Starting a reselling business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful reselling business.
Importantly, a critical step in starting a reselling business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Reselling Business:
- Choose the Name for Your Reselling Business
- Develop Your Reselling Business Plan
- Choose the Legal Structure for Your Reselling Business
- Secure Startup Funding for Your Reselling Business (If Needed)
- Secure a Location for Your Business
- Register Your Reselling Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Reselling Business
- Buy or Lease the Right Reselling Business Equipment
- Develop Your Reselling Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Reselling Business
- Open for Business
1. Choose the Name for Your Reselling Business
The first step to starting a reselling business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your reselling business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your reselling business.
2. Develop Your Reselling Business Plan
One of the most important steps in starting a reselling business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your reselling business.
- Company Overview – this section tells the reader about the history of your reselling business and what type of reseller business you operate. For example, are you a distributor, wholesaler, retailer, or a dropshipper?
- Industry Analysis – here you will document key information about the reselling industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target market are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your reselling business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your reselling business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Reselling Business
Next you need to choose a legal structure for your reselling business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the reselling business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small business owners. It is an agreement between two or more people who want to start a reselling business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a reselling business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a reselling business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your reselling business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Reselling Business (If Needed)
In developing your reselling business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a reselling business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a reselling business that they believe has high potential for growth.
5. Secure a Location for Your Business
There are a few things to consider when looking for a location for your reselling business. You’ll want to think about the type of products you’ll sell, how much space you’ll need, and your target customers.
Suppose you’re selling products that take up a lot of room, like furniture or large appliances. In that case, you’ll need a spacious location to display your items. You can get away with less space if you sell smaller items, like clothes or jewelry.
Think about the type of customers you want to attract. If you’re targeting busy professionals, you may prefer a high-traffic area with tons of foot traffic. If you’re targeting stay-at-home moms, a location near a grocery store or shopping mall might be more appropriate.
Once you’ve thought about these factors, start touring different locations and see which one feels the best for you. Talk to the landlord or property manager and get a feel for how they do business. If you’re comfortable with them, sign a lease and set up your new reselling business.
6. Register Your Reselling Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your reselling business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your reselling business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
A reselling business requires some licenses and permits that may vary depending on the location and the products and services. For example, you may need a business license, a seller’s permit, and a zoning permit. Contact your local licensing agency or business licensing office to find out what licenses and permits you need.
10. Get Business Insurance for Your Reselling Business
The type of insurance you need to operate a reselling business will depend on the scope of the operation.
Some business insurance policies you should consider for your reselling business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Reselling Business Equipment
To start a reselling business, you will need to invest in some essential equipment. This equipment includes a computer, printer, scanner, and a reliable internet connection. Once you have these basics in place, you can start sourcing products to sell.
12. Develop Your Reselling Business Marketing Materials
Marketing materials will be required to attract and retain customers to your reselling business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your reselling business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional reselling business website provides potential customers with information about the products you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media platforms will help customers and others find and interact with your reselling business.
13. Purchase and Setup the Software Needed to Run Your Reselling Business
To start a reselling business, you will need access to software that can help you manage your inventory and orders. A popular option for this is Shopify, which allows you to create a custom store and manage your products, orders, and customers from one central location. Additionally, you will need a payment processing solution to accept payments.
14. Open for Business
You are now ready to open your reselling business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Reselling Business FAQs
Is it hard to start a reselling business?
There is no one-size-fits-all answer to this question, as the difficulty of starting a reselling business will vary depending on the products you sell and the market you target. However, some general advice for those considering starting a reselling business is to do some research on the best reseller business ideas, and be prepared to put in the hard work required to make your business a success.
How can I start a reselling business with no experience?
If you're looking to start a reselling business with no experience, the best way is to sell online. You can create an online business or join an affiliate program. Another option is to become a dropshipper, which doesn't require any inventory or upfront costs. You can also start a social media reselling business by finding products to sell on platforms like Instagram or Facebook. The key is to find a niche that you're passionate about and start marketing to your target audience.
What type of reselling business is most profitable?
The most profitable type of resale business is one that specializes in a particular product or niche. This allows you to become an expert in your field and provide valuable information and products to your customers. It also makes it easier to market your business and attract customers.
How much does it cost to start a reselling business?
The cost to start a reselling business varies based on several factors, including the type of products or services, the size of your business, and the location. However, a ballpark estimate is around $1,000-$10,000.
Startup costs may include the cost of inventory, marketing, and other necessary expenses. Of course, you can always start small and scale your business as needed. For example, you may only need to spend a few hundred dollars to get started if you plan to sell products that you already have on hand. Whatever the case may be, it's important to do some preliminary research and plan accordingly to ensure that your business can be successful.
What are the ongoing expenses for a reselling business?
There can be many ongoing expenses for a reselling business. Some of the most common ones include inventory costs, shipping supplies and handling fees, and advertising and marketing expenses.
How does a reselling business make money?
A reselling business makes money by buying products at a lower price and then selling them for a higher price. This can be done in a number of ways, such as through thrift stores, flea markets, garage sales, or through online resale business and marketplaces, auctions, or retail stores.
Is owning a reselling business profitable?
There are many reasons reselling can be a profitable business. One reason is that there is a large market for goods and services, and people are always looking for ways to save money. Additionally, more people are looking to buy used items versus new ones as the trend towards environmentally conscious shopping rises. Finally, opportunities to source products at low prices can increase profitability potential for reselling businesses.
Why do reselling businesses fail?
There are many reasons resale businesses fail. One reason is that it can be difficult to compete with larger businesses who have more resources. Additionally, it can be hard to make a profit if the business is not able to purchase products at a low price and sell them for a higher price. Finally, the business owners may not have a good reselling business model or the skills or knowledge to make it successful. They may not know how to market their products effectively, or they may not have a good understanding of what customers want. As a result, they end up losing money and eventually have to close down.