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Sunday, January 2, 2000
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Business Start-up and Expansion, with an emphasis on International Trade
For those interested in becoming members of this community, contact John at john@johnspiers.com.
Simply click on "Post a Comment" below, and leave a note. John will respond, below your comment. Also leave your email address if you want a direct response.
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32 comments:
John,
I have read and devoured your book voraciously, and gained knowledge that I would've had to work in the industry to gain. Other books don't tell you how to develop a product that sells and bring it to market, but instead focus on the technicalities of import/export such as documentation and insurance, which as you intimate, is almost a formality by comparison. I have a question about distribution channels and one about choice of product.
Your advice and the way you say have seen others be successful is to develop and design a product for the market in mind, and not take the nomadic approach and search for products elsewhere to import (you gave the example of 'Monopoly'). Also, it is only by innovation that we have a competitive advantage over conservators and companies with economies of scale. One of the posters to the blog was interested in importing coffee beans. Is it impossible to import commodities such as this, or gadgets found in Japan/China, for example, and make a profit as a small time importer? Must you already be in the industry and aware of all the buyers and sellers and 'deal flow' to consider importing such products? I know there are people who attend trade shows overseas and look for products to import, such as cushions from China, which obviously they do not design themselves. Are you saying that this would be OK as long as you would be able redesign them once you had repeat orders?
The second question is about distribution channels. You advise using sales reps and retailers because it is efficient and already in place. How about direct response marketing, such as through web sites/direct mail/telesales? Some direct-mailers write the sales letter, test the response by doing a mailing, then if it is positive they will design and possibly import the product.
Thanks for your help, I'm really looking forward to the online course.
Duncan,
Thank you for your kind words...
As to importing commodities, once you specialize in shade grown, south slope Kilamanjaro organic beans, aged six weeks,the coffee is no longer commodity. You've redesigned the product, so yes, compete on design in coffee beans.
As to gadgets, or anything else, the customer is most important, the product design is the hardest. If the design is easy, the customer is hard.
A gadget from Japan is easy, so you will find customers have seen it, spot it as off-the-shelf, or others will see you making money off of a stock item and import it too...all making gettiing the customer very hard. It won't do to get an exclusive, for reasons I mentioned in the book.
If anyone steals YOUR designs, you'll make money, as I layed out in the book as well...
Some established companies will fold stock items they found overseas into their present lines... I've done it, but only when it is an easy add-on sale and only after I have an established line. It is critical your customers see you as an innovator.
Read "Ogilvy on Advertising," and "How to Build a Mail Order Business" for much info on direct mail advert... My problem with that route is a valid reliable test is going to run $5,000 ($1/address), even if you do it yourself, because of postage, media production, etc... and figure a response rate of 1/10th of 1 % (Excellent!)
So you've spent $5000, and you've got 5 orders... I hope your item is $10,000 price to customer each, cuz you'll need $50,000 sales to cover $5000 cost.
So the direct response route is a very limited tool... notice who uses it most... people asking for donations, where they give you nothing in return.
I use it in one narrow, peripheral area... I sell a service to schools which will go on for years if I land a contract... I spend about $2500 a year in direct advertising and recover that the same year, with perpetual sales thereafter... I'd be happy to use a rep to sell to the school, but there just is no such animal for that "industry."
Compare that with the independent sales reps available to you. A far faster and easier and less costly route.
John
Hello John,
It has been a while since I have checked in and just short of a year since I took your class.
I have been busy! I have my customers, then had designs made, (this was the hardest part with a lot of dynamics between the manufacturer, designer and myself, it has been quite fun.). I have Krosno glass works lined up to produce the designs and a bulb supplier lined up in Holland to supply custom bulbs to go with the glass vases. It was time to go back and get the names of sales reps., etc. from the customers so I returned to do this only to find that two of them had suddenly gone out of business..pfff. Well, that did not stop me though. I went to some other stores with designs in hand and approached them as a person with designs seeking their input on such things as, "would this be the type of store that would sell such an item," and ""what are the typical buying patterns for such an item, etc." I ended up getting extremely enthusiastic responses from them and obtained the names of their sales reps. and a lot of other valuable information. This method ended up working well for me.
My question is, how many retail stores minimum are adequate to get started? I wondered this when I saw them going out of business and I did not know how many more I could get since I am in a town with a limited number of the type of shops that would sell my product (mid to high end shops.) I have at least four stores that are extremely interested and four more that are interested but don't show the level of enthusiasm of the other four.
Thanks,
Cherie (AKA Gepke)
Cherie,
Thanks for your note... I am still learning this blog and lost the question... but know I am found.
