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Wholesale Market Is Tough for Little Players

June 10, 1998|KAREN E. KLEIN | SPECIAL TO THE TIMES

Question: I recently started a home-based business that produces custom computer business forms in small quantities, which I sell strictly wholesale. I have a complete business and personal line of custom products, all produced in small quantities, and that is where I want my business to stay--the small-quantity market. My problem is that it's been difficult to penetrate this particular market and I would prefer to stay away from retailing. Any advice?

--Carmen Merstik, La Quinta

Answer: It is difficult to sell small quantities in a wholesale market. Small businesses generally need to have the higher profit margins more typical of retail to survive--or they need to offer some value-added service that will attract customers, such as personal attention, quicker response time or customization.

In a wholesale market you are competing with larger companies that can produce a higher volume of product, handle more orders and operate on lower profit margins. You also may face longer collection times.

To be successful, you will have to promote your products as being delivered faster or looking more artistic than the competition. Or think about offering some items that will differentiate your company and create a special niche that your customers will be willing to seek out and possibly pay more for.

--Peter Cowen,

Peter Cowen & Associates, investment banker specializing in emerging companies

Westwood

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Q: I am an engineer and have been approached to do some consulting. Can you help me find resources for independent consulting businesses? Is there an association?

--Carolyn Chisholm, Torrance

A: There are many associations that exist for consultants in every specialty. Most, however, require purchase of a membership at a cost ranging from $50 to $1,500 before you can sign up for workshops and other resources that you might find helpful.

At this point, as you approach your first consulting job, you might want to consider getting more personal advice and help. If you decide that consulting is a field you want to go into on a long-term basis, joining an association will probably be worth your while.

In the meantime, what you need help with is in designing a letter of agreement and setting up your fee structure. You can pick up a business book that will have boilerplate documents that you can use as a start.

In your letter of agreement, you must define the scope of the assignment, the time duration and the deliverables--exactly what you will deliver in exchange for your fees. Make it as specific as possible and everyone involved will be better served.

I suggest you request up to 30% of your fee in advance, with progress payments to follow and the balance of your fee due 30 days after completion of your presentation. Additional work that is uncovered during your consulting should be done in the form of a change order and no work should begin on it until the client approves.

To get some personalized help in dealing with this assignment, consider hiring a business coach who has had experience as a consultant. For $250 to $500 a month, a good coach would be very helpful in saving you from making big mistakes at the outset of this job. Check the Internet at http://www.coachfederation.org or http://www.coachu.com for local referrals.

--John P. Delmatoff,

Pathfinder Coaching, Diamond Bar

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Q: I am seriously considering an online publication focusing on life in the city. I intend to provide restaurant reviews, movie reviews and schedules, art showcase information and community events. I also would like to offer advertising space on the Web pages. How can I attract prospective advertisers?

--Gary Bordey

A: If you do enter this competitive field, you will need to have a special angle to get people to use your site. There are already many general-interest city guides established on the Internet, including Sidewalk and CitySearch, plus a variety of travel-related city pages that offer guides to recreation, current events, plays, restaurant reviews and so forth.

Do an online search and make sure you know what else is out there before you go forward. Like any small business, you will need a business license and a business plan to get started and attract funding.

As for advertising, you should contact an online advertising broker who will line up advertisers for your site in exchange for a percentage of the fees you are paid.

--Don Hausknecht,

investor consultant, Marina del Rey

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If you have a question about how to start or operate a small business, mail it to Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia 91016, or e-mail it to kklein6349@aol.com. Include your name, address and telephone number. This column is designed to answer questions of general interest. It should not be construed as legal advice.

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