Retailing, Wholesaling Differ Greatly; Few Companies Do Both Successfully

Q: What factors should an entrepreneur take into consideration when deciding whether to sell wholesale versus retail? Can one do both successfully?

--L.J., Altadena

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A: The difference between wholesale and retail is something like chocolate and vanilla. The rules, the contacts, the funding level needed and the business practices involved are so different that it is very rare for established companies to do both well.

Companies that sell primarily to wholesalers typically do their own manufacturing, which is a capital-intensive effort involving setting up production facilities, doing design, establishing price points and a sales force, and having a unique vision for a particular product or market niche.

Companies that sell retail are much less costly to establish and they specialize in face-to-face contact with the end users. It is much easier for an entrepreneur to get into the retail world on a shoestring, perhaps starting out working home parties or taking orders off a simple Web site.

There is a trend on the part of some manufacturers--particularly in the apparel business--who are now opening retail stores, but that is still a new and unproven concept. I still think most manufacturers should not go there.

Some small companies that make products such as craft or novelty items do take their wares and sell them directly to the public, at street fairs and swap meets, for example. But typically, the reason they do this is that they cannot produce the item in large enough volume to sell wholesale and/or they cannot make it cheaply enough to give a retailer a standard margin.

--Bill Pearson, principal,

Retail Analysis & Planning, Pasadena

Help in Moving to California

Q: I own a truck cargo company that is incorporated in Iowa and want to move to Southern California. I need financing, help setting up a business structure and advice on finding a location for my headquarters. I have contacted some small-business development agencies but they seem unwilling to help.

--Randall LeMay, La Mirada

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A: You must be contacting the wrong agencies. There is free or low-cost help available for entrepreneurs who need it through governmental agencies, government-private partnerships, local business development programs, and educational institutions.

Start with the Small Business Development Center program, administered by the U.S. Small Business Administration. The program delivers counseling, training and technical assistance in all aspects of small business management. It can help you with financing, marketing, organization, and setting up your business structure. There are 10 general interest SBDCs in Los Angeles County. Call the SBA’s Los Angeles District Office in Glendale at (818) 552-3201 for contact information for the center nearest you or visit the SBA’s award-winning Web site (https://www.sba.gov), an extremely comprehensive and helpful resource for entrepreneurs.

The SCORE organization, a nonprofit group of retired executives who do volunteer counseling with management issues, is also a great resource. The group recently launched an updated Web site (https://www.score.org) with enhanced online counseling capabilities, which means that entrepreneurs can get answers and help with business situations over the Internet.

--John Tumpak, director of public affairs,

Los Angeles District Office,

U.S. Small Business Administration

Web Site Can Help With Licensing

Q: My wife and I are about to open our first business, a women’s clothing store. What permits or licenses are we expected to obtain?

--Sal Ruiz, Los Angeles

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A: You will need a city (or county, if your business is in an unincorporated area) business license, a reseller’s permit and a fictitious business-name statement, also called a DBA for “doing business as,” which you obtain from the Los Angeles County Recorder’s Office at (562) 462-2177.

Assuming that you will eventually hire an employee or two to help out with counter sales, you should also contact the state and federal taxing agencies and obtain an employer identification number. If you plan to incorporate, you will need to contact the state office of incorporation and consider hiring an attorney to set up the incorporation process for you.

For a comprehensive Internet listing of local permit and licensing information for small businesses throughout the state of California, visit the Web site of the Permit Assistance Center (https://www.calgold.ca.gov).

You can contact a local Permit Assistance Center directly for more information. Call the Los Angeles Office at (213) 977-7900 for referrals.

--Frank Stokes, consultant,

Stokes Pacifique Associates, Los Angeles

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Send letters to: Karen E. Klein, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or e-mail it to kklein6349@aol.com. Include your name, address and telephone number. This column is designed to answer questions of general interest. It should not be construed as legal advice.