Enough is enough. You have finally decided to start your own company. No more procrastinating, and you are taking action. Please read about what to expect when you start and build a startup company, because I am going to do this post as a follow up of that post. This post is all about starting and building a trading company.
1. Why start a trading business?
A bit about my own experience in running different kinds of business setup and how I reach the conclusion that a trading business is the best route for most of us. For starter, we don’t want to put ourselves into carrying too much burden in business models like retailing and manufacturing. And, a trading business is as near as you can get in achieving a balanced lifestyle.
I have had the opportunity to run a bakery retailing, an in-house minimart and also a pure FMCG manufacturing business. Believe me, these models can break you into pieces because of their high capital outlay. Imagine, an opportunity to start a bakery retail shop selling varieties of cake and bread. I use this example because of my experience in these markets. You need equipment for your daily production, with built-ins as required by authorities like electrical infrastructure, water sprinkler, drainage system and what have you.
After planning the production kitchen, depending on the premise’s location, you might need to engage a team of interior designers and contractor for the retail. Come on guys, you need a nice ambiance to attract the area’s foot traffic to at least, smell your pastries. Make sure you have enough flour, sugar, salt, and other ingredients to produce enough tasty confections to pay for the rental, your bakers’ salary and of course, for your raw material suppliers.
How about the online business models? The problem is, any Tom, Dick, and Harry can start an online business. Building apps, e-commerce, selling via sites like eBay and Amazon and blogging, these are online businesses that anyone can start with a low barrier of entry. As a result, many will vye for the same target audience. For instance, think of bloggers aiming for the first page of Google for the same keyword as “how to set up a blog”.
We’ll incorporate more about both the brick and mortar and online business model as we go along. In the meantime, you could use my thought process for your own, if they benefit you as a catalyst for starting something for yourself.
2. Look Within Your Own Professional Domain
You gotta do this even before you throw in your resignation letter. You need to feel the pulse of the market first and forget about the business plan.
It doesn’t matter in which field you are on, but let us remember this. You have been in your profession for years, and maybe even decades. Look at your own employer. What do they do? What are your employer’s needs within the industry? Let us put this into context.
I have been in the food industry for slightly more than two decades. As compared to my accumulative experience in the online business, I should definitely fare better if I look within the food industry market for inspiration. I was in manufacturing and has experienced first hand the needs of both the market. One served a niche and the other one was a production house that catered to the mass. Both providers have similar challenges and pain points. And as a business person in this industry, I see opportunities.
Not everybody can set up a trading business. This is good news, really. Unlike an online business, you do need some professional experience in the products or service you offer. Therefore, if you do it right, you don’t need to get involved in a “cowboy town”. Ditch the commodities, for God’s sake. For instance, as a Food Technologist, I would dabble into functional ingredients. No way am I getting into the bloody red sea of flour, sugar, eggs or even nondairy creamers. Those are cut-throat markets.
Now ask yourself, what are you good at? If you are in the paint industry, are there any supportive chemicals or additives that
3. Follow The Money
Get your perspective right from the early beginning. Why are you in business? I am pretty sure that everybody will give a different answer to this. But, the fact that you are reading this, I will assume that your reason is as good as mine. To make money. For those who go into business to be glamorous, frankly, a trading business is not your cup of tea. There is nothing “rockstar” about playing the middleman game.
You don’t need to set up a base in the city to start your trading business. All the big suppliers are in big cities and major towns. What do you have to offer to these big boys then? In fact, it would be better for you to move back to your small town if I were you. Look at the suburbs, the deep heartland, the outskirt of the cities where the big suppliers couldn’t care to spend extra resources, and yet could not do without. For all we know, most major firms prefer to focus their big guns in the major cities, and this is also the reason we see most headquarters set up in Manhattan, New York, Shanghai, Hong Kong or Singapore.
Anything goes when you set up a trading business. If it’s purely distribution, make use of whatever resource that you have at your disposal. Forget about playing the volume game and if you have small items, make do with any corner of your residence. We invested in a small property a few years ago, and it happened that while we were wondering what could be done with it, the trading business opportunity came knocking. So what I did, I used the ground floor of this property as a warehouse. No doubt a residential real estate is not meant for commercial purpose, but I ain’t using it as a shop front.
Your skills as an entrepreneur will be tested to the fullest when you start a trading business. I’m not about being cheap. If there are opportunities to scale, by all means, invest in relevant infrastructure and resources. What I’m saying is please, don’t be afraid to do things yourself when the net profits are low. Again, your mission is to make money. There are third-party services that you can hire to carry out a certain task, but I seldom find them reliable though, especially the logistic. For me, the good logistic services are simply too expensive and the cheaper ones, unreliable.
The logistics and delivery are the real pain of my trading business in the early stage, because of the bulky ingredients that weigh on average 25kg. After working on my business alone, tediously for six months, I realized my goods weren’t heavy anymore. I started to move with ease carrying these 20 to 25 kg cartons. That’s when I decided to stick with being a solopreneur.
4. Open Your Eyes and Ears For Synergy
As an owner of a trading company, I am always on the lookout for alternative trading business ideas. More so if your trading business is still as shaky as a beansprout. The beauty of this kind of business model is, you can send a whole month load of your clients’ needs to them, but only if they are financially sound, of course.
Now, how should we go about in achieving synergy for our business?
a. Buy another business
If you spot another business that is in the same business segment as your own trading company, and yet with a different business model, you should take a look. Currently, I am into B2B, because as a solopreneur, I don’t have time to target the consumer market. It would be great if there is a retail business for sale. If it has a simple logistic setup, it will be my perfect takeover target.
b. Joint venture
This is more complicated because this will end up something similar to a partnership. You can read about more about the flaws in business partnership by following the link in the keyword.
The thing about joint venture is more about the culture. Imagine I come across a potential partner with a business of similar revenue, who is currently running a B2C. Should the staffs follow the previous system of reporting, or should they adopt my style of solopreneurship, where all red tapes are eliminated on an instance?
c. Organic growth
Without finding a good partner, or spotting a takeover target, the best course of action would be to grow the trading business naturally. You could increase your product mix and try to sell them to your existing customers. Or you could opt to increase your geo-coverage, but I normally would not encourage this because of the extra commitment. I am all for freedom.
I hope you see all the advantages of starting a trading business as compared to other alternatives. Go ahead to start a blog if you want, but if you want to see faster results, this should be the best way to go. Make your entrance as hassle-free as possible. Remember to follow the money, regardless of the stage that you hit.
If you like my thoughts, please help me to share this post. Who knows, more people might escape the clutch of the rat race by your sharing.