An email inquiry:
I have a good friend who is from overseas but lives here in USA now for past 13 years. One of her cousins is married to the owner of a food company overseas. The company is 60+ years old and exports to Europe, Asia and Africa but not to the US. She was visiting them in their country recently and asked the owner why he doesn’t pursue the US market and he said he didn’t need the market and didn’t speak English. She asked him if she could pursue the US market for his food products and he said sure, no problem. His company does about euro 30 million in sales with multiple production facilities throughout the home country.
I have a good friend who is from overseas but lives here in USA now for past 13 years. One of her cousins is married to the owner of a food company overseas. The company is 60+ years old and exports to Europe, Asia and Africa but not to the US. She was visiting them in their country recently and asked the owner why he doesn’t pursue the US market and he said he didn’t need the market and didn’t speak English. She asked him if she could pursue the US market for his food products and he said sure, no problem. His company does about euro 30 million in sales with multiple production facilities throughout the home country.
My friend asked me to partner with her on this venture of introducing their food products to the US.
I think we could approach this opportunity as follows:
- Need exclusivity with the company to be their only agent in the US. I believe the owner would be agreeable to this.
- Rather than import the products ourselves, we would seek out importers/distributors of Fancy foods here in the US that are interested in the products they have.
- Either the importer or the company would pay our company (my friend and myself) an agency fee of 10% of all revenue they generate from the US.
I believe this could be a good opportunity but not sure how to proceed. Any advice you have would be greatly appreciated.
*** My answers are in between the *** ***
My friend asked me to partner with her on this venture of introducing their food products to the US.
I think we could approach this opportunity as follows:
- Need exclusivity with the company to be their only agent in the US. I believe the owner would be agreeable to this.
***It would not do you any good... if and when the product was popular, any one could get around that... it is called grey market...Exclusives never work in international trade.***
I perused your book last night and I remember how exclusivities are worked around. In this case, one of the buyers of the food product in let’s say Germany could then export some to the US. Is that what you mean?
***Yes. one way or another.***
- Rather than import the products ourselves, we would seek out importers/distributors of such foods here in the US that are interested in the products they have.
- Either the importer or the company would pay our company (my friend and myself) an agency fee of 10% of all revenue they generate from the US.
***Why? What value would you be providing that would warrant 10% of the action? An introduction? Neither side would consider that fair, and not agree. 10% is probably his net. Although having an export price no different than a domestic price will obviate the need for exclusives, if he gives you 10% he is essentially managing his operations and expanding production to meet USA demand for no compensation. Why would he do that?***
I believe this could be a good opportunity but not sure how to proceed. Any advice you have would be greatly appreciated.
***You get paid for contribution, and nothing else. Can you name what you would contribute?***
Reply -
I understand what you are saying and my answer would be that we are contributing the work to get his company into the US. He has indicated to my friend that he doesn’t want to get involved with the headache of getting his company selling into the US market. We (my friend and I) are taking on that headache for him
So, he is not interested in devoting any of his time to pursuing the US market, so if we do that for him it is like a new revenue source for him that he doesn’t need to chase after. We do the chasing (finding US importers/distributers interested in his products) and for that he pays us...
***Since he has no interest in pursuing the US market himself, you are saving him nothing.***
and for that he would hopefully be willing to forego 10% of his profit margin. No terms have been discussed with him, I have not met him yet.
***Above you said 10% or revenue and now you are saying 10% of profit margin. What is the difference? Say the revenue is 10 million, then 10% of revenue is one million. If by profit margin you mean gross profit, and that is 50%, then 10% of 5 million, or 500,000. If you mean net profit margin, and the net is say $150,000, then you are talking about $15,000. Gotta get the terms straight. No one is going to give you 10% of revenue. No one is going to give you 10% of gross profits. 10% of net profits is not enough for all of the work you’d need to do. Better to start your own company and earn all of the net for yourself.***
He told my friend he would send 50K worth of samples. Maybe he wants us to be the importers and distributors and he just takes big orders from us. I am really not interested in that, too risky. I want to find the buyers and then have them go directly to the company to place their orders.
***Risk is not the issue because entrepreneurs never take risks. The question is what work do you do that warrants any income? $50k in samples does you no good. You need orders, customers, not samples. Yes, he wants you to be the importer, and he just takes big orders, becuase that is how the business rationally works.
I think the toughest problem would be how come this product is not already selling in USA? To say he has not tried is one-sided.
1. Ask him if he has ever received inquiries for his products form USA, and if so, how did he respond.
2. You have a hypothesis that there is business here. Find your customers first: get samples and pose you hypothesis - "I believe if I introduce this to you, you will buy through me and build good business with it in USA (or whatever your hypothesis is). Am I right?"
Test your hypothesis before you put a minute or a dime into this....***
My hypothesis is that importers of Fancy foods in the US would want to sell this food once we approach them with the idea (and samples to taste).
***Then test exactly that. It would cost you nothing to walk into Fancy food importers with samples and say “taste this and tell me if you would want to sell this in USA.”
I don’t think you’d need to do that more than a dozen times to get your answer.
DO NOT spend $20,000 on a booth at a trade show to get the answer you can get for free.
The fundamental error here is “organizing around a resource, that is $50,000 in samples. You ought to organize around the opportunity, the customers. What customers? Your customers. Customers for what you should be trading in, unique to you, that no one else does like you do.***
Feel free to forward this by email to three of your friends.
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