- Education and Science
Buying From China: Part 2
Buying From China: Part 2
In my last article: Buying from China, Tips for Small Business Owners,
I discussed basic solutions to successfully buying products for new or established small businesses about to embark on purchasing products from China or other foreign countries, for the first time.
At the end of this article I will reveal a deeply held secret on how fortunes are made and kept for generations but you won't understand it unless you read this entire article so keep reading.
Now, I would like to talk to you about going to the next level of successful importing for businesses wishing to purchase larger amounts of products from overseas.
If you are planning on exporting, you will want to know this information also but lets keep to importing for now.
The principles are all the same as in my first article but there are now more zeros on the end of your checks and a lot more details to look at but well worth it. Bigger Paydays.
I say to people that wealth is just a mind set. A game you master but until you are there, it is a big mystery so let's hurry up and get you there.
Let's say your business is really taking off and orders are coming in every minute. An extremely exciting and extremely stressful situation all at the same time but a problem every business owner dreams of which is why they got into business for themselves in the first place.
To Capture The American Dream
So now you are in a situation where you have to email larger orders into your suppliers which means a lot more money is going out of your bank account and into some foreign account which can be scary just thinking about although you know it has to be done to keep your lean, green, money making machine rolling forward in a positive direction.
You already got a little taste of the amazing business opportunities out there and now you are hungry for more
Of course, by this time, if you followed the advice i suggested in my first article, you should already have a good working relationship with your suppliers and feel a lot more confident about transferring money around the world but you still have to be very careful because you never know what's happening on the other end of those transactions.
For example, the company you deal with might be going through some tough financial challenges of their own that you know nothing about. Who knows but you wanted to play the game and here you are, Showtime!
In the famous words of Donald Trump: Go Big or Go Home, so lets say we go for it!
Now you've made the decision that you have to start ordering your products in larger quantities which means Containers, maybe 20 Ft., 40 Ft ,or 45 Ft HQ. so you are looking seriously at that option.
The bigger the container, the more products you can load in there, the greater the risks and the larger the profits but by now you are a confident Captain of Industry with No Fear! Right! Yea, sure bud, whatever you say. lol
When ordering container loads full of products from overseas, the most feasible way to ship them is by Ocean Freight. You've probably seen those gigantic ocean freighters with hundreds of those large rectangular steel boxes loaded on them. Well those are containers filled with products being shipped all over the world only this time, at least one of those containers is going to be yours. Congratulations! You are now entering the big times.
One of the down sides of Ocean Freight is the delivery time. Depending on where the products are coming from and where they are going, delivery time may take a month or more but the costs are so reasonable, it's worth the wait. You just have to make sure that you have enough inventory on hand to wait for delivery, so planning ahead is key.
Don't forget that you also have to look at getting that container from the Port of Entry, to your warehouse so you also have to examine the costs of Ground Transport (Transport Trucks or Railway) which will be dictated by were you are located and were the container's final shipping destination port is located.
TIP: Never pay transport companies by credit card because they have a habit of charging you more without your permission or knowledge and billing it to your credit card even if you have a written quote and they like to take their time depositing it back on to your card so if the company you are talking to insist on a credit card, be very careful.
In my experience, very rarely will you ever have a problem with shipping damage or theft when you buy from overseas. The Chinese are masters at packing products into containers.
The problems start with North American transport systems. The more depots and warehouses your products have to be unpack and shifted over to another truck for example, the more problems you will run into especially fork lift drivers. They just don't care about your products.
They just figure it's insured and you won't lose any money but you do. You lose money on many levels that you will never get back so be very careful.
I had a customer who had 13 hot tubs in a warehouse in Florida and the fork lift driver drove his forks right through all 13 of them. It is a major problem and in the US, you cannot sue any transport companies for damaged or lost goods. It's the law.
In Canada, you have 30 days to file an insurance claim for lost or damaged goods and they have up to 9 months to pay it.
