External financing can be a great way to help you reach your business goals, but with so many different terms, rates, and fees, it can be difficult to compare financing options. So, how much does a line of credit cost, and how does that compare to the cost of a term loan?

Term Loan Vs Line of Credit:Typical Uses

While they are both types of debt capital, lines of credit and term loans have very different uses in small business finance. For a deep dive into the differences between term loans and lines of credit, check out our article: Term Loans and Lines of Credit: What’s the Difference?

In general, lines of credit and term loans are best used for the following small business expenses:

Line of Credit

• Inventory
• Payroll
• Seasonal working capital
• Short term costs

Term Loan

• Equipment
• Real estate
• Start-up capital
• Larger costs
• Longer time needed to repay

Term Loan and Lines of Credit Cost Comparison

Interest rates

, annual fees, principal, and credit scores can make for a confusing time when it comes to comparing term loan and line of credit cost. To help you determine the best financing option for your business, we’ve broken the costs down into a side-by-side comparison.

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What is the Prime Interest Rate?

Prime or the prime interest rate

is the prevailing interest rate that traditional banks charge to customers with excellent credit scores. The prime rate is usually the same as the interest rate set by the US Federal Reserve. If your credit score could use some improvement, you will likely be charged more than prime.

Merchant Cash Advance (MCA)

Merchant Cash Advances or MCA are another common type of business financing. When a small business owner takes out a merchant cash advance, they’re given cash up front, which they repay through a predetermined percentage of their daily debit and credit card sales. This can be a great lending option for businesses with fairly stable debit and credit card sales, but it is also a common vehicle for predatory lending practices. If you are considering a Merchant Cash Advance, make sure you read and understand the terms carefully before agreeing to the loan.

Cost vs Flexibility

All three of these popular loan options have pros and cons that you need to consider before choosing a loan for your business. The chart below helps you consider the total cost of a loan verses the flexibility of it’s repayment terms (i.e. how much and how often you will make payments).

Which is Right for Your Business?

Comparing the cost of term loans and lines of credit can feel a bit like comparing an apple and an orange. If you are considering an MCA as well, the decision can get even more confusing. The best way to decide what is right for your business is to start with what your business can afford in terms of monthly or weekly payments, what the loan will be used for, and what loan terms work best for your business’s financial situation. Once you have that list, you can start comparing it to different financing options to find the best fit for your business.

Financing with Accion Opportunity Fund

If you do decide that a term loan is right for you and your business, consider working with Accion Opportunity Fund. At Accion Opportunity Fund, our goal is not only to help you get the funding and support you need to launch your business, but to help you grow and thrive once you’ve got your foot in the door. Accion Opportunity Fund is a government-regulated, non-profit financial institution with a mission to help small business owners reach their goals. Find out more about our small business loan program and apply online today.

Disclaimer: Average interest rates and typical loan terms can change rapidly, so please thoroughly check with any provider to confirm rates and terms.

Learn More About Business Financing

When it comes to your finances, you want clear guidance and easy to implement tools based on your unique needs. Visit Accion Opportunity Fund. to get started strengthening your financial management and meeting your goals.

Experience a different kind of financial education. Learn with AOF has flexible, on-demand courses developed by small business owners, for small business owners. Learn on your schedule, with no time commitment or limit. Save your progress any time to fit courses into your busy schedule.

When you’ve gone through the process to create a product you’re proud of, you want it sold far and wide to reach as many customers as possible. But how do you get your product in stores? Mike Harrington, a sales trainer for Boston Beer Company, shared his team’s strategies for product distribution.

In this article, we will provide you with information on product distribution, best practices, examples, and easy-to-access resources that relate to initiating, building, and maintaining distributor relationships.

 

What Is a Product Distributor?

A product distributor—or wholesaler—is a company that sells products to retail businesses. As a business owner that sells and manufactures products—or supplier—you can sell your product in bulk at a contract price to the distributor. Then the distributor sells your product at wholesale pricing to retailers.

