The iron or steel wholesale business is purely based on supply and demand. The Wholesaler buys his products directly from steel manufacturers and sells to retailers.
The retailers then sell to every other person like contractors, artisans and private individuals. The general purpose of iron wholesalers is the sales of steel ware to retail outfits.
Wholesale steel business demands more capital investment than Aluminum or
steel fabrication business. The most capital intensive is steel manufacturing.
Steel manufacturing plants costs an insane amount of money compared to wholesale steel business. To get started in iron wholesale business you need to understand what the business entails.
The financial implications cover purchasing the product, space, shop, staff and storage facility. Steel is heavy and you need specialized equipment or labor to move them around.
You also need to secure your store from unwanted guests. Let us look at what you need to start your wholesale steel business.
The iron wholesaler is only as good as the product he sells. Make sure you select top quality products for your customers. Find reputable companies that provide good grade steel.
You don’t have to buy all your steel from one company but spread your options. Steel wholesalers deal in different grams of steel, bolts, nuts and roofing sheets.
The type of product you choose to sell depends on your business plan. Get a contract deal from the manufacturers for supply of the goods. A good manufacturer will assist wholesalers with retail pricing and general promotion of the product.
You need iron shelves to store your iron rods. The shelves are made out of steel, narrow, long and open at both ends.
Wholesalers find this design convenient in stacking a huge amount of same sized steel together. Other equipment's you need are cutters, benders, and tape measure.
Steel products generally sold by steel wholesalers are Stainless steel, steel plates, tubes, pipes, galvanized sheets. Others are cut to size metals and hardware like metal cutting saw blades and metal shearing equipment.
You might need an industrial weight, a mini forklift including a delivery truck. You also need a large warehouse to store your major stock.
Write a Business Plan
The purpose of a business plan is to raise capital for your iron business. The plan should highlight sales projections and distribution methods.
It also showcases expected operational and financial provisions. Others are the company profile, location and the services you will render.
The business plan should state if the company is providing both wholesale and distribution services. Include marketing strategies, business location and goals.
Other things that are of importance are budget and growth forecast. The company ownership structure and future projections will make a more robust plan.
Banks take all these parameters into consideration during a loan assessment.
Provide Adequate Storage
Wholesalers deal with huge quantities of steel products that need warehousing. Get a large secure storage space at the back of your store or close to your location. The size of the store and storage depends entirely on your inventory.
To maximize storage space, wholesalers build long iron shelves in multiple rows. The shelves effectively display the iron while separating them according to sizes.
Storage space is an essential requirement for iron business.
What are your Services?
What services are you going to offer your customers? Your primary source of income centers on margins per purchase of goods. The more goods your customers buy the greater your margin.
Any purchase made by retailers and contractors is your primary source of income. Other secondary earning is made through auxiliary distribution of products to construction sites and retailers. The cost of transportation is added to the purchase order.
That being said you need to own a lorry to provide delivery service through your supply chain. The fees charged for delivery and supplies quickly adds up to a substantial amount.
Get a Business License.
Wholesalers of iron rods need to get a business license before they operate. Different countries have different requirements for certification. The license attracts some fees and certain conditions.
There are also several steel associations both local and federal. Find the one closest to your location that deals with wholesale steel operators.
Financing the business
To start a wholesale steel business you need a start-up capital of about $100,000. The business plan you made earlier will help in securing a loan. The bank loan might need collateral in form of landed property or other valuable assets.
Try to secure a long loan spanning several years with a low fixed interest rate. The reason is because you need time to build inventory and collate profit and loss reports.
If you pay the bank according to terms of your agreement you will be fine. The major reasons for securing the loan include development of a company office and purchase of goods.
Other benefits of the loan are license fees, vehicular purchase and time extension.
Register your Company
Getting a license to operate is different than registering your company. Register your company as a wholesaler of steel and aluminum products. Make the company a limited liability company to limit the liability to the company alone.
If you make it an enterprise then any liability will extend to your personal savings and assets. While we are on the issue of liability don’t forget tax related matters.
Find Retailers in your Locality
Retailers will buy from your store if you offer them a sweet deal. Don’t over extend credit or you will run out of inventory and have little money to restock.
Offer discounts to trusted and regular customers and contractors. Apply simple marketing techniques like having a large signboard and business cards.
Treat your customers fairly and keep an eye on the difficult customers. Stock only the more popular steel and a few other products.
Offer added services like shipment or transportation of the goods for a fee. Local or international delivery service will bring additional income.
You might need a management team with wholesale experience in the metal industry. This will insure quick profitability in the shortest period of time.
You need to start making profit to pay off the bank loan. It is possible to start seeing a good profit margin within one year of operation.
Why are you going into business if not to make money? You can forecast a strong growth rate based on sales records and demand.
Write an all inclusive sales and operating cost including profit and loss. Hire an economist to look through your books for a proper assessment
There is no point in starting a business if you don’t have growth and expansion plan. The bigger your organization gets the more growth and expansion.
The best way to secure your business future is through high quality products and aggressive marketing. Every business needs marketing irrespective of the size or scope of operations.
Effective marketing will bring customers to your store. The best methods are through newspaper advertisements and television adverts.
You need to watch your advertising budget carefully so you don’t over spend. Send sales marketers to construction sites in your locality with brochures showcasing your services.
Your main target are building contractor, iron benders and retailers.
Build a Website
Despite the fact that your business is location bound having an online presence is a good idea. The website is built to showcase your products and service including contact information and something about your company.
A website is a 24hr marketing tool you can’t ignore
Starting a Wholesale Steel Business
A recap of what you need to establish an iron wholesale business
1 Buy the steel product form reputable manufacturers
2 equip your outfit appropriately
3 write a business plan
4 get ample storage facility for your products
5 define the type of service you want to render
6 Your business needs both registration and a license to operate
7 Seek loans from financial institutions like banks or cooperative societies
8 get a business name
9 find retailers interested in buying your stock
10 you need a good management team
11 do some sales forecast
12 have an expansion plan
13 do effective marketing to build your business
14 start a business today
Wholesale steel business is a lucrative venture that needs moderate capital investment and minimal technical skill.
The business owner needs to establish contractual agreement with steel manufacturers. If possible get a line of credit form the manufacturers.
A small scale wholesale business needs only a few staff numbering between two and four. Don’t forget to market your business through billboards, posters, handbills and complimentary cards. Other methods of marketing are multimedia channels and online resources.
If you like iron wholesale business you may also like Aluminum roofing manufacturing business ideas.