www.JournalJunky.com has exploded!!! When I began to make the earth-friendly journals in August, I never expected the business to boom so fast. I have now landed an account with a small chain of General Stores. The chain includes seven stores in the mid to southwest east region of the U.S.
The buyer asked me to fill out a vendor`s application which asked questions like what is my "required minimum order amount and reorder amount?" I really have no idea on what to set as minimums. I am afraid to set it too high or too low. I was thinking about 30 per store as an opening order and 20 as reorder minimums. Is there some kind of formula to come to this answer or do I just make up a number?
Also the buyer would like me to make custom journals for the company. She stated that her marketing department has to initiate the images, but if they came up with something, could they send the images to me for paper production or would they need to find a producer to supply the paper to me? This is an exciting opportunity, but what are the legal ramifications? That`s my largest concern. (I am thinking that they need to supply me with the paper with their logo on it. This keeps down my costs, or I would have to charge them more...)
The last thing I am wondering about is payment terms. The buyer told me that the terms were up to me. This is how she explained it:
"We typically are asked to set up net/30 day terms by the majority of our vendors. We pay your invoice 30 days after receiving the goods. However, we have also gotten 2%/15 day terms which gives us a 2% discount if we pay in 15 days, etc., etc."
How far can I go with this? "50% off if you pay me tomorrow?"-Good Grief!!
(I use the net/30 day terms with another account (a bookstore) that I have. A third account (a clothing store) paid upfront.)
How do I set up payment terms, and does this sort of agreement need a legal contract to draw up these terms?
I`m asking because you all (StartUpNation Entrepreneurs) have really been a great encouragement to me since I first started. Please share any advice. I appreciate it.
Minimum orders are based partially on your cost to produce, ship and process an order. IE., a company I worked for had a minimum order amount of $50.00. This included not only the cost to produce the product, but process the order.
Most people never think about the order processing cost. But for most any business it runs between fifteen and twenty dollars. Even small business must process an order. Order processing cost can include labor cost to write up an order, invoice the order, track payments, generate the shipping order. It also includes the paper and computer supplies to do an order.
As for pricing plans, consider these options. On large orders, offer a discount price. The company above had standard discounts. For large orders, the customer could get a 10% discount off their regular unit cost. For orders over a certain dollar amount ( $2000.00 for the company above ) the customer received free shipping.
The company also offered 2%/15 and net/30 payment options. You are not restricted to one or the other. I would also stay with these since they are the standard payment options. You also need to address nonpayment. You should have a statement on your invoice that the amount becomes past due say after 60 days.
Hope this helps.
nevadascul11/13/2008 3:08 PM
The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.
Big blessings to you, Nicole! You have already taken the fear factor out of your new-found success. You are a true entrepreneur - if we don`t know the answers, we know where to go to find them! I learned alot from the information posted here in answer to your questions. Hope you find everything you need.
Very cool product, and congratulations on your success. My only advice is to keep a very close eye on your books and make sure you`re turning a profit after you`ve been paid for these orders. Companies that grow quickly can run into cashflow problems just as fast.
I don`t know much about your specific situation, but chances are the local SBA or Score office has someone who has experience with some of your technical questions about filling orders and negotiating a price.
Congratulations!! You`ve already received some great advice. Keep us posted please
Founder and President
Charmed Life Products LLC
Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
I know you`ve been waiting in anticipation of my "new-found success" well it has certainly been a trip. I used the advice from my fellow SUNtrepreneurs and some of it backfired sorry to say. Well, this is how it went. I contacted my local SCORE office and they were very helpful as they usually are. I presented my terms to the General Store and I was really trying to sound professional and like I knew my stuff. I think I probably sounded stuck up and cocky instead of on point! Ha Ha (I really had no experience in sales so I am learning quickly-crash course in Business 101). The buyer didn`t seem to like my terms too much...more like restrictions and threats!
I learned three very valuable lessons that I would like to share with you:
1. Listen to the customer`s need and find where you fit in.
2. Make sure you understand how wholesale terms work before making a deal.
3. Developing a relationship is more important than the "processing fee."
1. I entered the sales deal with little knowledge of how my retail customer did business and how they processed this kind of buying agreement. The retail chain includes seven stores and I was unaware of how the company distributed their product among all seven stores. Ignorant of this process, I gave my contact buying terms in units and not prices. (I required that she order a number of items per store instead of requiring her to purchase a certain dollar amount-does this make sense?) My contact did not feel comfortable with the unit amount per store and she stated this.
2. Many of my customers are online customers and they purchase each item and pay additional shipping and handling costs. I was unaware that as a wholesaler, I should include this shipping cost in my wholesale price. To cover shipping and handling, I asked the owner for an additional upfront "processing fee." Since, I am a small upstart, I felt I needed to cover myself for the upfront expenses needed to begin her order. (The store does not pay until the order is delivered.) She really bucked at this fee and stated that no one else has ever charged a "processing fee" before. She stated that she needed to take a step back and reconsider.
SOOOOO....I waived the processing fee since I did not discuss it in our initial correspondence discussing pricing. I began calculations and decided that will still make a profit at my price, but for the future, I adjusted my wholesale prices to better reflect the cost of shipping and handling. I really take time and pride in my shipments. Customers always mention how "professional" the packaging is.
OKAY! Hope I`m not boring you with my novel...So the end result is this. I`m waiting to see what she is going to do. She (the buyer) mentioned she was still interested in my product. So I guess I`ll wait patiently...I`ll let you know how it goes. Thank you soooo much for your support and encouragement SUN! I have learned very humbling lessons (which I of course have written in my journal) and these lessons have made me a more knowledgeable business woman. I am sure, I have many more to learn in the future...
It has been a long time since I have written about my business journeys. Here is an update. The last time I was discussing a potential business account with a store chain interested in purchasing my journals. Conversations were put on hold for the holidays and resumed in mid January. This is a brief synopsis:
1. The buyer stated she really loved my products.
2. The buyer needed me to change my normal production process to meet her needs.
3. I was willing to change for her, but I was forced to charge a little more (.50/u) for my product.
4. The buyer was unable to satisfy her team with an explanation of why the increase in price.
5. The buyer stated due to the lack of customers purchasing nonessential items, they were unwilling to spend the money on my product.
In a nut shell, that contract did not go through. Now I must be honest, my confidence was a little shot with the rejection and I did not pursue another venture since then. Recently, I have worked up enough courage to start again with more businesses.
But, I need your help.
If you know of any small unique gift boutiques in your area that may be interested in my journals please share! Feel free to check out my products at www.journaljunky.com to see what I offer.
An update on Journal Junky for those who are interested! If you recall, the General Store was an account I was pretty close to landing, but in the end, they "could not afford" my product. I used your advice Biziness (thank you) and I decided that having 7 points of distribution (their 7-store chain) was more important than the shipping costs. I decided to reconnect with the buyer and offered her a better price than when we last talked.
She was very interested and stated she will "look into it" this week. My fingers are crossed and I hope this goes well...