Sales Approach as Export Agent & Freight Forwarder Fees

On Aug 15, 2014, at 7:11 AM, Steve wrote:

Hey John, Thanks for the responses. I appreciate it. I have sent out a supplier letter to discover interest in finding foreign markets and have set a time to connect via phone with them in over a week. I am in process of looking at other supply options and other avenues related to the pastries. However, as I prepare, I am thinking forward to my conversations with prospective suppliers. I could use some clarification/confirmation on my focus in these conversations. Please let me know if I am missing anything.

My understanding presently is that when I connect with the decision maker regarding the supply for my export possibility my main discovery should be whether or not they are interested in export or if they currently export. My desire revolves around their disinterest in export.

***Yes, in the context of being an export ageny, the irony is your best bet is someone who has conscisouly decided to NOT export.  Any buyer worth his salt will try to go around you directly to the source.  When your source is proven unavailable otherwise, then you are the defacto source.  In this way you need no de jure “exclusive” because what you have is necessary and sifficient.  It also serves your low impact approach to the supplier.  It costs nothing (no legal considerations) to begin to work with you.***

If I find that they are not interested, I am to find out what they might do with their current export inquiries so as to obtain them as great sales leads. 

***Well, come in with your own target market customers.  Get the agreement, THEN go after that low hanging fruit.  Prime the pump with your own contacts first.  I am sitting on buyers in Hong Kong for USA beef, and in spite of the Russian ban on USA beef, the drought in USA has caused such a shortage here that customers go begging, and beefsters don’t care.  Next year, el nino, no drought, the world changes again.***

Next, my consideration should be to find out the MOQ they would need to profit. 

*** You make an export sale no more difficult and every bit as  profitable to the producer.  So, what is your client’s present USA Min order requirement?  Then that is yours, or some rationale multiple thereof for export moq fob.***

My goal in the whole process of the call is to make the supplier feel at ease so that it really is no more difficult than a domestic sale. 

***Perzactly!***

Is there any subject a newbie like me may need to stay away from? 

*** No...  the subject is your offer to test their product in what your research shows to be a promising market.  YOu both get the same thing, solid market info upon which to decide what to do next.  Age quod agis:  You are selling the next immediate step: is there market overseas for their product.  The only definitive test is mow fob.***

Also, how do I end the call? can you help me understand my process 

***Yes,   end the call quickly.  As to the process, yes, let me send you a separate email tomorrow detailing this...***

if they are not only disinterested in export but are absolutely opposed (worst case)? 

***Excellent information.  Do an false door marketing campaign.  See if you find market.  If so, get a contract baker to produce under your brand.  You’ll know for sure #1 is absolutely opposed to competing with you.***

As I understand things, if I simply wanted to look for buyers in Mexico then purchase the pastries myself, then they are my property so I can export them if I desire, right? Is there something I miss in that scenario?

***No.  Customers trump all.***

I do have some uncertainty in constructing the MOQ FOB offer. This comes from reading the customs rulings in the research. They are so detailed as to percentages and such in the ingredients. I am not the expert in this area (yet) or in the product. But in order to construct that MOQ FOB offer, I would need that info (am I right?) 

***Yes.***

So is that info that I would need from my initial conversation? 

***No...***

Or is that obtained by me. 

***After they agree, the owner tells the baker to give you the breakdown.  The baker has it.***

Also, regarding labeling - Do I request that they not label the products for export as the importer would handle that according to their regs? 

***Low impact, you sell as it is labelled for the USA market, the buyer overseas worries about this problem, if it is a problem.***

In the passive marketing of the MOQ FOB, does that really produce a significant amount of business to justify it. I do see benefit because it is simple enough and why not do it since their is ease - I get that, but I just am curious to the return generated.

***Exactly... great place to file it, it may rise on rankings, and when people check you out they see it.  But I call it passive because websites are no place to base a business.  Amazon cannot make money at it.  Expect sales from the web marketing to be negligible, like ievery other website (or cost more that it is worth.)

