Business With The Red Dragon

Another Day Another Word:

Business With The Red Dragon

Hi!

China is truly the world’s workshop. it has moved from a place where cheap and inferior products are made to a place where almost any quality grade is produced. Small, medium and large organisations produce goods from China at a fraction of western costs. it’s not so much the idea of cheap labour, but it’s a case of a sliding scale in action. Factories over there have established repeat and constant business to the extent where the benefits of busy production translates into passed on savings. it’s always cheaper to run a factory with little idle time, where workers are put into full use with only small work gaps. When production is not on a sliding scale it is enjoyed by most businesses from the UK and Africa.Individuals and design companies are sending more than ever prototypes of their own creations for speedy lower cost production.

China is an attractive prospect as production companies are able to manufacture items in smaller quantities while still maintains a competitive unit cost. This is why websites like alibaba.com and tradekey.com are seeing a great mass of business sourcing. Forty percent of individual inventors you see in the popular BBCTV series Dragons Den, organise the manufacture of their sample products from a single unit or two, to early stage batches of up to a hundred – all from China. There’s a lot of production or supplier sourcing and that’s where there is a ready and waiting demand for a Chinese broker.

There’s money in loss!

Millions of Dollars have been lost to unscrupulous companies with bogus trade activity. Micro businesses and smaller companies don’t have the resources to set up their own trade representation and they have to rely on images and documents of commercial activity when sourcing goods or searching for a manufacturing concern offering the best value for money. A lot of the time it’s about taking a risk on several trade and manufacturing offers you come across on the web.

Commercial activity such as drop shipping is one of the common areas that has suffered a bad name in China. You may be sending cash for goods that don’t exist or at best made of inferior quality or fake designer brands. A large proportion of internet retailers in the UK and abroad have had their fingers bitten several times over. Sometimes you simply have to go to China yourself, but the time and expense of visiting regularly is cost punishing. It’s also a bit of a chore going to China to find the right company, especially where there is limited local knowledge.

There’s no question about it – there certainly is a market for such a service.Setting yourself up as a rep or broker is a good business idea as the overheads and set-up costs are minimal. All you need is to develop ample knowledge of how product sourcing works in China; all the import costs and legislation, and also the geographical location of all the industrial towns of the country. You will be your client’s eyes and ears. It’s probably best to start off specialising in a particular area of manufacturing or wholesale.

Begin to identify a list of reputable firms over there, so you can have a verified list to introduce to your clients. Some of your prospective clients would have already been in talks with suppliers and manufacturers. They would need someone to actually visit factories or supply warehouses to make sure these companies are who they say they are. It’s cheaper in the long run to pay a rep with due diligence to authenticate trade claims.

Get some China in you!

It would help if you could learn some of the Chinese language. You don’t need to become very fluent, but at least get some language skills that would allow you to communicate effectively. It shouldn’t take long to get a grip on the language as you could concentrate your language skills around the usual discussions on trade and commerce. It’s best to learn the language at the same time as learning the trade culture.

Commit at least 6 -8 month’s intensive learning. Divide that time in two – one half of the learning period in Nigeria (or your location) and the other half in China. Once you get over there, take all the information you need from the Chinese Chambers Of Commerce. Attend expat trade shows, network and connect with Nigerian trade organizations over there. Networking is good for first hand contacts and links to reputable Chinese firms and is also great for sourcing future clients.

Finding your clients!

The internet is great for helping you find clients – you have Alibaba, tradekey.com and www.bridgat.com. They are all very good ways of connecting with your potential clients. You can cold call to registered users, join the forums or take out a targeted advert. Tradekey.com offers advertising within their weekly newsletters and Alibaba will charge with pay per click visits from your banner link. You can also pay for banner or ad impressions in strategic parts of the website for a monthly fee. A strong presence on ‘Linkedin’ is also a very good way to find clients. You can set up your own group and invite other Linkedin.com users to join in. Joining related groups with a connection to China or general overseas trade should also produce good results. Meetup.com is also a useful site to join or by creating a related group.

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Till Next Time…

George

Get It in Writing

Another Day Another Word:

Get It in Writing

Hi!

I’ve worked with Warren Dunn since my MBA company internship days. Other than my Dad, he’s been the biggest mentor and influence in my career. His style is “lead by example” – he’s never sat me on his knee (I would pity his knee) to explain his best practices. I learned by osmosis and by observing how he handles certain situations. Sometimes, I a

lso leant what not to do in circumstances, thanks to his fearlessness in ventures (people and business alike). You see I have always known that I needed every sound managerial experience I could get if I was serious on starting & building & running businesses. I thought I’d share one now and hope to share more in future posts.This nugget will sound so trivial and mundane that it borders on useless. But I’ve found that it’s one of the most powerful tools in moving things forward in almost any context.Get it in writing. I don’t know how many times we’ve seen founders ignore this advice and then that coming to bite them where it hurts. This can be particularly useful when a company goes through an “inflection point” process that can take weeks or even months.

A typical scenario is this: a founder pitches a VC and the meeting goes great (according to the founder). The founder tells me that in the meeting the VC said he was “definitely interested in investing [X] million on a [Y] valuation.” Another scenario is a startup in an M&A process. They speak to a product manager or corporate development exec at the acquirer who says verbally that the company’s proposed price range is “definitely in the ballpark.” So the company is pumped because they have one prospective buyer.

I don’t know how many times this happens to Entrepreneurs/founders (a lot actually!). In each case, my advise to Entrepreneurs/founders would be to get the mutual understanding in writing – specifically a follow-up email (needless to say people don’t have that culture, especially in Nigeria). In that email, the money line is: “I want to confirm that [insert point]. Can you email to confirm that we’re on the same page.”

This simple follow-up email does a couple of things. First, it clarifies any potential confusion. For example, in the M&A context one common point of confusion is what the acquirer pays for the company is often not what the shareholders (i.e., investors) get in return. This can be a huge point of confusion and a deal-breaker in some cases. By clarifying any confusion earlier rather than later, you save everyone a lot of time.

The second thing it does is it creates a quasi-moral obligation (i.e., a “gentleman’s agreement”) if the recipient agrees in writing. These aren’t legally enforceable. That’s not the point. The point is that no one likes to back down on his or her word. That gets around. This isn’t as tactically important as the earlier point above, but it can be important. One scenario I’ve seen is founders who complain about X investor or Y partner giving their word that a deal will be done and then that person backing out. I immediately ask if they have that in writing. If and when they say “No”, I tell them pretty plainly that they are SOL. The whole “she said/she said” is just a waste of everyone’s time.

And even if you don’t have anything to confirm in writing, I’ve learned that it’s always good to re-cap key discussions with salient points with as much detail as you can. You may not even have to email it to the other side. But having an email audit trail of the different verbal conversations will help. People have leaky memories (trust me). And having a historical archive of the process and conversations can keep things on track by ensuring that there is a meeting of minds along the way. On the other hand, its just pure professionalism isn’t it?

So, get it in writing! Enjoy your weekend.

Till Next time…

George