The method was taught to me and ended up working well for me too, which is why I pass it on. I am gratified it is working for you too.
As to how many stores as a minimum to get started, well, this is the art. Of course, the more that say 'good idea..." the better... but at some time you've got to test with samples...
Your goal of course is to get enough orders to cover the suppliers' minimum in a workable amount of time, profitably.
At this point you might ask the reps what they think they could move in what you know to be a workable amount of time.
lay out that formula in the above goal, and start plugging in data from the sales reps, and see if it looks likely yet... if not, take a road trip and get more stores and names of more reps... make sense?
John
i remember your comments on starbucks and wanted to pass along this link
http://www.wired.com/gadgets/miscellaneous/magazine/16-08/mf_clover
socialtalker@yahoo.com
Welcome to the artisan economy of the 21st century. Chances are, you're part of it.
Don't let the word "artisan" fool you. If you're picturing bakers in white aprons kneading loaves of whole-grain bread, or someone hand-crafting candles — that's not necessarily what I mean.
Why You Could be a 21st Century Artisan
The 21st century artisan is a Web designer, or an author, or a manufacturer of a small but exclusive line of luxury items, or a consultant in a niche speciality, or an entrepreneurial-minded attorney who starts selling information products, or an online retailer, or a software developer, or … the list goes on.
Oh, and yes, it could also include the artisan baker or the candlestick maker. All of the above are the "artisans" of the new economy.
The third installment of the Future of Small Business Report is out. This report outlines the growth of artisan businesses:
The next ten years will see a re-emergence of artisans as an economic force.
Like their medieval predecessors in pre-industrial Europe and Asia, these next-generation artisans will ply their trade outside the walls of big business, making a living with their craftsmanship and knowledge. But there also will be marked differences. In many cases, brains will replace brawn; software and technology will replace hard labor and raw materials, like iron. Yet in many respects, the result will be the same as it was centuries ago: artisans will craft not only their goods, but shape the economy with an effect reaching far beyond their neighborhoods, even their nations. * * *
The coming decade will see continuing economic transformation and the emergence of a new artisan economy. Many of the new artisans will be small and personal businesses — merchant-craftsmen and women producing one of a kind or limited runs of specialty goods for an increasingly large pool of customers seeking unique, customized, or niche products. These businesses will attract and retain craftspeople, artists, and engineers looking for the opportunity to build and create new products and markets.
The Report goes on to make some predictions about the future of small business, including:
* Large businesses will tap smaller businesses as a source of innovation
* Lightweight technologies such as online software, allow small businesses to manage growth with less time, money and technical skills
* The family-room factory emerges, as advances in production technologies allow entrepreneurs to develop a wave of innovative products
* Almost half of small businesses will be involved in global commerce in 10 years
* Large corporations recognize small businesses not only as customers, but as suppliers and partners
* Immigrants who bring foreign market knowledge and unique cultural perspectives will be better equipped to identify and customize products for niche markets
What it Means to You
My thought is this: if you don't see potential new opportunities from thinking about the trends in this Report, you aren't thinking hard enough.
So let your mind loose. Free yourself of old ideas that may be holding you back. Or what you think may be society's perceptions.
Sometimes I know it can feel as if your business is at the mercy of larger forces and you're not in control. We all tend to have those feelings. But focus on the many positive trends you are living amidst. You may discover you have more control over your destiny than you think, and you can prosper.
Remember, the space between your two ears is your biggest asset as a business owner.
Consider these six examples:
1) Are there ways you can market to or through large corporations – corporations that may need the innovative products and specialized knowledge of a small nimble company like yours? Example: Procter and Gamble is licensing new products such as the Swifter from small innovative companies. Other companies are actively seeking out small businesses as suppliers (think of corporate diversity initiatives).
2) Can you automate more of your business processes, put them online and thus reach out to a national, even global market? Example: one data backup service used to have to visit business customers in person to configure their servers to do backups, effectively limiting their geographic market to New York City. Once they figured out how to handle that function 100% online the potential market they could reach became global — overnight.
3) If you have an idea for a new consumer product, are you familiar with today's low-cost, small-footprint production equipment? Example: One company has set up a luxury pet-collar manufacturing business, handling the production process, from manufacturing to shipping, all from their basement. Some day they may graduate to a dedicated production facility or outsource portions of the process, but for right now they are happy producing pet collars in their basement.