3 Types of Product Distributors

1. National:

National distributors have relationships with key retailers or “national accounts” as it’s known in the business. These are major retailers like Whole Foods or Walmart—large retailers that are found all over the country. They can leverage these relationships to get your product into mass distribution. They can do this quickly and on a large scale.

While larger distributors are going to have the ability to quickly increase your product’s distribution, they aren’t going to spend as much time getting your product into smaller, regional or local chains. They also aren’t going to spend as much time talking about and selling your specific product, since they need to spread their time and attention across the vast array of products they sell.

2. Regional: Regional wholesalers and distributors don’t have quite as big of a geographical footprint. They also probably have less brand recognition and overall pull as compared to national distributors. But regional distributors are more engaged with their suppliers, and therefore have more time to devote to you and your supplier partners to continue working on growing the brand.

3. Local or Specialty: These distributors are great for specific retail accounts. They are often more expensive and have stricter guidelines as it relates to distribution. The areas they sell to are smaller, and they sell fewer products. In some cases, there may be opportunities for more profitability because they are so specialized.

The smaller distributors may have more time to dedicate to you and your product, but they aren’t going to have the ability to distribute your product as widely as a large wholesaler.

Advantages to Working With a Product Distributor

Distributors are pretty complex organizations and there are some nuances you should know before working with them. First, we will explore the advantages of working with a product distributor. There are three main reasons why you want to consider working with a product distributor:

1. Wider Distribution: This allows you to get your product to the widest possible audience. When working with the right distributor, you can quickly expand your business’s footprint.

2. Provides Resources: Provides third-party sales, delivery, and infrastructure capability to your business. Your sales and delivery force might be a small team, so you can see how a distributor could help.

3. Saves Time: Creates more supplier bandwidth to invest time in product development and manufacturing. You can invest time back into yourself, your brand, your product, and your company because the distributor is handling the sales capability and infrastructure that have probably saddled you since your business has grown.

The Disadvantages of Working With a Product Distributor

Of course, before signing on the dotted line, there are a few things you should consider about the cons of working with a product distributor.

Negative Impact on Profit Margins: You probably have an idea for how much you’d like to sell your product for at retail, and what your profit margins are. You’ll have to take that into consideration when trying to figure out what price to sell your product to a distributor for, and then the distributor will sell your product to retailers. The con: working with a product distributor will negatively impact margins on product sales.

Someone Else Tells Your Brand Story: You’ll have to rely on a third party to “tell the story” of your product as well as you do or your direct sales team would. Ultimately, no one is more passionate about your business than you are or your direct sales team. Therefore, it’s critical upfront that you train the salesforce of the distributor and show them that passion so that they have the tools to tell your story. It’s your job to get them as excited as you are to sell your product. Come prepared with materials to make it easier to sell your product and to know where they should sell it.

Difficult to Gain Traction: When it comes to distributors, many of them are already working with a large number of products. It can be difficult to generate and maintain “share of mind” or product popularity when a product is young, not established, and with no proven track record. It’s important to be consistent in pursuing sales channels with distributors to try to develop consumer awareness.

Whether you choose to work with a product distributor or not depends on your long-term vision for your business, and where you plan to be in several years. If a distributor makes sense in fulfilling those plans, then it’s best to get started with a distributor early on.

Frequently Asked Questions About Product Distributors

1. How do I know when my business is ready for a distributor?

When there is warranted volume and profit opportunity, as well as a corresponding increased need for:

• Inventory Housing
• Sales Staff
• Trucking and Delivery

Knowing when you’re ready for a distributor comes down to questions of capacity. To what degree do I have the ability to produce a certain quantity of my product? Then based on the sales rate of my product, how many retail outlets do I want to sell my product to? Once you understand the volume and profit opportunity for your product, that’s when it makes sense to consider a distributor.

There are some other factors to consider when evaluating your need for a 3rd party distributor:

• Your business plan: How many or how much of your product are you looking to produce? How many customers are you planning to sell to?
• Customer service: You (the supplier) can no longer adequately service your existing customer base due to time constraints.
• Capacity: Sales projections out-pace current production levels.
• Delivery Services: The cost of product servicing and delivery to the supplier begins to seriously affect sales and profits.