In my opinion, North American transport systems is an extremely unregulated industry and the cause of huge insurance rip offs so if you can get a truck to pick up your container right from the container pier and trucked it directly to your warehouse without being open, the better.
Your warehouse location, whether you own or lease, also has to offer off-loading facilities to unload the cargo off the transport trucks which means extra staff, fork lifts (sometimes) and bay doors for the truck to back up to, plus enough storage space to hold all of your inventory.
If time is a major factor, there is always Air Freight to consider only it gets very expensive which means once again, cutting into your bottom line but you might be selling live lobsters for example so delivery time is a major factor but that's a decision you will have to make at the time. It will show itself when the time comes so lets just take one step at a time.
Many foreign suppliers request a 50/50 or 30/70 payment system which means you would have to wire 30% or 50% of the total amount owing on their invoice, into their company bank account with the payment methods I mention in my previous article and the balance being paid in full before it leaves port F.O.B. (Freight on Board) China or whatever country you are dealing with.
There are security measures you can take with your bank to insure you receive your order and not lose your money, like Letters of Credit. for example but that is another subject which we can talk about later or discuss with your bank manager so for now, let's look at this more closely. Am I boring you yet?
Let's say the payment system is already in place so you wire over their initial down payment of 30% to 50%, which probably covers all of your suppliers overhead in case of loss and their profit is sitting on the dock, 50% to 70%.
The chances of them not getting paid the balance owing at this point in time is pretty slim considering you already paid for at least half of the order but let's back up a step or two. There are a few things you have to set up long before you place the order.
If I just stressed you out there's no need to worry because I have a simple solution again so just relax and learn how the big boys do it.
Grab your phone book and look in the Yellow Pages for Freight Forwarding Companies and Custom Brokers. If you find a company that does both, even better. It will make your life a lot easier on many levels. Here's what you do.
Call up these companies and explain to them exactly what you are trying to accomplish as an importer or exporter. Set up a meeting with one of their agents so they can either come to your location or you can go visit them at their office and lay it all out to them what you are doing. Just give them the facts and they will become your logistics partner.
There are plenty of players out there in the same logistics game so make sure you find a company that you click with because this could turn into a long term business relationship, which is what you want, so you have to make sure you like who you're dealing with.
Rates may vary from company to company so shop around and get quotes from at least three companies.
Also make sure that the company you might be dealing with has offices in the country you are buying products from, like China for example, so you can actually have them go inspect the plant and your order, for more peace of mind but they will obviously charge you extra for that service.
They will even have storage space available in your area or anywhere else in the world if you don't have any or enough yourself but once again, it will also cost you a lot more so be prepared for more expenses coming out of your pocket.
That's the one thing you'll learn very quickly in your business is that everyone and I mean everyone is trying to get into your wallet so watch everything like a hawk. You don't have to run every part of your business but you should know everything going on at a glance.
If your company is at this level of business or even before you place your first order and you have the working capital to play with, I would suggest investing some money and go visit your suppliers operation overseas or where ever it is.
Plan it so there are some trade shows going on in your same industry to utilize your time better and look at some other product lines that compliment what you already offer while you are there but don't forget to take a little relaxation time and enjoy the sites.
The Great Wall of China is a pretty cool place to visit. A working and tax deductible vacation. Just a few of the perks of running your own company. It makes you want to build business relationships with companies located in every destination you ever wanted to visit.
The great thing about these Logistic Companies is that all you have to do, once you have your account set up, is send them the invoice from your supplier and they will take care of the shipping details for you and as long as you pay their bill, they will continue to take care of all the logistics headaches, which is great. That allows you the time to focus on other parts of your operation that need attention.
Once you have a smooth running operation set up, that's when you are sitting on the beach drinking margaritas and orchestrating all these details from emails and your on-line banking services.
Then life gets to be a lot of fun because now you are enjoying the two key factors that most of the other business owners out there don't have. Time and Money but that takes a little work to get there so lets begin.