Other curiosity - I took an import/export class about a year ago and the main teaching was for the teacher to explain what a freight forwarder does and to show you how the forms work and what is required. It was mostly informational rather than instructional. Additionally, he did not take the student in the direction of starting and building a business which is what you do (and it is awesome). But in the process, he mentioned that when dealing with the freight forwarder, there were certain 'fees' that were bogus and that you should dispute those specific fees and not agree to them (akin to a car dealer's vague fees). Is this the case? and from your experience are there any fees with a custom's broker / FF that should be disputed so as to better represent our buyer/seller?

***Ungh...  freight forwarder fees are low in comparison to the services rendered...  the problem is not bogus fees, the problem is unsaid fees... since people comparison shop, some FF leave out significant fees in the pro-forma phase of costing.  The trick is not to find bogus fees but to find ALL the fees...  who cares what the fees are?  Ultimately all brokers tend to charge you the same,  and the customer has to pay all fees anyway.

GEt the leader FF in your field, keep bugging them with “is this all the fees?” and add them to your price.  show them you don’t care what they are, that you only want to know WHAT they are...”***

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Why Swiss Are Rich

Because they have nothing to do with silly embargoes...

"The food-import ban has a rather limited effect on growth in the eurozone," said Peter Vanden Houte, chief euro-area economist at ING Groep in Brussels. "For some areas in the sector, oversupply could cause prices to drop."
According to Vanden Houte, there may be "some shifts towards Switzerland and it may profit from higher Russian demand as a substitute for European products -- but I doubt it'd be able to strongly increase production to meet the demand."

They are happy to sell to either side....

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Start Up Perseverance

On Aug 14, 2014, at 7:35 PM, Steve wrote:

>>>>With respect to why I would not become a formal - legal entity in the form of company yet is understood, however let me ask this - Am I correct that by using my name that there is no real requirement legally to legally form a company as of yet anyway?

***Right, in essence you are in research  mode....****

 I could for all intents and purposes, simply carry on this way for a long time anyhow, correct?

***Yes, with a view to makng money sooner than later...***

 I do believe though that it is not best once the re-orders begin flowing and such to visit a CPA and start getting advice on the legal end (I do know that this is further down the road).

***The legal concern is you pay taxes, pay taxes and you have no legal concerns from the govt...  cpa’s advise you on the legal form given your unique circumstances...***

>>>>Understood, I guess what I was really trying to get at is - I would like to get the price right...but you're saying that the price will simply be what it becomes and then (since we are not competing on price and are offering premium product) we'll see what the market says to the one importing our goods and then we will discover what the consumers want so we can redesign or we will find them reordering what we provided.<<<<

***Perzactly...***

>>>>When you say 10% fee to net, could you help me with how I arrive at that. I am wondering if that is net after FF fees etc. Or is it  after only the supplier's stuff and my costs?

***Well, 10% of say $5000 or $5500?  either way, it won’t be a big deal one way or another...  but biling for time spent billing (10% fee on your costs, loooks greed sometimes...***

>>>>What is interesting is that prior to your writing this, I started asking myself, why not simply produce these patties myself through a local baker to me and then what you taught in your book came back to me 'Where is the best place in the world to produce these pastries?"

***Ultimately your are in business for yourself.  Every baker stole his business idea from every baker before him...***

 Which brings me to the next question. - If I found mexico was the best place to make my pastries to export to other countries then could you explain how that impacts my USA based business financially. 

***You’d be a USA based relatd-party importer who also directs sales from around the world into the Mexican pastisseria you own or co-own or with which you are associated.***

Here is where I am going with this: Since the product is being produced in Mexico and then sold to, say, Switzerland then what are my fiscal responsibilities for income earned outside the US? Let's say I earned 10,000 dollars USA in a transaction between two countries that ends up in my bank account would it benefit me to have a Mexican account in order to maximize my financial benefit and to aid future transactions in Mexico for cash flow?

Yes, because it is legally a mexican sale, not a usa sale.  Why bring it here?  A CPA would help you keep it ll straight for tax purposes,a dn the tax codes are written so google and apple and bowing pay no taxes, so you’d follow those laws too.***

 BTW, my question is not meant to be 'I want to evade taxes' but this is simply a scenario that I could see myself getting into and I want to be savvy to the implications both foreign and domestic from a business mindset.