2. What questions can I expect from a distributor? What information can I prepare when I begin working with a distributor?

Before you can start building relationships with distributors, you need to have a plan.

What is your plan? You can’t build sales support materials until you have a clear picture of what you want to accomplish and how you’re going to do it. Most suppliers come up with an annual plan that explains the following:

• Distribution opportunity and targets: These are the retail outlets not selling your product that could be.
• Target category and demographics: This enables the distributor to work with you collaboratively to identify the direct opportunities for your product.
• Suggested pricing and wholesaler margin: You need to consider your margins, the distributor’s margins, as well as the retailers’ margins.
• Available supplier resources: These are resources you might bring to the table, such as financial support like salesforce incentives; manpower such as sales reps you can leverage to help the distributor; advertising on radio or TV; the point of sale (POS), etc.
• Market insights and positioning: Where will the product live? What does it add to the category? What value or advantage does it bring to the wholesaler? Is my product an improved version of an existing product that brings an advantage to the wholesaler and adds something new to the retail space? Perhaps it’s a completely new product that creates its own category.

Ultimately, you must be prepared to answer these questions from the wholesaler:

• What is the reason/value for the distributor to PLACE the product? What angle can they use to sell your product to retailers?
• What is the reason/value for the consumer to PULL the product off the shelf or out of the cooler, or wherever the product is placed in retail stores?
• In other words, what differentiates your product from other similar products? Some reasons might be quality, profitability, and value to the customer.

3. How should I approach a conversation about increasing my distribution?

Distributors sometimes look at “How can we increase distribution?” as an adversarial question, but they shouldn’t. Increased distribution is good for everyone’s bottom line. However, distributors have a lot of products to sell, and it’s up to you as the supplier to show them the opportunities that you see and make it very clear.

You can only effectively communicate solutions to buyers who see a gap that your proposed solution or product will fill. If the distributor is underperforming vs. your plan, the supplier’s responsibility is to illustrate the GAP: “This is where we are. This is where we could be. This is what we stand to gain. This is what we stand to lose.”

If the distributor is overperforming vs. your plan, it is STILL the supplier’s responsibility to illustrate the GAP: “We’ve achieved the goal, but demand is such that we have the opportunity to increase distribution, volume and profits. We are doing well, but this is how we’re performing vs. the competition or competitive distributor.”

The way you illustrate the gap is via market insights. This depends on your and the sales force’s ability to survey the market by gathering data on accounts that either carry or don’t carry your product and use that data to boost the selling story you’re presenting to the wholesaler. Success stories will sell your product. It helps greatly if you have a success story about how you worked with a retailer and you can pass that story on to the distributor’s sales force.

Increasing distribution depends on increasing share of mind—product and brand awareness—with distributors. To help your sales force increase share of mind, you can use product launch presentations to show exactly what the brand is and how to sell it. Provide selling tools to make their job easier and give them a selling story that makes it easy to recite to the retailers. Consistent products and valuing quality certainly helps, as well as providing field support to the distributor.

4. Are there any standard requirements that distributors have? For instance, do I have to be producing at a certain volume or speed?

The short answer is no, not necessarily. The distributor needs to see three things:

• The immediate profit potential of selling your product.
• The product is worth the time and effort necessary to sell it.
• That housing the product in their inventory will lead to increased sales and profits. They want to know there is value in the space that your product takes up in their warehouse.

5. Are there any resources that help me find distributors or choose between them?

There is no single go-to resource for finding and selecting a distributor. You can ask for referrals from other business owners in similar categories, attend trade shows, and ask retail buyers about their preferred distributor and why. You can learn a lot about walking into a retailer, examining the products on their shelves, and having a conversation with their buyer about their preferred distributors in a certain local geography. They will probably have a lot of insight into why one distributor works better than another.

Become a student of the industry from the above but also read journals and industry blogs to stay on top of the trends.

Lastly, if you have an attractive product and proposal, understand that you possess leverage. You do NOT need to enter a relationship with the first distributor that makes an offer. Make multiple proposals and evaluate which distributors’ offers are most attractive.