Your logistic partners will handle all the shipping and customs paperwork as well as insuring your order against loss, (hurricanes blowing your container off the ship for example).
They will get your order right to your warehouse and if you can set it up the right way, they can also bill you for the total amount owing for all your logistics needs and you have at least 30 days to pay them, which gives you time to sell all your products. Part of the negotiation process for your logistics handlers is they don't get paid until you receive your order which is standard.
Remember that, if for whatever reason your products disappear on route, your insurance claim will only pay for what you paid for the products plus shipping expenses so if you already sold the products at your retail price and spent the money on bills or partying for example, and your order goes missing before your customers received their products, you maneuvered yourself into a tight corner which is what happened to one of the first companies I worked for many years ago before the Internet. I was wondering why my paychecks kept bouncing. Not good.
Also keep the insurance premiums in line, now that you know what the claims will actually pay out if your order disappears. You need just enough coverage to cover you and that's it. Don't get hustled by insurance reps. Let you logistic partners take care of that. They know the deal. Higher premiums equals less profit.
You must have access to money to play this game at this level so make sure your finances are in place before you start ordering product.
Always have a back up plan or two because in a worse case scenario that your order does get screwed up somehow and say you file an insurance claim, it might take months to get paid so having that extra financial cushion to keep paying the bills until you get things straightened out is a big stress reliever. That is a worse case scenario but it does happen so know you know.
If the logistics company you are talking to want payment up-front before going to work, walk away. That tells me that they are either in financial trouble or a little too paranoid to deal with for my liking.
Those people could easily become life long golf buddies so find a company that you enjoy working with and have a payment plan that also works for you because at this point in the game you should be having a lot of fun.
That kind of relationship may or may not take time to build but there is a lot of competition out there that want your business so don't be afraid to play a little hardball to get the billing arrangement that best fits your business strategy.
So here it is in a nutshell.
Email your PO (Purchase Order) to your supplier and as soon as they email you back an Invoice, you now know what it's going to cost you to buy your products.
Then email a copy of your supplier's Invoice to your Custom Brokers and Freight Forwarding handlers. They will email you back an invoice of what shipping, import duties, custom broker fees, insurance, taxes, etc. plus any other hidden expenses, will cost you.
Now you have a good idea of what the entire order will cost, shipped right to your door. There's that CPU (Cost Per Unit) equation I talked about in my last article again. You will find that knowing your CPU is absolutely vital for determining your retail price points. You want to make a profit, right. Just divide the total cost of your order with everything included, by the total amount of products you ordered = Cost Per Unit
For all you Non US residents out there reading this, remember that China and almost the entire world deals in US Dollars, although the Euro is quickly gaining strength in International trading so watching the exchange rate is a key factor in timing for placing your order.
A couple of points either way can save you or cost you thousands of dollars so learn to watch the money markets or just just watch your evening news for your countries daily exchange rates and be ready to make a move (place your order) when you see a spike in the markets. They usually report it every day.
Personally, I find that around noon everyday, there is a big spike or movement in the markets so I have my finger on the "Pay Funds" tab on my Electronic Funds Transfer with my banks online banking services account. I've saved and lost thousands and thousands of dollars with the click of my computer mouse when watching the exchange rates.
It either meant a real nice vacation at a 5 star resort or the kids went hungry. lol. Just kidding about the kids going hungry but you know what I'm saying
Of course, there are always unforeseen circumstances that pop up out of nowhere that you can never be prepared for.
For example, customs deciding to separate your container for inspection because you are new and they haven't seen your companies name on the customs paperwork before so they are checking you out which means, trucking your container over to a local warehouse, usually owned by a trucking company, from the port terminal and inspecting your order which could mean they take everything out of the container and you are financially responsible for paying the warehouse workers for loading your products off and back into the container.
Sometimes they use an XRay machine but either way, you are paying.
They will also ding you extra bucks for transporting your container from the container pier to the warehouse and then back to the container pier again before it even heads to your warehouse.
