Wholesale/B2B

When you set up your first lemonade stand as a kid, you probably didn't think about how much your supplies cost - the 50 cents a glass you made per glass was pretty much pure profit. But in a wholesale or business-to-business operation, Mom and Dad aren't giving you the ingredients for free. Your relationships with suppliers can have serious impact on your bottom line, your cash flow, and your sanity. Bearing in mind some basic considerations can help to create a satisfying collaboration.

Maximized profits. Of course you'll want to get the best deal possible for your inventory and supplies. You'll need to shop around, especially for items that are commodities. Be sure to monitor prices and continually examine your supply chain. You should also try to find more than one supplier: make them compete for your business. In today's challenging economic environment, you should be able to get some deals. Of course, the Internet is a great place to look for good prices. Business-to-business Web sites often make it easy to get bids, see wholesaler inventory, and determine shipping costs.

Smooth cash flow. There are things you can do to make sure that you don't run out of working capital. Ask your suppliers for extended payment plans so that you can manage your cash flow more easily. Also, you'll need to determine what kinds of inventory levels will work optimally for your business. You might not want to keep 500 extra wallets in inventory if you only sell 20 a month - even if you received an additional 5% off for buying in bulk. On the other hand, if you're on top of your inventory levels, you can ask for early payment discounts.

Trusting relationships. Bear in mind, cheapest isn't always best. There's more to a supplier relationship than the lowest prices - think about building long-term relationships that you can really count on. How will your suppliers deal with returns or faulty shipments? Do they have existing business relationships that they can provide as a reference? Also, check their history with a credit rating agency.

• Meet Nicole and Phillip de Leon of Alexander Henry Fabrics, who discuss the unique challenges involved in wholesaling to business clients. Click on your preferred video format in the 'Watch the Video' area on the right.
  
  
• Access articles on effective competitive analysis, streamlining purchasing through online procurement, managing purchasing to maximize cash flow, and building successful supplier relationships.
  
  
• Find out Fred Steingold's answer to the question, "My small business sells services to other small businesses. We do good work and rarely receive any complaints. Still, I'm concerned about getting tangled up in a lawsuit if a customer has a serious disagreement with us. Any suggestions?"
  
  
• Read a profile of Michael Beirne, CEO of NovaForge, a McLean, VA-based business that provides security services to biotech companies.