Conclusion

It’s important to understand the advantages and disadvantages of distributors. Know your business plan, where you are, and where you’re going in business. If you see your business expanding, it’s probably beneficial to partner with a distributor to get there. Be prepared and do your homework. Selling your product is not just about distribution, but about product and brand awareness or share of mind.

 

All of us have walked into one of those stores that just feels right – it has the right atmosphere, the right layout, the right music, the right smell. The whole ambience signals that you’ve come to the right place. Likewise, the attractive design, easy user interface, and smart organization of a website tell you as a customer that the shop has what you need.

You want to create this kind of engaging retail experience for your customers. You want people to come to your store or site and know immediately that you’re the right brand for them. So how do you do it?

 

Identify Your Customer

The first step in merchandising your brand is getting to know your customer. Ask yourself some basic questions:

What is your target demographic?

What about your product or service appeals to them?

What types of experiences will they respond to?

For example, say you’re opening a frozen yogurt shop near a university. Your target demographic will probably be university students – they’ll be attracted to a specific type of design, contemporary music, and trendy topping choices (not to mention plenty of outlets to charge their devices!). On the flip side, imagine you’re opening a frozen yogurt shop near an established neighborhood of baby boomers. They probably won’t like loud contemporary music and won’t have any interest in whether you offer kombucha. The first step in creating an engaging experience for your customer is figuring out who your customer is and what appeals to them.

You can learn more about defining your target customer and refining your brand to attract them here.

 

Engage the Senses

Once you’ve nailed down your target customer, you can start putting together concrete elements of your retail experience that will draw them in. It can be helpful to think about it in terms of the five senses – engage your customers through sight, sound, touch, smell, and taste.

1. Sight

Visual response is arguably the most important aspect of a retail customer experience. Consider what the space looks like and what you are trying to convey.

Start with the basics. Is your store clean and well-organized? Does the lighting make sense for your demographic? Do your shelving, cabinets, and other fixtures fit within your aesthetic?

Look at how your merchandise is displayed. Again, consider your demographic. Will your target customer prefer an artsy arrangement or a simple, easy-to-use layout for quick access? For example, a clothing store for millennials may choose to organize by outfit or style rather than by type of clothing. A store that focuses on simple basics, on the other hand, may organize all the pants in one place and shirts in another.

One way to make sure that the visuals work is by using the PSA approach. PSA means “Place, Step Back, Analyze:”

Here’s how to put PSA in action in your store:

• Have an idea
• Place your products so they look pleasing to the eye
• Step back and look at the whole picture

Put yourself in the customer’s shoes. Would this visual layout make you feel at home in this space? Does it send the right message for your brand? If not, make some changes until it feels right!

2. Touch

The next thing to consider is the feel of your products. For example, if you’re selling a $100 sweatshirt, can your customers perceive the value from the feel of the material? Your want the feel of each of your products to convey their quality.

Research shows that if a customer picks up a product and carries it around the store, they’ll be more likely to buy it because they are in the mindset that they already own it. Make your products accessible so that people can physically touch them and move them around. Train your salespeople to encourage customers to try out products, try on clothes or try samples of food – this may be all it takes to get them hooked.

3. Sound

The next sensory factor to consider is sound. What do customers hear when they enter your space? Is it pleasant and soothing, or jarring and off-putting?

Many retailers use music to set the mood for their customers. High energy music would be appropriate in a teen clothing store, while mellow instrumentals would be appropriate in a spa.

Both Pandora for Business and Spotify provide business music stations for little cost. Since it’s important to check out music licensing requirements for use in retail space, these two stations have pre-checked and cleared all licensing issues, so they’re easy, low-cost options for business streaming.

4. Smell

Scent is next on the sensory list. It will apply more often than you might think. Obviously a coffee shop or bakery would want to entice customers with the aroma of their products, but smell is an extremely powerful sense and any retail experience can benefit from a smart choice in this area. A fresh, light scent in a clothing store can summon memories of fresh laundry and soothing aromatics in a spa enhance the sense of relaxation.