***I agree never evade taxes when the laws are written so you can pay no taxes...  always thought tax evaders were rather silly.***

>>>>I know that you have experience and knew the answer and I'm glad that you did with respect to where to FOB. However, how did you arrive at these locations? Is it simply just Trader common sense, or Freight Forwarder Interaction, or is there a webpage that allows you to place in the origin and destination and it gives you options?<<<<

***Well, experience mostly, but I always defer to freight forwarder on specifics, since the field changes constantly.  Webpages are too static to catch what has changed in the last 3 or 4 minutes, all that really matters in the world of logistics...  Librarians and logisticians, the two most unsung heroes in the economy.***

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BRICS and Russia Beef

Kevin asks -

Hello John, John isn't possible for theses countries that are exporting to Russia could be buying from the United States and re-exporting to Russia?

Brazil’s Association of Meat Exporters said on Tuesday that beef exports rose 19 per cent in July to $692 million over the same period last year. Exports to Russia rose 113 per cent to $181 million last month, compared to July 2013.
The volume of meat exports to Russia also surged, rising 78.9 per cent during the month to 41,000 tonnes.

Hey Kevin,

Everything happens, and no doubt there will be some of that... but assuming a shooting war does not start, trade patterns will return to rational, given distortions by subsidies, etc, that we have now.

There is a shortage of beef in USA now, so this won't mean much.  Next year may be an el Nino year, and if so, the drought is over and the beef flows again...

John


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Naming Your Company and Orientation

On Aug 13, 2014, at 8:22 AM, S wrote:

Hey John, love the course and appreciate your brain...

1.Do I call myself ‘My Name Company” or simply “My Name” in the heading for the supplier / buyer correspondence?

***Either way works,  but I’d use the “company” even in this research phase... but dont bother making a company yet..***

2. The cost of the pastries US retail are 7.49 per six pastries from prospective supplier. When/If they agree for me to be ‘agent’ for them in exporting to Mexico+ then what would be the best approach to maximize profit? 

***I’d back off  from the Maximize profit orientation, and switch to serve the customer...  that way the profits will follow...  you are in search and learn phase of exporting food...  

You have two customers: the supplier for your services, the buyer for the pastries... you want to make as much money for both as you can...

The producer needs an export sale as easy and profitable as a domestic sale.  So forget “agent” as a formal term, and think informal “agency” that is to say, since the supplier will not entertain direct exports, you are defacto the only soource for mexico... don’t go for legal “agency” or contracts...  that “costs” your supplier too much...

The buyer wants to test new product trying to find a hit for his outlets...  s you put together MOQ FOB in which you announce your price and show your commission.  so usa retail is $1.25 each, and your price is 20 % off or $1.00 each Ex Warehouse...  so you start adding on all of the costs to get these FOB Laredo, and note your, say, 10% commission.  Of course the buyer will try to go around you, but as noted earlier, you are defacto sole agent.

When they buy with 10% fee to net, they know this is negotiable in future, if demand in mexico discovered by this importer warrants any future negotiaitons.  nine of ten importers will find no need to negotiate since they will find no demand, on average.  Youa re search and learn for the one who will find demand.  ***

The average price for pastries to Mexico was 4.23 for 2013 and the global avg was 3.82. How do I determine the price given the circumstances.

***YOUR price is 10%.  Nothing else matters.  The trade data bird-dogged the most likely customer, and gave averages on prices paid.  You ar ein spacialty, so you are further out the bell curve as to price...***

 I have not solidified a MOQ FOB offer as I still need to work out variables. How would I seek a lower price (I know they would give a 20% discount on 6 pakckages)?

***Their prices are probably based on volume, so they just hand you a pricing sheet.    You are not competing on price, so why do you need an special price?  later, if and when a market is discovered, then volumes will become known, and you an quote a specific customer prices based on the volume price sheet.

now, aside from the market knowledge you uniquely acquire upon which you’ll be trading, you are also independently assessing other opportunities...    eg, do you discover you might be useful making these pastries in mexico and exportign aroound the world from mexico?