It might cost you a grand or two but in those rare times that it does happen, it won't happen again because now they will know who you are. It's very rare and a worse case scenario but as they say, Shit Happens and believe me when I say, I know.
One of the most difficult challenges for any small business owner, as their company begins to expand, is letting go of the day to day details in running the business and handing them over to others to execute for you, so if you are not prepared to do that, then you will never grow and achieve the success you feel you deserve so keep your ego in check and stay humble.
Train your staff on exactly how you want things done and slowly let them take over that duty. Who knows, they might even work out a more efficient system for you if you just give them a chance.
As the old saying goes, Do well so you can do good, because I don't care who you are or how big you get, it can all be taken away in an Angel's Breath and if you don't believe me, just look at what's going on in Corporate America these days
You'll find that as you grow that there are just so many things to take care of and not enough hours in the day to perform them all yourself so if you don't delegate, you will self destruct before the big paydays ever materialize or you will be too stressed out to deal with them effectively.
Freight forward and customs agents are experts in their field that you can count on so let them take care of all those logistic details for you so you can focus on other things like playing on a beach in the Caribbean sun or whatever else pushes your buttons.
Moving product is what it's all about at this point in the game because without sales, there is no cash flow and with no cash flow, there is no business, an argument I've had with accountants for many years.You won't need their services if there is no cash flow for them to account for. Makes sense to me
Hire part time book keepers or office administrators who can also keep the books or accounting software, as well as run the office to help keep you on track financially, as soon as you can afford it because you always have to know where you stand with your cash flow when dealing in larger dollar amounts or at any level in your business really. By this time in the game, you already know that part but I just thought I would mention it again
Over the years I have learned to sub-contract out a lot of work so I don't have to bother with all the headaches of hiring employees. Payrolls, training, insurance claims, taxes, attitudes, sick days and never ending bullshit. Especially those whining, moody sales reps. lol.
Somethings I can't sub out because if I don't over see the operation, it turns into an expensive headache but whatever I can pass over to others to execute for me and stays within my operating budget, I do it.
You have to surround yourself with a professional team who have the same vision as you for the growth of the company but never lose site of your day to day operations, even if it's just a quick glance at the final numbers. Numbers never lie so a quick glance will show you instantly what division needs your attention. You are not that wealthy yet because if you were, you would not be reading this article so stay focused on the prize.
It use to drive me nuts when I worked for other companies and regional managers would blast into the office and want weekly or monthly projections. Who the hell knows what's going to happen tomorrow never mind next month so I would just break everything down to what I had to do that day to stay on target and if I did that everyday and made it real so I knew I could make it happen, everything else would fall into place. It just made my daily goals a lot more obtainable but everybody develops their own style and if yours is working for you, great, don't change anything, just do more of it
An old saying that I heard many years ago stuck with me and I would like to share it with you.
I pray likes it's up to God and I work likes it's up to me
Ok, here is that deeply held secret on how fortunes are made. Are you ready?
DO IT AGAIN.
Yup, that's it. Do it again and again and again. Just keep duplicating the same process, if it is working and look for ways to do more
Once your entire purchasing & distribution operation is working smoothly, just keep repeating the exact same process over and over again. Keep looking for ways to save & make money while streamlining the entire operation.
There is a time to nickel and dime things to death so you can squeeze out every penny and there are other times were you have to bite the bullet and pay. It will show itself
For example, re-negotiate your prices with everyone you deal with which equates to more profit in your pocket.
Your customers are gold so keep adding new products that compliment what you do and provide more services to what you already offer. Extended warranties, for example, are a cash cow. I don't know your business but keep crunching the numbers looking for ways to save and make more money but be very careful when it comes to your staff.
It is extremely costly to continually hire and train new staff so you need to build a hard working, loyal team which is why i love Performance Bonuses or Profit Sharing instead of huge salaries
Stick with what you know.