Aroma and fragrance point to the nature of your products as customers walk in the store, so make sure you’re hitting the right scent notes. By the same token, be very careful that no unpleasant smells sneak into your space. A backed-up sewer or overflowing garbage can create quite a stink and it only takes one unpleasant experience to drive a customer away forever.

5. Taste

Taste is somewhat narrower; it will generally apply only to businesses that sell food and beverages. Just like getting customers to pick up and feel your products encourages a sale, allowing them to taste products can be just what it takes to lead them to a purchase. Sam Adams knows that tasting their products will make a sale, so they provide daily tasting of their unique brews. You can also turn tastings into special events, which have the benefit of giving your brand both exposure and prestige.

 

The Bottom Line

Knowing how to create an engaging retail experience for your customers relies on two main points. The first is knowing who your customers are so you can provide what they want. The second is incorporating the five senses to create an immersive experience which will leave them wanting more.

 

You may have a million ideas for the perfect product to sell or you may have trouble brainstorming just one. But before you start crafting a business plan around a product or service, you’ll need to consider the market. When deciding what to sell, it’s all about finding your product niche.

Check out these 5 actionable strategies that will help you find your niche:

1. Figure Out Your Options

What are your options? This is a loaded question. The answer is: everything! You can, theoretically, sell anything and everything. But in order to make a name for yourself, your brand, and your product in a saturated market, you’re going to need to focus and narrow down the options.

In other words, you need to carve out a product niche. A niche is a specific category within a category – for example, instead of “retail clothing” you could focus on “monogrammed hand-knitted infant caps.” See the difference?

Not everyone will want your product or service, but that’s ok! The trick is becoming the go-to source for the people that do want it. You want your brand to stand out and be memorable, which means putting your own unique spin on what you’re selling.

So, start by considering what you want to sell and what you have the ability to sell – you probably don’t want to start a bakery if you don’t know how to bake! Then, take a look at the other businesses that sell something similar and look for gaps in their offerings. Say you want to start a coffee shop -you visit the other shops in that area and realize that they aren’t offering fair trade coffee. Finding your product niche might mean exclusively selling fair-trade coffee products – you can build your brand, your reputation, and your customer base around this. If possible, find several different angles you can take to differentiate your product or service so that you can choose the best one later in the process.

2. Consider Your Customer

So you know what you can sell. Now you need to figure out what you should sell. Who are your ideal customers? What can you give them that no other business can? What do they want? What do they need? Are there enough of them to support your business? Will they be willing to pay the prices you need to be successful?

Do some research to figure out which of your potential options is likely to be your bestseller. One of the best ways to do so is to simply go out and meet some people! They’ll be happy to tell you what they want and how other businesses aren’t meeting their needs. Talk to them about your ideas and find out if they’d be interested – they’ll also give you feedback that can help you make your ideas even better! Of course, the other benefit of this kind of research is that it’s free.

3. Crunch The Numbers

When you’re figuring out what to sell, you’ll need to crunch some numbers. The big three (Data, Demographics, and Psychographics) will help you determine what your customers will want to buy and how much they will be willing to pay for it. Formally assess the spending habits, incomes, occupations, and values of your customers to come up with not only ideas for your product, but also pricing structure as well.

If you’re in a high-income area with a large number of two-income households, you may have a higher ceiling for your price point as opposed to an up-and-coming area with young families.

Now compare the pricing structure you think the market will support to the costs of running your business. Will you be able to make enough to turn a profit? You may need to reevaluate your price point and your expected costs to see if you can make it work. If that’s not possible, it’s time to revisit your decision on what to sell. It’s not enough to offer something in a unique niche that people want to buy – you have to be able to make money selling it!

4. Harness Your Passion

If you can create a product you’re passionate about, your customers are going to respond to that and, hopefully, become equally passionate about your business. Passion translates to a compelling brand and to a more credible, authentic product.

You can start off by finding your product niche that can support a business and simply go from there. But choosing something you’re truly passionate about can make the difference between a functional business and a remarkable one – when you care about your work, your products and services are better and your customers can tell the difference.

