturers drop-ship and some don't, but it's more accepted with larger, more expensive items like wakeboards. If you drop-ship, you may have to tell customers to expect multiple packages if they order more than one item. To avoid this, either have most of your products come from one supplier or keep smaller items in stock and drop-ship only the larger items.
The next step is to design your catalog. You'll save money if you design it yourself, but you need adequate computer skills and graphics software. You'll also need a scanner and a large storage disk (such as a Zip drive) to store the files for the printer. If you pay a printer to design your catalog, you need only provide product copy, photographs and a sketch of how you want the catalog to look.
Cut costs by printing large quantities. For a 16-page, four-color, 8 Â½ -by-5 Â½ -inch catalog, it costs about $6,500 to print 5,000 copies. Printing 10,000 copies costs about $8,000. Save postage by presorting and bar-coding the catalogs so you can qualify for lower mailing rates.
Get more information and ideas on mail order marketing from the NMOA, 2807 Polk St. N.E., Minneapolis, MN 55418, (612) 788-1673.
For more information on designing catalogs, read How to Create Successful Catalogs, by Maxwell Sroge (NTC Publishing, $89.95, 612-788-1673).
For tips on writing product copy, try Write On Target by Donna Baier Stein and Floyd Kemske (NTC Publishing, $37.95, 612-788-1673).
For reprints and licensing questions, click here.