This is from Joe McVoy
, who helps inventors get their inventions into Walmart and other large retail stores.
"How Much Financing Do You Need To Sell To Wal-Mart?"
Whether you want to sell to Wal-Mart or any other retail
chain, here's an easy way to calculate how much working
capital you'll need.
1. Determine how many stores you will be selling to.
You might be planning to only sell one region or through a
couple distribution centers so it may not automatically be
the entire chain.
2. Calculate how many units of your product that each store
will need to sell each month to justify keeping it's place
on the shelf.
3. Multiply the number of units per month per store by the
total number of stores to get the total number of units per
4. Multiply that total by your selling price per unit to the
retailer and you'll have the total dollars.
5. Multiply that dollar amount by three (in order to give you
30 days to make the product and 60 more to ship and get paid).
Here's what can happen when you don't have enough financing.
The customer was Wal-Mart and the product line was children's
stickers. We were told we'd been approved and would be getting
our purchase order once our warehouse slot was assigned.
The buyer told us we would need to be able to ship within one
week of receiving the order, so that meant we had to make the
product in advance. The amount was $750,000 worth of stickers.
It took 7 months to get our warehouse slot and needless to
say, our suppliers wanted paid a lot sooner than that so I
had to scramble to find the $350,000 to pay them.
Since purchase orders can be cancelled at any time with no
penalty to the retailer, it's almost impossible to borrow
money based on a purchase order. So, you can imagine it's
even harder to borrow money on a verbal "promise" of a P.O.
We got it done through private investors who would get the
receivable as collateral once we got the order and had
shipped it, but because of the high risk, the cost was
The lesson here is to make sure you have adequate financing
before trying to get a major chain as a customer!
To Your Success,
Profitable Marketing Systems, LLC
1100 Nautilus Court
Lafayette, CO 80026