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Pre-Launch Sales

Discussion in 'General Entrepreneur Discussion' started by Zedd9165, Jul 31, 2018.

  1. Zedd9165
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    Zedd9165 Contributor Read Millionaire Fastlane

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    Hey guys,

    I have been working on a project for quite some time now and the things have become clear after a lot of research that I can go in and start my company. However, manufacturing the material in smaller quantities is not being entertained by my manufacturers and the ones with low MOQs don't have the desired quality.

    Therefore I was thinking of bringing a couple of samples and test the market before i go full fledged. So is it advisable to have a pre-sale marketing and spreading the word about my product and then evaluate the demand and manufacture accordingly?
     
  2. Ddowns46
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    Ddowns46 Contributor

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    Check out this thread i started a few days ago which covers my experience with a presale campaign: EXECUTION - Journey through Presale hell

    In short, we have done about 1.7M in pre-orders and counting. It’s a great way to test the market and generate capital, but there are negatives that you should be aware of. If you’re going to do it, make sure that you can actually meet the committments that you advertise to your customer (ship dates, product quality, customer service, etc).

    Also, i would recommend that you really drive home to your manufacturers why you believe your company will succeed. We sent out RFQ’s to a large number of manufacturing companies and many of the quotes we got back were 3-5x more than our targets (and what we ended up paying). The reason is because we were new, and had no money or sales. It’s human nature to avoid taking a risk on an unknown. It wasn’t until we started aggressively persuading these suppliers to buy into our vision and take a risk on us, that we got pricing that was favorable.
     
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  3. Zedd9165
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    Zedd9165 Contributor Read Millionaire Fastlane

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    I agree with you on the pricing part. I have been in talks with a couple of manufacturers, their MOQ is pretty high and the pricing is almost as same as of those suppliers who's MOQ is low.

    For example Supplier 1: MOQ 100; EA USD.14
    Supplier 2: MOQ 1000; EA USD. 12.

    Pushing them any further below 2 dollar discount is making them stop replying so this is cutting off my options. Plus buying with such pricing from a manufacturer is not at all worthy because it's clear that the manufacturer's sales executive wants to close the deal with minimum discounts and from buyer's perspective I hardly have any margin left after all the logistics, import and custom export duties applied.

    So its kinda tough right now to find a genuine manufacturer who can give better pricing considering that we are starting up. I would really be helpful for any individual if he/she receives any such support from their manufacturers during the initial stages.
     
  4. Ddowns46
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    Using your quoted figures, $1400 revenue for a shop (even in China) is not a lot of money. There is just not much upside for them. Even $12000 is not a lot of money in China. They give the good pricing to the customers sending them huge orders.

    How does having them reduce their price by 2 dollars improve their bottom line? Our suppliers steeply discounted their rates because they were confident it would benefit their bottom line long term.

    Also you alluded to your margins not being healthy. Keep in mind that you’ll need profits to roll over into. more inventory. Without healthy margins you will run out of money. Cash flow projections help immensely with visualizing whether your margins are sufficient.
     
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  5. Zedd9165
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    Thank you for the advice I really appreciate what you said and I realised that the amounts I'm talking about may seem pretty low to a big scale manufacturer. Also yes low margins can create huge problems with the cash flow.

    Also, I understand that from a manufacturer's perspective that the price they gave me is a good one considering the MOQ I wanted. I can also make a nominal profit. However, the margin is of great concern for me when I'm trying to tap into a market where there are already few big retailers doing business and to compete with them I personally feel that the only thing I can do is come up with economical prices where everyone can afford high-quality goods.

    Any suggestions on how I can give my manufacturer a feel that I'm one of the serious buyers and crack a deal with them?
     
  6. Ddowns46
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    If i was your supplier, I would look at your product, and then do my own research to figure out who your competition is and what they offer. I would ask myself, does this potential client really offer anything better than his competitors? Is the only thing he is offering a lower priced product, financed by my slashed profit margin?

    Many vendors didn’t understand our vision and gave us crappy prices. The ones that did, however, gave us incredible prices because they knew we would be successful. We convinced them that our offering was far superior to our comptetitors. And its paying off for them. One supplier dropped all of their other clients to serve us full time. If i called the owner in the middle of the night he would answer.

    Creating value for your customers, enables you to be vaulable to your suppliers.
     
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  7. Zedd9165
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    That really makes sense. I need to look out for more reasons to work on this product in that case apart from the pricing which can make my product stand out from my competitors.
     

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