How To Set Your Minimum Order

Terms and conditions is a wall-punchingly boring phrase. I mean, come on. If you saw “Terms and Conditions” on your high school timetable, you’d assume your teachers pretty much wanted you to smoke oregano behind the bike sheds.

But although the name is dull, the thing itself is actually rather thrilling.

Here’s why.

Your terms and conditions set out how you do business. They cover things like:

1. How and when you want to be paid.

2. How much a retailer has to spend.

3. How many of each item they have to buy.

4. What happens if your work is damaged in transit.

5. How much your stockists have to pay for shipping.

When else in life do you get to be that specific about what you want?

You can’t exactly say to your postman “I expect you to be here at 8am, clean-shaven and smelling of pine needles, holding a lightly toasted cinnamon bagel along with my phone bill.”

And if, upon arriving at the altar on your wedding day, you gave your beloved a laminated card which said:

Darling:

You will ensure all of my meals contain either bacon or chocolate. You won’t talk to me when Deadliest Warrior is on, because you know how I feel about medieval siege weapons. You won’t buy me carnations. You will care for my sea monkeys as if you had personally hatched them. You won’t reproach me for not taking out the recycling, or for what happened to your wing mirror on the drive here. And your friend Carl can go sleep on someone else’s couch.

Let’s get married!

Well…eyebrows would be raised.

But in wholesale, the more specific you are about what you want, the better. Let’s look at one of the major terms you need in your catalogue or line sheet: your minimum order.

This is the smallest amount a retailer must spend if they want to stock your work. It can be one of the best bits about selling your work to shops. When you sell directly to the public you get paid in little amounts. In wholesale, you’ll generally get paid in much bigger wodges of cash, especially if you set a minimum order level.

The level you choose is entirely up to you.

But when you’re working this out, think about how much cash you need for your business to function.

If your materials are expensive or the process of making your lovely thing is labour-intensive, you might decide to set a relatively high minimum, say £500. If creating your product is less time-consuming you could choose to set your minimum at a lower level, like £100.

Your minimum order is there to protect you. It keeps cash flowing through your business. That means you can do things like buy materials and pay yourself, as well as make a profit.

Having said that, it’s not mandatory to have a minimum order.

A supplier with no minimum is very attractive to retailers, especially when that supplier is new to them. And it’s possible to get your protection in other ways, such as having minimum quantities instead.

But what if you run the figures and decide that, to make your business work, you need to set a significant minimum? Well, that’s okay too.

A high minimum order can function like a velvet rope, allowing only the right people in.

When you stipulate a minimum order of, say, £500, you’re asking retailers to make a commitment to your brand.

Impulse buyers who simply happen to have a bit of extra room in their budgets might find it a bit steep. Instead, you may attract buyers who are certain enough about your work to make it a major component of their offer.

Depending on your wholesale prices, a high minimum can also encourage retailers to stock your full range instead of just one or two items.

Think about the impact you want your products to have on the shelf. Are you happy for customers to have a couple of designs to choose from, or do you want your stockists to have a comprehensive collection that showcases your entire range?

Now let’s think about re-orders.

If you have a low (or no) minimum, it’s easy for retailers to top up their stock levels whenever they need to. That could mean you get paid fairly small amounts, but on a regular basis. A high minimum order, however, probably means your retailers aren’t going to re-order your stuff every other week. They’ll generally wait until they’ve run down most of their existing stock first.

That might mean the value of your re-orders is higher, but you receive them less often. Like so much in life, it’s a horses-for-courses type situation. Much depends on the kind of lovely thing you make, your goals and what’s going on for you at this point in the life of your business.

But here’s the thing.

You can always change your mind. You’re the boss. It’s your business. They’re your terms and conditions. Basically, what you say, goes.

See? Told you it was thrilling.