The side point is, don’t put too much emphasis on what you are now seeing foggily since as your info becomes more fundamental through search and learn you may discover far more valuable role for you to play than you imagine yet...***

3. I am also trying to research the best FOB for it. The supplier is located in NW Iowa, I am in So. Florida. Could you give me some direction on that?

***If mexico is your #1 market, might as well be FOB Laredo, but if worldwide, FOB houston is OK...

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Hong Kong Cruiseliner Port

Everything in Hong Kong is largely privately run, including ports.  Whereas in USA crony capitalism decides who gets subsidies to run a failed business in our "government-owned" ports, in Hong Kong private companies run profitable operations.

“A key part of our investments in Hong Kong is an exclusive joint venture partnership to manage the new Kai Tak Cruise Terminal alongside Worldwide Flight Services and Shun Tak Holdings Limited. This collaboration is part of our vision of making cruise vacations as popular as air travel among Hong Kong travellers,” he said. 

Also, mass transit is privately owned. Keep this in mind after November, when the markets crash irrecoverably, and we need to rebuild from scratch.

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Austrian Economics & Interest

von Mises says:

We cannot even think of a world in which originary interest would not exist as an inexorable element in every kind of action.

True, if you presume a world in which usury is acceptable.  In the section cited, he compares an investment in a hotel in which the interest (usury) paid calculation prices out the project as untenable, to another location where the costs are lower to the interest rate works out, by all calculations.  And indeed, if and when interest is universally charged, it becomes a necessary consideration in overall calculations.  Thus, interest (usury) once allowed, becomes a necessary consideration since competitors will avail themselves of such factors.

This is similar to the phenomenon of building material codes.  Once there is a government enforcement of building codes, and usury to collect power in ever fewer hands, the big boys begin to design the materials, own the patents, write the codes that all builders must follow.  This monopoly is necessarily lower quality products, which then make for costs dropping due to subpar while prices rise due to inflation.  Small builders create profits (rents) for the big boys by at once paying higher interest rates and being forced to include materials in construction in which the same big boys turn a profit.  Further, the meager profits of the small boys are taxed to pay for enforcement, while the big boys pay no taxes whatsoever, with the government concessions for the big boy projects.  The introduction of government supervision of health and safety leads to a downward spiral in health and safety and community wealth.  The small quality builder is forced to build junk, but on the other hand, he need only be slightly better than the horrors produced by the big boys in order to earn a living.

Education saw the same thing. As govt supervision of education increased, public education went very far downhill fast.  Private schools need only be slightly better to charge a super-premium price.  Private schools today would be disgrace in the 1950s, but that does not matter.  The comparison is what sells.

As to Mises comment, a Moslem would ask "Why not just invest in the hotel, instead of lending money at usury?"  And certainly Christianity teaches the same thing: don't invest at interest (usury), invest as a participant in the profit and loss.

But we live in a system in which it is acceptable to lend in which you are guaranteed a return no matter what happens to the other.  Since some small players can and do benefit, we all accept a system that overall impoverishes most of us.

I would never say outlaw usury, I would say just do not make us pay to enforce usurious contracts.  they is necessary, and sufficient to end it.

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China News Round-up

Several Stories From China:

Hundreds of pigs killed by thunderbolt

171 pigs were killed and another 110 were hurt after a thunderbolt hit a pig farm in a village in Chaling county, Hunan province on July 26, according to rednet.cn on Monday.

The owner reported that the lightning strike caused a direct economic loss of nearly 300,000 yuan ($48,683). The farm's owner buried the dead pigs in a bio-safe way and claimed the insurance.

Lightning Cha Siu.  Packing the pork too closely, free range pigs are better.

Bikini show arouses debate

Bikini show has aroused heated debate online after photos of models wearing makeup and accessories typically used in the traditional Chinese Min Opera (or Fujian Opera) went public on Sina Weibo, a popular social networking site in China. The combination of bikini and the traditional Chinese elements became target of attack. Many Internet users slammed it as neither fish nor fowl and said it showed disrespect for the traditional art.