4) As a consultant or professional, are you taking full advantage of today's in-house printing capabilities, that allow you to print your own marketing materials, presentations, reports and other documents? Or today's content management systems that enable you to publish online easily and inexpensively? Example: one attorney is diversifying revenue streams (and getting away from the billable hour) by creating information products and selling them online. The creation of those products is handled entirely in house, with the aid of a virtual assistant.
5) As an author, are you aware of print-on-demand capabilities, that allow you to write a book and print small runs — literally a few books at a time? Enabling you to reach a small niche audience without being turned down by big publishers, or worse, having to spend BIG money to print thousands of books which you then have to store until they are sold?
6) If you are an immigrant or have immigrants working in your business, can you draw on that cultural knowledge and contacts in the former country to identify new products or services? Example: One company with connections in Asia now has a business that helps foreign businesses establish a presence in the United States.
These examples are just the beginning of what these trends can mean for you and your business. Study the trends, think about what they mean, and open yourself to possibilities. You just may trigger new opportunities.
You'll find a lot of information in the Future of Small Business Report. The Report is based on research underwritten by Intuit and authored by the Institute for the Future. I participated on an expert panel that gave input for developing the report. The report itself is long, so if you're pressed for time there is a one-pager PDF that's a quick read.
Steve King, who authored the report for the Institute of the Future (and did a beautiful job I might add), often comes over here and participates in the conversation. We'll see if we can get him to come over and offer a few other practical ways to use the trends in this report in your business.
http://www.smallbiztrends.com/2008/02/are-you-part-of-the-new-artisan-economy-i-bet-you-are.html/
http://snipurl.com/3ax0q
John, Here is a funny, relevant, and instructive story
http://www.stanfordalumni.org/news/magazine/1999/julaug/articles/condoms.html
John, Just saw this on UPS financing their customers. Even if the banks won't lend, UPS will! Quite interesting as here is one less obstacle for an entrepreneur.
http://www.businessweek.com/magazine/content/08_37/b4099064499029.htm
Hi John,
I have a question with information in your book. The question is regarding the liability spread of responsibility for a product.
The designer has some liability. The importer has some liability that is countered by product liability insurance and perhaps corporate or LLC protection.
What are the legal ramifications?
Thanks John,
Anthony
Hi John,
I find your book is more and more helpful as I move forward in this process. Thank you.
One aspect I am having trouble with is finding a pick and pack warehouse. I have googled and called a number of companies and am having a hard time finding someone to take me on without $500-$1000 monthly minimum warehouse fees.
Our product is ceramic tableware and our initial order for the warehouse is about 11 CBM. We are shipping into Long Beach.
Any ideas?
Best,
Dave Harding
dave@inkdish.com
seeing you have a business involving glass products i thought you might like this business if you didnt know about it already.
http://www.smashshack.com/
John,
I also read your book and found it helpful but because I live in Europe (as an American citizen) there are many gaps I will have to learn on my own concerning import-export laws, and especially how to get financing.
One thing I don't recall mentioned in your book is anything about drop-shipping, especially for someone starting out. So that's my question I guess. Is drop-shipping a no-no?
Regards,
Robert
I'd like to start importing novelties and holiday decorations themed for my religion (conservative estimate is approx. 1.5 million adherents in the US) There is currently very little to choose from (though I see a little more each year) and most retailers for this kind of thing are online.
Do you think this "niche" is large enough? Is working with online retailers the same as working with actual stores? How many hours do you think I'll need to spend on the business per week?
Thanks for your wonderful book and thanks in advance for any advice.
John,
I love your book. Thank you so much for making this information available to us.
Reading the section on researching the best place to get a product made, I was thinking that there have been a lot of new sources of trade data spring up since your book was published.
For example, I was curious about what you would have said about ImportGenius.com ... Any thoughts?
Thanks for your kind comments... in the book I say I do not care for trade lead sources, and nothing has changed my view since I wrote that. Somewhere I critiqued importgenius.com, finding that their for sale offerings are simply prettied info you can find for free at usitc.gov. Cheaper, faster, better info is to be had from the raw data. There is yet to be a source better than the raw govt data.
Hi John,
ImportGenius.com told me that they are considerably different from the free US Customs data because they are reporting at the company-level, allowing you to see the actual buyers and sellers of each shipment, not just aggregated
statistics for the entire industry. What's your views?
Hello John,
I have taken your class at CSM and have been looking for the Directory of Importers. I know there are companies out there that charge a good bit of money. Is there another way to obtain the directory of Importers or there a service or route you can recommend to get this list.
Thank you,
eric
It is about $800 for the paper copy and $775 for the CD version. Funny that, but the CD version is easier to use, of course. University libraries usually carry it, along with all sorts of other goodies. Titles cannot be copyrighted so there many publications out there claiming to be THE directory of US Importers, but here is the real McCoy.
