Spread It Around Find the best way to distribute your product, and you'll rake in the profits.

The Entrepreneur: Wayne Willert, 47, founder of Gutter-Bolt Inc. inPort Washington, New York

The Product: The Gutter-Bolt is an aluminum bolt used toattach gutters to houses or other structures. The product claims tooffer a number of benefits over steel bolts, which aretraditionally used to attach gutters to buildings, including adesign that reduces torque, prevents breakage and holds firmly.Pricing ranges from 39 cents to $1.89 each, depending on thequantity and packaging purchased.

Startup: About $80,000 by the end of 1996, which paid forpatents, production equipment and an initial production run

Sales: $1.2 million in 2003. Nearly two-thirds of salescame from independent hardware stores, Ace Hardware and True Value.The rest came from Allied Building Products Corp., which sells tothe construction trade; Hardware Wholesalers Inc. (HWI), adistributor to retail hardware stores; and Do It Best, supplier forDo It Best hardware stores.

The Challenge: Determining the best distribution strategyfor a new product

How will I distribute my product to retailers? The rightsolution depends on many factors, but inventors have a bevy ofoptions:

• Sell direct to retailers.
• Sell through distributors, which sell a broad range of productsto many retailers.
• Sell through captive distributors, which sell a broad range ofproducts to one chain of retailers.
• Sell through distributors, which sell to companies in yourtarget industry.
• Sell through rack jobbers, wholesalers that lease shelf spaceat large retailers. The rack jobber buys inventory to furnishproducts for that space and gets paid by the retailer when theproducts sell. Retailers benefit because they keep low-pricedproducts stocked, and there's no risk if the productdoesn't sell.

After weighing all the options, Willert settled on the rightstrategy for his product-pushing sales past $1 million.

Steps to Success

1. Start with adistribution approach that matches your capability. Willertwas originally offered a deal from a rack jobber that promiseddazzling sales numbers, but he wasn't sure what his profitswould be and whether he could meet the order demand. In the end,Willert decided the best way to build the business-in a way thatmatched his finances and production ability-would be to callindividual hardware stores.

"I produced a small display for the store and promised totake unsold product back after 90 days," Willert says. "Iwent store to store in my area, then began promoting the productover the phone. Once I got early store sales, I picked upadditional sales as a result of satisfied customers."

2. Learn how yourproduct sells. "I found out early that retail storesneed a display to sell the product," he says. "I feltlocal hardware stores would show the display and explain my productto customers. The big-box retailer can't match that level ofsupport." Understanding his product's sales process ledWillert toward more traditional distributors and away from rackjobbers, which concentrate on large retailers.

3. Consider youroptions in selling to the target market. One of the majorways hardware stores find products to buy is by attending small,regional shows featuring products from distributors andmanufacturers. Because he runs his own roofing company in LongIsland, New York, Willert didn't have time to attend manyshows. But at the shows he did attend, Willert made contact withdistributors such as Allied Building Products, Do It Best and HWI.As a result, Willert was able to strike deals with these companiesto carry his product.

4. Weigh your optionsbefore making the final decision. Willert wanted adistribution network that could sell enough to support his productwithout too much effort on his part. The volume rack jobberspromised to produce was enticing, but after a thorough evaluation,Willert took a different route.

Willert explains how he came close to making the wrong decision:"I had an order for over 100,000 [units] from a bigdistributor who was going to bag the product up and sell toWal-Mart and other major retailers," he says. "Then aproblem developed, my patent was temporarily abandoned, and theorder fell through. This was a blessing in disguise, as I am muchbetter off with my current distribution. I can grow mycompany's sales, and I can control where and how my product issold."

Lessons Learned

1. Understand whatdistributors do-and what they don't. Distributors shipand sell products people know they want to buy. But distributorsaren't good at pioneering a new product or persuading people totry it. One reason is because distributors carry too many productsto know every one they sell. But just as important is the fact thatdistributors provide buying convenience for their customers. Acustomer can buy 30 or 40 products from a distributor by placingone order, and a distributor offers quick delivery on items thatmight take days to get from a manufacturer. A distributor'sfunctions include stocking, ease of ordering and quick delivery-butnot pioneering sales efforts. So before turning sales over to adistributor, build a base of direct sales to prove the product willsell.

2. Have realisticexpectations when using distributors. Distributors appeal tomany inventors, and for good reason. They have access to majoraccounts, they sell lots of products, and they usually offer totake stocking orders. But don't expect more from distributorsthan they can offer you. If your product needs a hands-on salesapproach, distributors can't provide that. And if the productsdon't sell, distributors will send them back to you. Certainly,it's great news when distributors decide to take on your line,but don't assume that will translate into immediate sales.

3. Check out thedistributor's five newest products. Don't be afraidto ask distributors for the names of their manufacturing contacts.Call those contacts to find out how the business relationship hasworked for them. This is important to do if your agreement willpreclude you from selling on your own to certain markets. Youcan't expect every product sold by a distributor to be goinglike gangbusters, but some of them should be doing well.

4. Secure plenty offinancial backup. Distributors can have big orders, but theyoften pay in 60 days (or sometimes even longer). So set asideenough cash for 90 days. Otherwise, you may get into a squeeze ifyou have to pay your vendors in 30 days, then take another 30 to 45days to make and ship the product, then wait 60 days to get paid.It can be even worse if you get returns. Having enough cash helpsyou establish a secure relationship with your distributor.

Don Debelak is author of Entrepreneur magazine'sStart-Up Guide #1813, Bringing Your Product to Market, and host ofinventor-help Web site www.dondebelak.com.