Lam Ping could have handled this.

Animals suffer from square dancing in zoo

Giant pandas and other animals in Nanjing Hongshan Forest zoo act agitated when hearing the sound of square dancing, The Modern Express reported on Tuesday.

Neighbors living near the zoo complain that square dancing is always accompanied by loud music and some seniors singing the chorus in the center of the zoo, which may clearly disturb people. Most of the square dancers are seniors aged over 60 who can enter the zoo for free.

According to the zoo's director, animals can be harmed by loud noises.

Don't we all.

Chinese tourists dumped in Thailand suburb

A group of 19 tourists went on a package tour to Thailand through a travel agency in Xi'an, and were dumped in a desolate suburb because they said "No" to a shopping stop required by the tour guide, Hua Shang Daily reported on Tuesday.

The package tour charged 2,500 yuan ($405) per person and the optional program charges more than the total package tour fee.

The tourists had to call the Chinese embassy for help in Thailand, and after a five-hour wait returned safely to their hotel.

A Xi'an to Thailand package deal for $405?  Please name the travel agent.

2 officials get prison terms for taking bribes

Two officials in Zhanjiang have been imprisoned for taking bribes, the Southern Metropolis Daily reported on Monday.

Liang Bizhi, the former director of the city's Potou district, received corrupt payments totaling 2.6 million yuan ($423,300) plus $50,000 between 2003 and 2012. Li Guoxing, the former deputy chief of the district, received 150,000 yuan in 2010 and 2011. Liang was given 13 years in prison and Li was sentenced to 10 years and two months.

When o when will we see such stories common in USA, or better, truth commissions?

Guilin starts 72-hour visa-free program

Guilin, the transport hub for the backpacker haven of Yangshuo county, began offering 72-hour visa-free stays to international transit passengers on Monday.

The policy covers travelers from 51 countries, including the United States, Japan, South Korea, Australia and a number of European Union nations.

Which is, in effect, making Guilin, a lovely place, a Hong Kong for 72 hours for each visitor.  Interesting development, time-dated polity.  The carriage turns in to a pumpkin after 72 hours...

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Toward A White America

In the United States we are careful to track everyone by race, since when it comes to politics, race sells. Pat Buchanan is lamenting the deconstruction of USA, and notes the changing racial demographics.  In summary he notes:

Perhaps. But sociologist Robert Putnam discovered that the more ethnically and linguistically diverse a society becomes, the more its social capital evaporates, and the less do its multicultural members gather together to cooperate in common causes.
And from those recent polls, Americans seem to look on the prospect of an even more racially and culturally diverse America of tomorrow, not with anticipation, but with a measure of dread.

Who?  Some cracker named Bobby did a study and "discovered" something?  Well, to be science, Pat, it has to be valid and reliable, that is you measure what you say you are measuring, and you find the same results each time different measurements are taken.  Sounds simple, but it is really hard to achieve "science."

Now, a part of science is simply empirical.  What do you see already occurring.  How about the most peaceful and prosperous places on earth are all multicultural, multi lingual and multi racial. For example, Hong Kong, Dubai, the Vatican, Monte Carlo, Singapore and Switzerland. Can't beat them.

They also share the fact they they are small, defenseless (except Switzerland), relatively sound money, insignificant state welfare, and lots of immigrants and languages.

So, instead of worrying how many white people there are, why not worry how big USA is, how few languages are spoken commonly, the unsound "money" and too much defense, and too much state welfare.

Our problem is not Honduran kids showing up on the border.

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Iraq: Mission Accomplished

The elective war on a country no threat to the United States, has reached a milestone:  the people who arranged for Barack Obama to be elected have finally made it his war now that he has elected to return.

"They can't blame George Bush anymore," Cheney quipped on AM 970 The Answer's "The Cats Roundtable." "I think he's been a failure as a president. I think the scandals, wth respect to the Veterans Administration, with respect to the IRS, these are bad situations."

As if none of this went on in the Bush administration, as if the republicans don't target conservatives in elections.

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