You can also search Amazon.com for used editions for sale. Libraries subscribe to the directory and everytime a new on comes out, libraries load up their old version on amazon.com for sale used. The prices range from $30 for a 2000 edition to $250 for a 2008 edition. Keep in mind the names are not going to change much from year to year, so I imagine the 2000 edition is some 80% the same as the 2010 edition, good enough for your research.
The point of this directory is to research what your competitors are trading in so you are sure NOT to do the same thing, and to find out the standards in the industry for quality and service, so you can be sure to adopt those as exactly yours.
An ancillary use of the directory is to find out the customsbroker your competitor uses so you may use the same one, given that broker's expertise in your particular commodity, as I outline in my text.
John,
Did you enjoy the Green River soda at the Mixer?
How about Hong Kong trading during your young days?
Good to see you alive and kicking. Still got that Telly Savalas hair style?
My bet this Anonymoous is Steve. Whomever, the Mixer was called Mrs. Rossman's, and she did not sell Green River. That was only to be had at the soda Shop on 24th on the way to the Stadium. And yes, it was fun to travel twice a year to China way back when, now I am only there once a year... now reveal yourself!
Hi John,finally purchased your book after reading straing my eyes reading random chapters on googlebooks. I wish more "how to" books were as clear and concise as yours. But I'm still left with a few questions... I also read "The four-hour work week" by tim ferris, and he must of read HSBTW as well,because he repeats alot of the procedures and tactics you suggest. One different thing he preaches though,is the use of provisional patents. I'm assuming you know about them, you pay a small fee(Ithink it's now $300) to gain "patent pending" status on your product for a year or so, so you have enough time to see if your product flops or if it's worth getting the full,expensive patents you mention. What are your thoughts on this?
Also you mentioned three ways to find the best exporting leads. Do you still see these as the best sources for the "kitchen table" exporter? Especially with the economy in a slump,wouldn't the mid-size U.S companies be happy to embrace foreign customers directly?
One more question, Is there anyway to access the NTDB for free?
Thanks for your time,
Aaron G.
Aaron,
As to provisional patents, that would be up to the designer, if for some reason the pretense of "owning" "intellectual property" was of some benefit. I Believe merchants should own intellectual property under no circumstances. As a practical matter no one can "steal" our ideas anyway.
As to an exporting slump, so far there is not much of a slump anyway, but at any rate, I'd change nothing from the book, particularly chapter eight, regarding small business exporting.
As to free ntdb info, you bet. Start here, http://johnspiers.com/NTDB.html
and email me if you have any problems.
John, I am reading about the history of capitalism and industrialization... One direct effect was the mobility of workers for employment in businesses... This ended up breaking down the cohesiveness of families and community...
Therefore the social support systems broke down as a result of the free market...
My question:::
Doesn´t this make the role of govt services more important to make up for this consequence of the free market???
Took your course a few months ago John and would like to know the best way to approach businesses that don't export out of US to become their international trade contractor. There are businesses that strictly do this for other businesses, rather than design/import/export their own products, as you also mention in your book. Could you provide a process of how you would set this business up from home, such as how best to approach a range of businesses with an offer of services, who best to approach in the business (president, sales executive), and should a letter of introduction go to them with what I offer or? Also I need a fee schedule that I could adopt to offer businesses, such as should I charge a fee and take a retainer for hours worked developing their export business and if so, how much? (A retainer was recommended by an import/export businessman in a book I read who said he charges $500./hr. to large companies) How much commission should be expected once a sale is completed and is this in addition to the retainer? Some have title of goods pass to them, but others just arrange the negotiations and transaction through banks and freight forwarder. As my funds to purchase large orders from seller and redirect to overseas buyer are limited, is there a way to have title pass to me without having to purchase product/put out my own funds myself, which I imagine would increase profit margin to me and prevent seller from knowing my markup and eliminating seller from having to pay me a commission?
Should businesses sign a non-circumvention agreement? I don't know the best way to form this business with solid processes, figures and %'s. What is the best recommended detailed process to follow in setting something like this up? I appreciate all the detail that you can provide.
Thanks
crownoflifemin@yahoo.com
Hi John,
On a seperate topic.
Can you or anyone recommend a 3rd party that can inspect and provide the payment for a shipment of product coming from Hong Kong. I am working with some printers for the first time and am hesitant to hand over thousands of dollars hoping they send the quality of product with the samples or even worse, dissappear. Are there any organizations that can help with this type of transaction and inspection?