What about the ones that have a system that is working great and for whatever reason decide to change the entire process. That just blows my mind. Why screw with a good thing. At least continue to do what's working and ad to it but never, never, never cut off your gravy train thinking something else might work better. Always test your markets first
If you have not started a business yet and are looking for some ideas on what product or services to sell, I always suggest to find a product or service that consumers are going to need every day, week or month and keep re-ordering. In other words, Necessities of life.
It's a lot easier servicing old customers than to go out everyday and constantly try to find new ones. I'm not saying don't do that. It's a given but treat your customers like they are your partners. Take care of them and they will take care of you.
There are very few Bill Gates out there or geniuses like these Hub Pages people and other social networking sites but you will find that the richest and most powerful families in the world that control countries and economies, invest in things that people need everyday to exist which is why their fortunes are handed down for generations. Ex. power, communications, food, fuel, building materials, transportation, water, clothing, consumer electronics, etc. etc. etc. and of course real estate.
I don't think there is any other vehicle for building wealth quickly, that is also available to so many people on so many levels, than real estate.
Look around. There is opportunity everywhere if you are open to it. Find that niche to fill and be the best you can at servicing it. Two words to burn into your head when looking for opportunity are: Recession Proof
Did you know that during the Second World War, when cities and countries were being destroyed, a very brave and amazing lady named Elizabeth Arden was opening up beauty boutique's all over Europe. No matter what is going on in the world, woman like to look and feel good.
Saying that, one of our divisions, www.BlissHomeSpa.com, manufactures over 150 All Natural Skin Care Products and will even Private Label them for you, so if money is tight or limited, you can sell your own line of All Natural Skin Care Products.
They will also accommodate any size order whether you are a Massage Therapist working from home or own a spa. The entire world is looking for natural alternatives to all the chemical based products on the market and that industry is just beginning to take off, especially here in North America. OK, I had to give our companies a plug. lol
I know Alternative Energy Sources is about to explode here in North America also and will continue to be a powerful merging market for decades to come.
As a current or future small business owner, it most likely won't be financially possible for you, at this point in time, to invest in giant wind or solar farms but what about wind turbines, solar heating panels or geo-thermal heating systems for residential homes as an example.
Sell the hardware to home owners for a profit, install the units for a profit and work out a deal with the local power company to get a kick back for you and your customers to sell off the excess energy produced for a monthly residual profit. I like those words: Residual Income
You are already in the home getting to know your customers so what about offering new, high efficient heating and cooling systems along with big ticket appliances to compliment their new power source. Just let your mind ponder on that potential for awhile.Huge!!
What else can you offer them? How about also providing them with consumer financing through your bank or lending institution and keep selling them products and service contracts on a low monthly payment plan, year after year. Evolve with technology
You can close them on the deal with the fact that they will own all the hardware when the loan is paid off, which they can pay off at any time and will eliminate their monthly power bill while driving up their property value for future resale. No Money Down and No Payments for 12 months plus you sell and install it all. Now that's powerful.
I don't know of any homeowners out there who wouldn't love to tell the local power company to kiss their butt goodbye because they don't need their services anymore. Do You? I doubt it.
Do you know you can buy all that hardware from China for very low prices. Now that is food for thought.
I can hear the power companies cursing me already. lol
I'm just throwing some ideas around to open your mind up to some amazing business opportunities all around you if you are just open to receiving it.
I guarantee there is something staring you right in the face as you read this article that can turn into a gold mine. Listen to what people are saying all around you and look for an opportunity that fits your current situation which also has unlimited growth potential.
Those suggestions are exactly that, just suggestions but it is definitely something to think about before you invest all your savings or go into debt.
Have a business that people need and re-order products or services from you all the time is where it is at. A future Blue Chip Company.
You'll have no problem finding investors or financing if you ever need it but for those of you that already have that invention that is going to revolutionize consumers buying habits or change the world, I want in OK. lol
So have fun and don't be afraid to go for it.
Remember, if you need any help or have any questions, you can always find me here
Just mention you read the article on Hub Pages