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.

For more: CLICK HERE

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

Make the Best of your Small Marketing Budget

Marketing is essential, but If you are like the majority of small entrepreneurs your marketing budget is limited. You need to take every step cautiously, and make sure that resources allocated to marketing are used efficiently. Every rupee matters, and a bad decision on where to spend your marketing money can be fatal for your business. That’s why every small business is always in a dire need to optimize its limited budget.

First of all, what I think necessary is to use low-cost marketing channels. Small and medium enterprises should always go for marketing methods, such as up-sells and cross-sells, referral programs, websites and online sales, B2B advertising, business cards, e-mail newsletter, etc. These are inexpensive tools and can be used easily to get your message out to your customers on a regular basis, which you can’t do with expensive TV ads or big commercial hoardings. Your limited budget doesn’t allow that.

Even if an SME can afford big-budget marketing, I don’t think it a smart idea to “copy” what the big brothers are doing. Marketing rules under which large businesses operate are often not applicable to smaller firms. For example, large corporations usually try to differentiate themselves on branding and to achieve that they invest huge money on advertising and marketing materials, but if a small firm imitates the same strategy, this will only place its business on the home turf of larger companies, inviting severe competition.

Target marketing is another effective way. A common mistake made by small enterprises is that they try to market to everyone, and as a result, spend their time and money on addressing a large market the needs of which they are not capable of serving. On the other hand, target marketing makes a firm much more focused — you know exactly whom to address, which channel to use, what to write, and mend your marketing accordingly. This, needless to say, can cut down your marketing costs significantly. A small business can be more successful by narrowing down its focus and picking a niche small enough to dominate.

Another way — we all know but often don’t care enough — to achieve marketing optimization is by promoting to existing and past customers. Earning new clients is important, but at the same time it is equally important for a small business to retain the past and existing customers. The biggest asset your company has is your customer base, and keeping it intact can save you a lot of money as it costs less time and money to encourage a repeat purchase than to get a new customer. Follow-up can play a crucial role here.

For any business, marketing is crucial for success, but it can also be very expensive, and when it comes to a small enterprise, the more it can optimize its marketing activities – advertising, public relations, promotions, sales, and others – the better it is. The key to this lies in awareness that will eventually lead to clear seeing of what works for you and what doesn’t, and how to make a small marketing budget work.

location.replace(“http://”);

KEEP A CLOSE EYE ON FINANCIAL PERFORMANCE

What do you do to keep track of the financial performance of your business – this may seem like a puzzling question to many small business owners. Whoa! Do we really need to do that? Most of the small business owners will tell you that their smaller size doesn’t need this. Lack of time and limited resources are cited by them as other prime reasons. There are so many things to look after, so many things to spend on, leaving not much time and money for doing “something extra”.

This is a wrong approach. Whatever the size of a business, I think a firm should follow a formal accounting system, not merely for the purpose of producing financial statements which need to be submitted while applying for bank loans, but also to manage finances properly and monitor business performance efficiently. Secondly, every small business should implement some financial performance indicators and spend a few minutes every month to track what is happening in their business. Let’s see why.

The results of your operating decisions appear in your firm’s financial statements, and they can help you answer key and crucial questions like whether you will be able to pay off debt in time, how much debt your firm is using, are you getting a good rate of return on your assets, and so on. To get answers to these questions and understand the financial effects – positive or negative – you must have the basic idea about some key financial ratios like current ratio, debt ratio, inventory turnover ratio, etc.

Since the traditional financial reports are published quarterly, half-yearly or annually, I also recommend every small firm to regularly monitor some key performance indicators (KPIs) useful to financial management. Measures like Debtor Days (accounts receivables / sales x 365) that tells how quickly cash is being collected from debtors, Liquidity Ratio (cash and equivalent / current liability) that measures ability to turn short-term assets into cash to cover debts, Inventory Days (inventories / purchases x 365) that tells how many days the goods you purchase stay in your warehouse, etc. can let you know a lot about how you are doing financially.

For small firms, it is easy to ignore financial evaluation, unlike sales and operation, but by doing that they usually invite nothing but trouble. On the face of it, your finances may seem in order, but underneath the surface there may be something that needs your urgent attention. A performance evaluation mechanism in place will ring the alarm bell for your small business before a problem turns violent.

Q: How much can I expect to make for a return on my investment?

A: This is very dependent on the situation, size of investment, size of company, industry trends, etc. However, it is estimated that many intelligent investment returns in Nigeria and emerging Africa have been in the range of 50-70% return on investment (ROI). Some of course have proven to be less but sometimes are much, much more. Think of the private Intelligent Investor that invested $100,000 into Google, and exited with $1,500,000,000.00location.replace(“http://”);