$30,000 upfront payment for first time overseas customer

[arcola]

hello,

i have an export company. one of my customers wants to place a $36,000 order. i am flying to saudi arabia to negotiate with this customer/company.

1. i don't have inventory
2. i don't have a credit line or access to that kind of capital

my supplier requires i pay 50% upfront, 50% before shipment. cost for the goods is 28k. my profit is 8k.

I cannot risk not paying my supplier. therefore i am going to strictly offer a minim of 85% upfront, 15% on delivery. that way i can pay off my supplier in full, to mirage risk on their end, and only risk the profit on my end.

what do you guys think of this?

 

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[biophase]

I think the margin is too low for that type of risk. At that rate, you need 5 good orders to cover 1 bad one. Why can't you ask for 100% before shipment like your supplier does to you? Is this a customer that has ordered before? What kind of relationship do you have with him?

 

[tafy]

Pass on the same rules to the customer

50% deposit and 50% before shipping done!

Make sure the contract states that you are the middle man in all of this and the real deal is between the customer and the supplier?

You can get a line of credit from the bank also or probably easier to fly out and check yourself the quality.

 

[100k]

Ask for 100% upfront payment.

 

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[arcola]

Thanks guys.

What I'm asking though is are these terms typical for a first transaction with a newcustomer ? Or should I strive for more lenient terms at the expense of putting me at risk

 

[arcola]

I think the margin is too low for that type of risk. At that rate, you need 5 good orders to cover 1 bad one. Why can't you ask for 100% before shipment like your supplier does to you? Is this a customer that has ordered before? What kind of relationship do you have with him?

I can't raise it too high. I don't add enough value compared to the competition.

 

[ZCP]

Prepare yourself for when they say no. In dealing with companies from that region, our customers often hear, "are you financially strong enough to do business with us?" Mentally prepare for how you will answer that. Are you prepared to walk away from the deal? Have you worked out with your supplier what the terms of the deal are? Maybe you take less markup on this one in return for paying them a little more and they take on some on the risk in giving terms. Be clear that you will turn the deal down and they will not get the order unless they can help you with terms on this one. They might be willing to walk down the path with you. At worst, they deal direct and you get a commission.

 

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[biophase]

Thanks guys.

What I'm asking though is are these terms typical for a first transaction with a newcustomer ? Or should I strive for more lenient terms at the expense of putting me at risk

If this is a new customer you definitely want 100% payment upfront before shipping.

 

[biophase]

I can't raise it too high. I don't add enough value compared to the competition.

So you want to risk $36,000 to make $8,000? I only import, so as an exporter I'm thinking this might be the type of margins you get. But for low margins you must minimize risk. If you get paid $44,000 before you ship, then most of the risk is gone.

BTW, what happens if the boat sinks on the way there? Who's shipment is it when it's on the boat?

 

[arcola]

So you want to risk $36,000 to make $8,000? I only import, so as an exporter I'm thinking this might be the type of margins you get. But for low margins you must minimize risk. If you get paid $44,000 before you ship, then most of the risk is gone.

BTW, what happens if the boat sinks on the way there? Who's shipment is it when it's on the boat?

Hi bio phase. I'm not risking the money if I get upfront payment. I'm only risking my profit. The terms are 85% upfront, 15% before shipment so if the ship sinks it's his risk. The 36k is fob busan.

I'm kind of new so I don't understand what you mean by managing risk with higher profits. I went low on my price to be more competitive, I'm a little high considering the market.


I'm really worried of spending all this money on a plane ticket and getting the terms rejected. Because upfront payment but the feeling I'm getting is this is normal and my customer should under stand

 

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[arcola]

What do u think bio phasebio phase

 

[pro]

1) Don't get on a plane until you have the terms worked out in advance

2) Use escrow

 

[arcola]

1) Don't get on a plane until you have the terms worked out in advance

2) Use escrow

do u have experience in this?

 

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[biophase]

I don't understand why you have to fly out there? What are you discussing in person? Are you still negotiating?

 

[arcola]

I don't understand why you have to fly out there? What are you discussing in person? Are you still negotiating?

I honestly do not know why either. We have nothing signed, nothing. They are sponsoring the trip, giving me a hotel. It's really strange.

He just asked that I have all the paper work ready for a distribution agreement and samples and the rest we will discuss in person.

In at Arab culture business is done in person, but still , I really want to just say. " why don't we go Over some basics first, and solve the details in a in person meeting. We have to make sure we can agree first though:". But I don't want to derail anything. I'm an opportunist

 

[biophase]

I thought you said you were spending money on a plane ticket? If they are paying and you have the time, why not go?

 

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[arcola]

I thought you said you were spending money on a plane ticket? If they are paying and you have the time, why not go?

they are sponsoring the hotel, food, etc

not the plane ticket sorry for the confusion

 

[biophase]

Well it's up to you then. Is there chance of repeat purchases?

What's your cancellation policy?

 

[arcola]

What's a cancellation policy ?

Yes I mean it's impossible to predict the future but if he successful the first time he's definitely going to reorder it's that type of arrangement

 

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[biophase]

What happens if they order and send you the first payment and then cancel the order a month later?

What do you tell your factory?

 

[arcola]

The first payment is %85, which is my entire cost. The second payment is %15 which is my profit.

If he makes the first payment then at least my name is good and the factory gets paid.

 

[eliteguy]

The first payment is %85, which is my entire cost. The second payment is %15 which is my profit.

If he makes the first payment then at least my name is good and the factory gets paid.

Hello,

I've been lurking around here for a while, but never posted anything(sorry admin if I'm not following the rules). I have experience in the export industry and can help you with your questions. I've been working for an export company (very slow lane / sidewalk, I know...) for 3 years. We ship retail food and beverage to countries all over the world, but I mainly work on the South East Asian countries.

I was wondering if your deal went thru?
What product are you selling? Keep in mind every country has its own importation laws and some may require certain documentation before your customer can clear customs.

If your customer is willing to pay 85% upfront and 15% when the product ships (or arrive, depending on your terms), by all means do it. In this business, it is better to risk profit than your own money, however, keep in mind we are the business of building relations, which requires a lot of trust. Your customer is as putting as much risk as you. If the product is shipped by sea, it will be months before they will receive their product and they are trusting you with an advance payment, the same way you are trusting them to pay in full when the product is shipped. With that being said, most customers will not agree with 85% or 100% advance payment (of course there's always exceptions, if they trust you can deliver and they have a lot of capital, they may pay in advance). Most would prefer 50% or even 30% advance payment.

Let me know if I can answer any specific questions or you can PM me.

Thanks,

 

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