How well are you managing your distribution process, and what about finances?
A Houston Chronicle article by Sam Ashe-Edmunds delves into effective ways to manage your distribution process. The article covers valuable management topics such as research, pricing, partnerships, setting benchmarks and monitoring. All of these considerations help you to figure out the right price to charge for maximum profit. Mr. Ashe-Edmunds stresses the value of research when it comes to your brand, determining the most valuable product placement for sales generation. He suggests that a distribution method, such as big-box retailers, may generate a large volume of sales, but may damage your brand if you are selling a high end product. He also mentions that channels with low costs of sales may produce high profit margins, but low volumes, which in turn effects total profits.
In terms of pricing, it is important to understand your total cost of sales, including the expenses attached to each of your distribution channels. New businesses may not always take every cost into account, especially when they receive a large order from a new customer, and are anxious to secure the sale. So what distribution channels might you consider? If you are selling online, IT costs will be a major factor, marketing costs, as well as shipping costs and all the taxes and fees associated with this form of distribution. Discounts may be offered periodically, and forecasted increase in sales must accurately cover the unit profit loss from the offered discount amount. If you are planning a team of sales staff, commissions must also be taken into account.
If your distribution strategy involves working with partners, each relationship will have its own set of challenges. Selling through a channel can help increase revenue and market share, but many factors need to be taken into consideration. Monique Reece, founder of MarketSmarter, suggests 8 steps to create successful strategic partnerships. Collaboration with your internal team, as well as constant communication with your partners will help in the management of these relationships.
Constant monitoring of all distribution channels will give you a good idea of what is working, and what needs to be changed. Regularly evaluate all the costs involved with each channel for optimum profit margin. Make sure your customers are paying on time. Offering credit terms can compromise cash flow, especially if you are waiting for payment and a large order needs to be unexpectedly filled. You don’t want to damage relationships with key distribution partners. There are many financing options available. Invoice Factoring offers you the ability to receive cash now for invoices due to be paid later, without compromising your credit. Factoring is not a loan, rather an alternative commercial financing option that allows you to access the cash from outstanding accounts receivable before they are due to be paid by your customers.
Planning purchases in advance to maintain an edge over your competition involves a steady cash stream. Manufacturing financing using invoice factoring means you can deliver the work, submit the invoices, and receive payment as quickly as 24 hours later. Find out how you can use invoice factoring to help finance your business.