Rapid Expansion

[Catherine Heckford]

Hi everyone

I am thinking of starting a food business. I'm not so worried about initial funding. I can save up for this. Production would be outsourcen to a manufacturer and I'd offer my products to supermarkets and retailers.

My questions are, if say a supermarket takes a strong interest in something,

1. How do I bridge the financial cash flow gap between paying a manufacturer and getting paid by the supermarket?

2. Is there any protection you can put on your supply chain that is similar to house buying where contracts are exchanged at the same time to prevent a customer from pulling out after the order has been made?

Thanks
Catherine

 

[Inva]

1. With the initial funding which you are not worried about

 

[Catherine Heckford]

1. With the initial funding which you are not worried about

Hi Inva

No I'm on about after the initial launch. If the cost of meeting a susequent large order exceeds the cash in the business. How do you bridge the gar between paying your manufacturer and getting paid by say a supermarkets?

 

[Chris Ashdown]

Hi everyone

I am thinking of starting a food business. I'm not so worried about initial funding. I can save up for this. Production would be outsourcen to a manufacturer and I'd offer my products to supermarkets and retailers.

My questions are, if say a supermarket takes a strong interest in something,

1. How do I bridge the financial cash flow gap between paying a manufacturer and getting paid by the supermarket?

2. Is there any protection you can put on your supply chain that is similar to house buying where contracts are exchanged at the same time to prevent a customer from pulling out after the order has been made?

Thanks
Catherine

Your first problem may well be the minimum order a manufacturer would need to start a new line to make your product were not talking hundreds here but thousands to make it worth there while , and they will have no interest in not getting paid upfront or sharing the profits at a latter date when you are a millionaire

Supermarkets are killers of small suppliers with initial orders on sale or return being a likely order, Help with marketing costs, payment after 90 days plus end of month, I think it was Pash on here who got his fingers burnt a couple of years ago

Bridge the gap is your startup money

Have you tried the product on local shops to see if it sells and made a full marketing plan?

 

[Mr D]

Hi everyone

I am thinking of starting a food business. I'm not so worried about initial funding. I can save up for this. Production would be outsourcen to a manufacturer and I'd offer my products to supermarkets and retailers.

My questions are, if say a supermarket takes a strong interest in something,

1. How do I bridge the financial cash flow gap between paying a manufacturer and getting paid by the supermarket?

2. Is there any protection you can put on your supply chain that is similar to house buying where contracts are exchanged at the same time to prevent a customer from pulling out after the order has been made?

Thanks
Catherine

The 3 months plus between order arriving at supermarket and getting paid - you cover that using your existing cash on hand.
May take you quite a while to get in a supermarket, they would have to take something else off the shelf to put your product there.
If they do sale or return - what then? Can you cope?

If they are late in paying - how do you get the money?
Having lent all that money to a supermarket, what happens if they go under?

For most businesses its usual to think in terms of building the business first before going down the supermarket route.

As for number 2, yes you can have your solicitor put into contract anything you want.
The other side does not have to sign anything they disagree with. just like you do not.
Oh and supermarket with a big order may well not be paying you anything like what a small shop does per unit.

 

[Mark T Jones]

The finance products you need for this come under the banner of trade finance / invoice finance. @Ian J knows a lot about this

But; if you are selling to supermarkets / big retail you are entering into a very tough world indeed - you really need to fully understand their contracts before you consider signing them.

Factoring & credit protection offer some cover, but there are a lot of terms to consider.

 

[Ian J]

The finance products you need for this come under the banner of trade finance / invoice finance. @Ian J knows a lot about this

If you have firm orders from customers then purchase order finance could be available which covers the funding requirement from placing the order with your supplier until delivery to your customer and invoice finance covers the funding from delivery until your customer pays

 

[Gordon - Commercial Finance]

I am thinking of starting a food business

Learn to walk before you think about how you are going to run.

Options are out there, but you are years away from needing them.

 

[The Byre]

Most first orders are on sale-or-return and some supermarkets are looking at 120 days payment targets.

Start with local small convenience stores, then after a few years, you can look at local small-supplier schemes run by the big boys (Aldi, Lidl and Sainsbury spring to mind).

Learn to walk before you think about how you are going to run.

Options are out there, but you are years away from needing them.

This!

 

[Mark T Jones]

Just thought I'd throw in a link to this article I wrote years ago...

https://www.linkedin.com/pulse/dream-order-threatens-your-business-mark-t-jones/

 

[Gordon - Commercial Finance]

Just thought I'd throw in a link to this article I wrote years ago...

https://www.linkedin.com/pulse/dream-order-threatens-your-business-mark-t-jones/

Self promotion? I'm reporting you Mark

 

[Mark T Jones]

Self promotion? I'm reporting you Mark

 

[Ian J]

Self promotion? I'm reporting you Mark

Mark is a Full Member and not a freeloader

 

[Gordon - Commercial Finance]

Mark is a Full Member and not a freeloader

I apologise....self promote your heart out!

 

[Mark T Jones]

Mark is a Full Member and not a freeloader

must have been drunk when I did that

 

[AlanJ1]

My questions are, if say a supermarket takes a strong interest in something,

Walk before you can run, unless you have a niche product or able to offer to pay thousands for space it won't happen.

 

[Ray272]

Distributors are worth working with. Usually a history of trade with supermarkets and they can normally pay you prior to production and when goods are ready.

Big supermarkets will crucify you with terms like sale on scan. Paid monthly based on number of items sold/scanned.