When Starting a Business, Think Wholesale!

In order for a start-up to be successful, it must accomplish two things: (1) it must attract people who are interested in buying their goods and services and (2) it must be able to grow with limited capital. Understanding the difference between wholesale value and retail value when starting a business will determine your revenue potential.

Retail value, which comprises less than five percent of all the money flow on the planet, is where money is spent for goods or services.  For example, when you go to a restaurant and purchase a meal, it is retail value. You are not expecting any return on the money; you are spending the money and eating the meal. You buy some shoes and the same thing applies, you hope to get value from the shoes but you are not expecting a return on your money. Retail value is less than five percent of all money flow simply because the people who are spending the money are careful about what they spend it on.

Wholesale value is an entirely different area and comprises ninety-five percent of all the money flow on the planet. Wholesale value is money flowing with a different quality. It is not money spent; it is money invested. For example, we might think twice about spending $1,000 on a meal. But, we certainly have spent $1,000 buying stocks on the stock market. Because we don’t think the money is spent, we think the money is invested and, as such, we expect a return from it. We might not spend $1,000 on a bottle of wine. However, if we hear that the bottle of wine is an investment and it’s going to appreciate to $2,000, we might just buy it.

Now let’s look at an example in Corporate America. When he was just starting out, Bill Gates did not say:  “I would like to just sell software.” He started out by saying: “How can I make this software a wholesale value to PC manufactures. So that when they buy it, for every dollar they spend on my software, they can see themselves making a dollar fifty or two dollars in return by marking up their hardware. As a result, I will sell thousands at a time because every time they put a dollar in, it’s a dollar invested. Once I have all the PC manufactures building Microsoft into this big empire, how can I make my money?  By bringing the company public, I will make my money not from the profits of the business, but as a result of people investing into the shares that I own.”  Bill Gates made his money by being a shareholder in Microsoft.

Is your business wholesale or retail value? Why?