5. Share Your Uniqueness

How can you make your product stand out amongst the competition? Technology to the rescue! The most exceptional and sought-after products and services won’t do you any good if no one knows about them, so spread the word! In today’s world, this is cheap and easy to do.

You’ll want to create a website that presents your brand and your products and services in an engaging way. You can also create social media campaigns to spread the word and help bring in new customers. Then, encourage your customers to spread the word even further. This kind of grassroots support is extremely effective, especially for unique products and services.

This kind of marketing will give you an additional benefit: tons of data from your website and social media profiles on what your customers are talking about, what they like (and don’t like), and how you can better meet your goals. The decision on what to sell isn’t just a one-time thing – it’s something you should revisit and regularly evaluate to ensure you’re still meeting your customers’ needs. There’s no such thing as a perfect product or service, but the most successful businesses constantly strive for that goal.

Wondering What To Sell? Just Find Your Niche!

Finding the right product to sell is the key to building a thriving, successful company. With some research and lots of passion, you’ll be able to choose what to sell and carve out your own product niche. It’s not about finding the perfect product; it’s about finding your product niche that’s perfect for your customers.

Want to turn your love of baking into a successful business? It’s going to take a lot more than a pastry bag and a dream to start a bakery. Here are the seven steps to turn your passion into a reality.

Step 1: Select a Bakery Type

What kind of bakery do you want to run? There are a lot of potential ways to start a bakery business. Some options to consider:

• Wholesale Bakery: Do you want to sell your products to existing establishments, like coffee shops and restaurants? Many businesses will start out as wholesale, and then once they’ve established a following, open their own shop. If you go the wholesale route, you’ll have to decide if you want to work out of your home kitchen (check laws in your state to make sure you’re compliant), a kitchen incubator, or try to work out an arrangement with a restaurant to use their kitchen during their off-hours.
• Retail Bakery: If you want to open your own bake shop, think about how you want the store to operate. Counter-only? Sit-down? Food truck? Each option comes with its own rules and regulations, so research thoroughly before you make a decision.
• Online Bakery: If you want to sell baked goods online, you’ll have to consider where to do your baking just like you would for the wholesale option.

Step 2: Test Your Recipes

If you’re going to be doing all of the baking, your next step is to test and perfect your recipes. Friends and family are a great place to start, but eventually you’ll want some more objective feedback. Farmer’s markets and small grocery stores are a great place to give out samples and solicit reviews. If you’re planning on offering additional items you won’t be making yourself, now is the time to source them.

 

Step 3: Calculate Costs

Once you’ve figured out what baked goods you’re going to sell, you need to figure out how much capital you need to make it happen. You’ll need to know those numbers to create your bakery’s business plan, and also to figure out how much money you’ll need to bring in to cover those costs. Consider all of the following:

• Recipes: For any items that you’ll be making, cost them out on a per-item basis. It’s important to know how much each cupcake costs to make so you can figure out what to sell them for.
• Supplies: Cost out any additional items you intend to buy on a regular basis, such as napkins and utensils, bake boxes and other packaging and serving supplies, and even cleaning supplies for the kitchen and retail space.
• Equipment: Calculate costs for any equipment you may need to purchase. You may luck out and find a commercial kitchen space stocked with a number of the items you’ve factored in, but you shouldn’t count on it.

 

Step 4: Write a Bakery Business Plan

If you plan on seeking funding for your bakery, you’ll definitely need to have a business plan to give to potential lenders. But what if you’ve got the startup money saved, or have already secured investors? Write a business plan for your bakery anyway. It will help you to become more focused on growing a viable business.

