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What does it take to have a dropshipping business that you can depend on for a continuing income? How do you set it up so that you are doing more than swapping money around and making a profit for your supplier, but keeping little for yourself?

Two words immediately come to mind: Plan and Policies. And while we are on the “P’s” I should add Profits. You need a plan to produce profits and policies to ensure that you keep them. There is no magic product that sells so much better than any other. But there are some suppliers who are dependable year in and year out, so let’s add one more P – Partner.

Let’s put Profits first. You must understand what profits are. There are Gross Profits, basically the difference between what you pay for the item sold and what you sell it for. That’s just about a no-brainer.
Then there is Net Profits, that’s what you truly make by the time you add in your advertising and website expenses, your business cards and postage fees, even your printer ink. This is where the Planning comes in. You have to work out not just where you are going to buy and what you are going to sell it for, but all facets of your entire operation. And work it out so there is some money for you in the end.

Part of that Plan has to include your Policies. Are you going to take back defective items from your buyers? If so, for how long? Are you going to chuck them in the trash bin? Will your supplier take it back? How long a return period from your supplier? How will any national laws affect your policies.

Keep in mind that a returned item in the bin is as much an expense as your web hosting or telephone. And the policies of your Partner can definitely affect your own policies to your customers or your bottom line profits, or both.

Oh No! Here comes another P – Pricing. Yes, you definitely need to consider that in your planning. You have to price your goods high enough to cover all of the things above, yet low enough to allow you to be competitive in whatever markets you choose to do business.

Naturally, your suppliers policies tie in here as well. Do they offer better pricing on higher monthly volume? Can you afford to price your goods at that lower cost and offer them at a lower price, even though you may make just a slight profit until you reach the monthly volume?

Decisions, decisions. But they need to be made and not from the seat of the pants. They take time and effort. Both are needed to find a trusted supplier who you feel you can depend on to back you up when needed. One who has their own well defined policies, so you know from day one how to formulate yours to mesh with what they offer. You may not agree with each and every one, but you can see that overall they will work with you and build a partnership that benefits both.
Then you build your policies around theirs. If they have a 30 day return period, you must make yours 21 days, so you have time to return the goods to your supplier. If they say the must be notified within 7 days of receipt, you must say 3 or 4 days, so you have time to pass it on to your supplier.

You must also decide of you will accept payment only from verified buyers at verified addresses. This is a decision that is yours alone. The type of product you are selling may have a bearing here. You may be safe shipping plumbing fixtures to an unverified account, but would think twice before sending a plasma TV.

Again, all in the plan. “These are my policies, I don’t care how others do, this is my way.” And then live with them. Keep in mind at all times the overwhelming objective is to make, and keep, a profit.

There is one other plan you need. It’s called “Plan B”, or Strategic Planning. What if? What if your supplier turns out to be a dud? What if the market for your product dries up or your product is found to cause cancer in mice? You’re committed to the concept, but something has caused your first particular plan to not work as hoped.

It’s a good idea to be constantly searching replacement or additional suppliers and new products to offer. You do not have to be a pioneer of a new product, but keeping tuned into the market and being able to react quickly when a new opportunity presents itself is a true mark of an entrepreneur.

So, get all of your P’s lined up. There is a great opportunity in dropshipping for those who approach it as a business and work from a plan that has been drawn up with plenty of investigation and forethought.

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