Affiliated School;
I would like to start a local distribution company that deals in the distribution of home use appliances and consumables like soap, washing powders and detergents. This is mainly because there is a shortage in distribution and most of the retailers have to go and get their own supplies from the manufacturers. The kind of financing required is the start up financing; this is basically at the seed level (Cumming, 2010).
Having conducted a small research using questionnaires, it was clear that there was a lacuna in the distribution of goods in the local area. There is only one big distribution company but it is expensive and most of the small businesses choose not to use its services. The main idea is to start distribution of non perishable goods and increase variety with time and exposure (Ijiri, 1977).
In order to be able to be certified as a small scale distributor of commodities there are some requirements that have to be met. They include ownership of at least one mini lorry, a small warehouse that will be the storage space. It should have an office in the background as well. A qualified driver and initial float of at least $20,000, this is meant to cater for the initial goods to be bought and all the other operational expenses. In total the start up capital required will be $176.000. The cost is broken down as below:
The implementation will be based on delivery; this is because the company will charge a lower initial price for the service as compared to the already existing firm. The price will be increased with time and after market control. There will be a contract drawn up between the retailers and the company and also between the manufacturers and the company.
There are a total of 30 retail outlets in the local area that have agreed to the service; all require a weekly supply of the detergents but on different days. Each delivery will be charged $300. The gross revenue earned from the delivery will be $9,000, less the operational costs of paying the driver and the fuel and office requirements. The net profit will be $5,800 per week. In a month the net profit will be 5,800 × 4= 23,200. Without any increases in clientele base and working with the minimum price the payback period for the business will be 7 months. This means with increase in clients, increase price charged and efficiencies that allow for economies of scale, the business will expand fast enough and increase in volume of goods delivered.
References
Ijiri Yuji, Herbert Alexander Simon, (1977), Skew Distribution and the Sizes of Business Firms, Orthodox Print Press, New York
Cumming Douglas, (2010), Venture Capital: Investment Strategies, Structures and Policies, Random House Publishers