Here are the basic elements that a bakery business plan should include:

1. Executive Summary: An overview of your bakery’s goals.
2. Business Description: An explanation of your company and industry, along with the current outlook and forecasts.
3. Organization and Management: An explanation of how your company will be structured. How many employees will you need? Who will be in charge of what? Even if the company will just be you for the foreseeable future, it’s a good idea to think about when you might need to bring additional team members on board.
4. Products and Services: This is where you explain your concept, including what you’re selling, what vendors and suppliers you’ll use, what your anticipated costs are, and what makes your business unique.
5. Market Analysis and Strategies: An explanation of who your competitors are, how you differ from them, and what kind of market share you reasonably expect to take.
6. Sales and Marketing: An overview of how you plan to market and grow your business.
7. Funding Request: If you’re creating a business plan in order to secure funding for your bakery, this is where you ask for how much money you need right now, explain what you’re going to spend it on, and when you anticipate needing another round of financing.
8. Financial Plan: Even if you aren’t looking for funding, completing this section is a good exercise. List out your sales projections, costs, and how you plan to allocate resources. This will give you a good idea of whether or not you can actually make money.

Step 5: Secure Funding

If you’re just starting out in business, a bank loan may be out of your reach. Traditional banks deal mainly in large sums. If you’re starting a bakery, you likely won’t need that much cash. Here are some alternative lending options for new businesses:

• Microloans: Usually smaller than a traditional bank loan, microloans can be a great option for a business just starting out.
• Investors: If you’re willing to take on a partner or partners and give up some of your business equity, investors may be an option.
• Savings: If you can scrimp and save enough to get your business off the ground, you can avoid having to ask for money or pay interest. This isn’t possible for everyone, obviously, but it is ideal.
• Crowdfunding: There are tons of websites out there for drumming up money for your business, and lots of people who donate money on those sites. If you decide to go the crowdfunding route, make sure you read the fine print so you understand fees and penalties for not reaching your funding goal.
• Friends and family: More forgiving than a bank and with usually with much less interest involved, loans from friends and family can give you the boost you need to meet your funding goals. If you do borrow money from friends and family, it’s a good idea to document the payment terms, just to make sure everyone is on the same page.
• Credit cards: This is a risky option for financing your business, but if you have a plan in place for making required payments, you can keep your credit in good standing and keep your business afloat.

Step 6: Choose a Commercial Space

Whether you’re looking for a commercial kitchen to bake in or a full-scale baking and retail operation, finding the right space can be a long and arduous process. Know what you want in a neighborhood and space, and look at a lot of different kitchens before you make a decision.

As you get deeper into your search, depending on economic factors and your preferences, you might decide whether you want to buy or rent a commercial space. Consider foot traffic, accessibility, and nearby businesses that could complement or compete with yours. Most importantly, make sure any location you consider meets all safety requirements, which vary from state to state.

 

Step 7: Market Your Bakery

If you created a business plan, you likely spelled out your overall marketing strategy. Now it’s time to put that plan into action! Make it clear from the outside of your bakery that you’re having a grand opening, and get the word out through social media, flyers, and local media. Keep the momentum going by promoting your business both online and off.

Getting to wake up every morning and do what you love may not seem like a lot of work, but turning a baking hobby into a viable business will take a lot of skills beyond the kitchen. Don’t be afraid to ask for help when you need it, and remember that you’re going to be learning a lot about running a small business on the job, and that’s okay.

 

It’s a tricky balance: How do you keep a good assortment of products-but not too many? How do you keep your stock low-but not too low? How can you increase your inventory turnover-but at the right profit level? It can be hard to find just the right recipe, especially when seasonal products enter into the mix, so let’s explore the basics and some inventory management techniques you might find helpful.

An inventory system will also help you know if you have a theft problem, whether from employees on the inside or customers on the outside. If you run a manufacturing company, you must keep track of raw materials, goods in the process of being made, and finished products.

All of these represent money that’s tied up until the product leaves your factory and gets purchased and paid for. If you’re a retailer, it’s a similar story, with merchandise sitting on shelves or stacked in your storeroom.

Most likely, the stock of items you need to do business makes up a large portion of your investment, and managing it is key to making the most money, especially for small businesses that are less likely to be able to absorb the kind of losses inventory issues can cause.

 

Choosing an Inventory Management System

The first step to managing your inventory properly is knowing what you have on hand. You can go as simple or as fancy as you like, depending on the nature of your business and how many items you’re dealing with. For some businesses, a simple logging system would suffice, while for others, a computerized setup is much better.

