Module 7 • The management plan


generate an adequate turnover of stock by buying just enough not to be “out of stock.” Therefore, enquire about the quantities that a supplier delivers before deciding.


3 Price


The price you pay for your raw materials or stock is a cost to your business and has a direct influence on the price you are able to charge your customers (Costing). Make sure that you identify suppliers whose prices are competitive. This could mean that you must buy direct from the manufacturer and not the wholesaler. Also, look out for discounts. Discounts can be defined as reductions in the listed prices. The following are different types of discounts offered in the industry: • Quantity discounts


These are discounts to encourage customers to place larger orders to enable them to cut costs by doing fewer deliveries or to get rid of excess stock.


• Cash discounts


These are reductions in the listed prices that reward customers for either paying upfront or promptly i.e. 30 days.


• Trade discounts Trade discounts are the discounts that are given to intermediaries such as wholesalers. It implies that they prescribe the retail price, but give you, as the intermediary business, a discount. The discount amount is normally your mark-up. Make sure that you ask for a trade discount when selecting your suppliers.


Important points to remember when selecting a supplier: • Pricing structure The price of the raw materials, terms of payment and possible discounts are aspects to concentrate on.


• Delivery Whether they deliver and how. • Quality Do they supply the quality expected by your customers? • Service Is the service by the company up to standard? 5.3 Finding suppliers


Many new entrepreneurs have difficulty finding supplies of inventory and materials to start their businesses. An obvious way to find suppliers is to approach established businesses selling similar lines and to interview the managers. Local competitors are not likely to be very co- operative with new competition, but you can try to get information from businesses outside your immediate trading area. A ready source of free information for any new entrepreneur is the Internet, where the appropriate product category should yield a good list of prospective suppliers.


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