“I’m presently working as a Sales Director of a consumer goods company.  I am availing of the early retirement offer end next year so I can put up my own distribution company.  I am 45 years old.  Can you give me some tips about my plan? “ – Brad

Human resource practitioners put up manpower service agencies, marketing managers eventually manage their own marketing consulting company and sales managers set up their own distribution companies—like what I did after I retired at an early age of 40.  I am consoled that you intend to pursue something in line with your core competence and experience. However, not to dampen your interest, I personally know of some people who retired and put up a business with their hard earned retirement money only to fail even before takeoff.  There are various reasons for this which you can actually avoid. Here are some tips for you:

Start planning now while you are still working.  Most people only start planning for a business upon their retirement.  Some do not even get past the planning stage and decide to just go back to employment for fear of the unknown.  If you want to pursue the distribution business, you need to start drafting your business plan now.  Start to gather pertinent information about the business so you can slowly develop your plan.  Where would you like to operate?  It is not necessarily an advantage to run a distribution company where you currently reside.  There are many people I know who are based in Manila but have opened distribution sites in the provinces.  What industry or product categories would you prefer to sell?  It is ideal that you distribute product categories you are already familiar with.  What distribution model will you offer your prospective principals or suppliers? Brand owners would normally look for channel experts.  For example, a pharmaceutical company selling over-the-counter (OTC) products would need a distributor who effectively covers drug stores in the territory.

Sharpen your financial acumen.  Most sales people who go into distribution business assume that this is all about the ability to sell products. If that is your take, you are in for a big surprise. While sales is important, it is not the most important.  Profit and efficient working capital management are two fundamental areas you need to master. To ensure profit, you need to constantly control your operating costs.  Regularly monitor and evaluate each item in the operating expenses to ensure you land your monthly profit and loss report in the black.  Be a master in working capital management.  As a distributor, your gross margin is dependent on the distribution fees given by your principal. This means, you do not have much elbow room to generate higher margin per unit sold. But with a relatively low margin, you can still generate higher return if you can turnover your working capital faster (e.g. 30 times per annum). Keep inventories to the minimum; ensure stringent control of accounts receivables; secure when possible longer credit terms with your suppliers.

Start to look for your key people. This is a difficult task for most small businesses especially start ups. The ideal set up is when you can have family members who are able and available to help you run the company.  I am blessed to have a wife who was willing and available to handle the operations of our distribution company when we started it eight years ago. Now, our son is managing our overall operations. Start to interview people who are residents of the place where you intend to open your distribution business. Invest in your key people in terms of competitive compensation and motivation programs (e.g. training, incentives).

Practice an entrepreneurial lifestyle. You need to practice adjusting to the different kind of environment of an entrepreneur. There will be nagging details of the business you will need to personally attend to.  You will miss your corporate life where you can delegate various tasks to your staff.
Lastly, I suggest you discuss with some of your current distributors about their business operations.  Pick their brains and learn from their experiences. They can give you wealth of information you will need to lessen your fear of the unknown. May God Almighty bless your endeavor.
 
Emilio “Bong” Macasaet III is Partner and Chief Distribution Strategist of Mansmith and Fielders, Inc. (www.mansmith.net), the leading marketing and sales training company in the Philippines. For inquiries, please email info@mansmith.net, call (+63-2) 584-5858 /412-0034 or text (63) 918-81-168-88.   Please also send your marketing, sales and strategy questions to mentors@mansmith.net.