As we discussed in the article Starting a Home-Based International Trading Business , you need to select the products you will trade and the supplying countries. To illustrate, we used the example of trading food products for manufacturing purposes while remaining open to new possibilities that may come along the way.
The next step is to start communicating with some suppliers in your list. While waiting for the response of your potential suppliers, use the time to initiate contact with your prospective buyers.
Dealing with Buyers
Since, we chose food products for manufacturing as our main product, we will be dealing most of time with manufacturers or institutional buyers. This has advantages and disadvantages. The big advantage is that you will potentially be dealing in big volumes. Big volumes bring bigger commissions for your sales. Another advantage is that you can easily enjoy your new identity as a bonafide international trader.
The disadvantage, though, is that you will always be pitting with several competitors every time the buyer has a requirement. Manufacturers normally issue invitations to bid to all their accredited suppliers, and not just to you. Thus, you will be participating in these biddings if you want to make a sale.
Getting yourself and your supplier accredited by manufacturers can be a tedious and sometimes frustrating process. However, accreditation is a procedure imposed by most manufacturers to protect themselves from unreliable suppliers. Some suppliers post the lowest bid, but deliver products that fall short of the specifications, delayed shipments, or may not be able to deliver at all.
Manufacturers have production schedules and timetables to beat. Any disruption to their raw material supplies could mean tremendous losses. If a supplier fails to deliver on time, the buyer maybe forced to buy from other suppliers for a ‘prompt shipment’ deal and the price would be much higher than those contracted on a ‘forward shipment’ deal.
Forward shipment means the price is set for a future shipping period. For example, in November, you make an offer for a shipment in February, next year. Prompt shipment means your supplier has to execute shipment as soon as they received the payment, normally the Letter of Credit.
To contact some of your prospective buyers, make some phone calls with the purchasing departments of manufacturers and buyers of your product. Get the name of the person/s in-charge of procurement. If you have the chance to personally talk with the person, start a “get-to-know-you” process. This will allow you some headway to present your product or your supplier easily as soon as you have one.
Making initial contact with your buyers is very important to your future relationship with them. When the time comes when you have made concrete arrangements with your supplier, you may only have to present your supplier’s credentials. The screening process for your supplier can be less stringent because you are now familiar to your buyers, and you have started to gain their trust.
Reliability of Your Supplier
One important thing: You need to make sure that your supplier is indeed reliable as they claim to be. Conduct your own investigation through references and inquiries from other trading companies or banks to ensure that you are not representing a “fly-by-night” company. Never make assumptions about your own personal assessment. Do not take some negative opinions for granted either. Since you will be dealing with foreign companies with whom most of your future negotiations will only be done through the phone, emails, fax and letters, it is advisable that your supplier is able to live up to expectations. Remember that you are the one in the front line and any mistake that your supplier makes will be a disaster for your business.
It may take some time, maybe a few weeks, before you get some positive responses. Very often, most of your first choices would already have representatives in your area. Send some more letters of proposal to your second or third choices.
We recommend that you send out your initial proposal letters in your business stationery rather than by E-mail or fax. You may send emails when you make a follow-up. Communicating in a formal letter of proposal in your business letterhead, will give your prospective supplier the air of confidence that they will be dealing with a serious and well-founded company and will be in the same context, reliable.
Recommended Books on Starting an International Trading Business:
- How Small Business Trades Worldwide: Your Guide to Starting or Expanding a Small Business International Trade Company Now
- The Handbook of International Trade and Finance: The Complete Guide to Risk Management, International Payments and Currency Management, Bonds and Guarantees, Credit Insurance and Trade Finance
- The International Trade: An Essential Guide to the Principles and Practice of Export
- International Logistics: Management of International Trade Operations (with Make the Grade Printed Access Card)
- Import / Export Kit For Dummies
- Understanding Global Trade
- Export/Import Procedures and Documentation
- Starting a Home-Based International Trading Business (Part 2)
- Starting Your Own Home-Based International Trading Business
- Pros and Cons of Financing a Business
- Starting a Home-Based Exporting Business
- The Future of Automated Trading in Forex