 

Manual Inventory Record Keeping

If you don’t carry a lot of different items, or you don’t move many each day, a stock book where you log transactions might be fine. You list the types of items in one column, and write down the sales in another. This tells you at a glance how many of each have been sold. You can do this in an actual notebook or set up a basic spreadsheet on a computer. This is the simplest form of inventory management, and it works best when just one or two people enter information and there are only a few different items to keep track of.

There are a couple of methods of manual logging to consider. You can use tags, cards or tickets to track each type of product, entering them in your log as they sell. You can also use sales receipts from your cash register, comparing them with delivery receipts to figure out how much has been sold.

Remember that you MUST be sure to enter every sale or you might get caught short. The accuracy of a manual system, and therefore its usefulness to you, is totally dependent on how you use it.

It’s limited in how useful it is for analyzing sales data, but manual tracking might work quite well for you in the beginning stages of your business, especially if you’re not dealing with a large size or variety of products. As the number of items you sell or manufacture grow, however, you may want to think about using a computerized system for inventory control.

 

Computerized Inventory Management Systems

Today, when most of us are so used to using computers, tablets and smartphones, it makes sense to bring their speed and utility to inventory management. Even owners of very small businesses will usually benefit from a more automated system of inventory tracking. Without too much of a learning curve, you could spend far less time entering data and get far more useful information than trying to do it manually.

There are a couple of different types of computerized systems, from programs that are designed to track your inventory through the warehouse and manufacturing end, to those designed more for retail applications. Some even tie right into your accounting software, automatically updating cash flow reports and income projections.

 

Point Of Sale (POS) Systems

With this type of system, your cash register doesn’t just ring up sales and figure out the proper change, it’s part of a system that also keeps track of your inventory. Retail stores, bars and restaurants generally find POS systems very helpful in managing inventory and supplies.

With each sale, you get an updated, real-time look at where things stand, and can tell at a glance which items are selling and need to be reordered, and which are not and might need to be discounted to move. You can also enter other information during a transaction, such as customers’ email addresses or cell phone numbers, which can be very helpful to your marketing efforts.

If you’re considering using a POS system, look into the types of reports it will give you and how easy it will be to use to track your inventory. You want to easily be able to add new items into inventory and set alerts for things that are running low.

POS systems are customizable, but usually include the software, cash register, receipt printer, bar code scanner, and credit card reader. If you can’t afford to go with a full-blown system, start small and add on as you need to. There are even free and very inexpensive POS apps for your smartphone!

 

Inventory Management Software

Many businesses find it helpful to integrate their inventory tracking with their business accounting. Tying the two together will easily help you understand the bottom line impact of inventory on your finances.

QuickBooks has several add-on products that will track inventory, including an inventory module and a POS program.

SkuVault integrates with dozens of other software systems, such as e-commerce front-ends, drop shipping services, POS systems, and accounting programs.

Software consulting firm Capterra has a comprehensive list of inventory management titles and reviews if you want to explore further.

 

Basic Inventory Management Techniques

Whether you’re using a manual method or going computerized, knowing what your inventory is will help you manage it to make the most money you can. Some techniques to consider:

Set Up Reorder Points

For items that are selling well and you plan to continue carrying, set up a minimum level at which you’ll want to reorder. When the number you have on hand reaches that reorder point, you’ll generate an order. You can do this manually or set your inventory management software to do it automatically.

Clear Out Slow Sellers

If you’ve had items in inventory for a long time, think about discounting them to move them out. They’re doing you no good sitting on the shelf, so it may pay to sell them for less and put that money to better use on faster-selling items. One exception to this might be seasonal items that may still be in style and sell later on.

Identify Trends

If sales have increased for a product and you expect that will continue, increase your order quantities or put in a special order to make sure you don’t run out. Be careful not to over invest in fads or trends, but timing it right could benefit you greatly.

Physical Inventory

No matter which type of software or manual method you choose, you will need to do a periodic physical inventory, counting what’s on hand and comparing it to what your records say. Make a list of what you’re “supposed” to have, then count what is actually in stock. This way you can account for any losses due to theft or the misplacement of goods, and tighten up procedures to cut down if that’s happening.