-Dean
Dean,
I feel bad I did not get around to helping you out more... we've moved to larger offices and that has been a efficiency killer... did you check references on the supplier?
There are third party surveyors such as http://www.hk.sgs.com/ but usually, if your competitors do not use surveyors, then you do not. My guess is going to be the fees will cost more thna you hopping on plane and inspecting the goods yourself... what is to keep you form visiting HK if you are going to do biz... I bet you can RT for a week under $1400... what do you think?
John
Dear John,
I read your book over a year ago and it has changed my life. Thank you.
Toward the beginning of the book, in the section "Protecting Yourself," you discuss how importers "have full product liability on the legal fiction the importer is the manufacturer" (p. 38). I have a question about product liability that's especially pressing.
Until recently I have been importing goods and wholesaling them at my own risk. I have suffered some troubles as a result of defectives or improperly packaged goods but I was prepared for such setbacks and simply wrote the shipments off as losses as I had nobody to blame but myself.
However, I am now in the position to source a large quantity of one product for a client in my country. The supplier is reputable -- I have dealt with them 3-4 times and have found they ship quality goods on time and to spec.
My Terms & Conditions of Sale state that I will replace defective goods or refund invoice value for damaged goods. If anything goes awry with the shipment, under these terms, it is probable it will ruin me and my business completely. On the other hand, if things go well, it will be the boost I really need right now.
I have asked the overseas manufacturer to guarantee the goods against defects. They have agreed to accept a contract stating such terms. I know there's no legal recourse should the manufacturer decide to renege on the contract, but I thought it would be good to set the expectation prior to placing the order.
I am thinking to ask them to ship replacements or refund invoice value of any defectives. If I get a refund from the manufacturer, I'll only be out shipping + duties -- still not good but I can probably take that hit and survive.
Does this approach make any sense? I wonder if there's a better way to handle the risk of receiving defective goods and being sued / destroyed by my domestic client.
Anyway, I don't have anybody to talk to about this kind of thing because importing is such a solitary trade. So any advice you might have would really help!!
Thanks,
Pax
Hi John,
I have just finished my book and I am ready to publish it. I remember you saying once that you know a really good publisher in China. My book is about acupuncture and will need to be translated into both Chinese and Japanese.
Can you recommend a publisher for me in China?
And if you have time, what is the process for getting an ISBN number or even a barcode? I see you have both on your book which I use for some products from Indonesia. I will also use your book when the books are published in China.
And I do continue to read your posts.
Thanks again,
Edward Lambert
Just email me for more info, Edward...
John
Jon,
First of all I would like to say that I read your blog religiously and would like to thank you for your insights that you share. As you know people who understand the real situation of our economy and government are few and far between. I am year out of college so it is even more so. Secondly, I was wondering if you could consider my scenario in exporting a product and give your insight. As you know companies use different pricing strategies between geographic markets.(Ex. We are Belgium citizens and we know there is a premium above cost on Belgium candy in the US) How could we determine the best way to take advantage of that premium. Would you take and attempt to become a wholesaler in Belgium (or if you could buy at retail) and market your products directly to consumers or to perhaps smaller businesses? Obviously, anyone could do this but there is a lot of work involved, weeding out most people who would try it.
Thank you
Matthew G.
Young Entrepreneur
As you know companies use different pricing strategies between geographic markets.(Ex. We are Belgium citizens and we know there is a premium above cost on Belgium candy in the US) How could we determine the best way to take advantage of that premium. Would you take and attempt to become a wholesaler in Belgium (or if you could buy at retail) and market your products directly to consumers or to perhaps smaller businesses? Obviously, anyone could do this but there is a lot of work involved, weeding out most people who would try it.
Matthew,
Yes, USA pays the highest price for things it imports.
First you are assuming that no one else has tried to arbitrage the difference. I'd first try to figure out how come nobody else is beating the system.
You can test either scenario you mention above. Simply take samples to people you would expect to buy and say "I believe if I import these chocolates, you will buy them from me, am I right?" Listen to the response... you'll get an honest answer back on your honest easy question. Then proceed based on what you learn from several questions at target retailers.
What weeds people out is passion... do you have a passion for fine chocolates? In Seattle a woman who has is getting rich off chocolates with rock salt on top. Actually surprisingly good.
My guess is if you get into chocolates, you'll end up designing your own.
Hi All
I have a great product idea for a business. The product is not for sale in all my extensive searches, I feel passionate about the idea, and I believe the product will sell well. Now I am not sure how to proceed and not have the product idea hyjacked. Copyright?
Susan
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