Have you seen this weeks episode of The Entrepreneur Road Show yet…you should.
I am currently in the process of writing a book that will be a guide for people who want to outsource the manufacturing of their products to overseas manufacturers but have no idea how to. I have outlined the steps in a 10 step, easy to read process. Right now, I’m probably about half done and I will release it as an ebook sometime in March. I’ve been outsourcing for my small business for three years now and I am able to share all my good and bad experiences in the book. The following is a small excerpt from the book.
The Best Way to Get the Lowest Rate – The First Time You Ask
A recent purchase order I sent out for the production of 10,000 Sand Shack belts (sorry I blurred the prices!)
One of the best ways to get a competitive rate without much negotiation is let them know that you are actively comparing their prices to those of their competitors. By now, you have probably been exchanging emails with a manufacturer for a few weeks and have a sample product in your possession. Although you have most likely paid for the sample, they have invested a considerable amount of time and energy to help you develop it and make it right. They want you as a customer; they really really want you. So, when asking for a quote, use the following outline to insure you receive a quote that is more than fair.
“Can you please give me the price for product XYZ? Please show me where and how much the price breaks will be for quantity W, X, Y and Z (ie. 500, 1000, 1500, 2000).
Also, we will be sending the sample product and project details to other manufacturers we have been in contact with to cross-check your quotes against, therefore, please make sure your quotes are as low as possible”
I have successfully used this outline to get great deals on everything I make overseas. When they read this you seem prfessional, knowledgable, and that you have plenty of other options other than them to choose from. They won’t risk giving you an overly inflated quote and losing you as a customer.
What do you think? What other bargaining techniques could you use to get a good price?
Also, feel free to check out a recent guest post I wrote for Myfirstpaycheck.com, a leading resource for teenage job seekers.
{ 11 comments… read them below or add one }
Hey Brian,
A little off topic, but how do you take orders from retailers? What do you do when you get your first sale from them? Do you have a special paper that they sign when you get their order? Do retailers fax you orders? E-mail? In person do you have a special form they fill out? Thanks in advance.
Best Regards,
Adam
No worries Adam,
Taking orders is quite simple. If I take an order in person, I will just fill out a handwritten invoice, give them a copy, but then once I plug it in the computer (quickbooks) I will fax them an official invoice for their records. When in person, if they are a new customer, I will just have them sign the bottom of the invoice to validate it…If I know them I won’t do this. Retailers can also fax their orders in. I have downloadable order sheets, or they can simply use an invoice template of their own. They fill it out, so that is their validation in itself. They can also email it…yep…I’ve taken email orders, phone orders, faxes. Any way somebody wants to order product from me, I’ll let them… After all, they are the customer, and you want to make it as easy as possible for them to order.
Hope that helps,
Brian
What does the handwritten invoice look like? Is it just carbon paper? Do you have specially printed invoices with your company name on it or is it just generic?
Also I guess I’m seeing that there is no legal paperwork that is filed, you are just trusting them to pay you when you send them the product. Do you set dates when they want to receive the product by too?
Thanks again,
Adam
@Adam,
Yea, it is just carbon paper. I actually don’t have any special invoice with company name on it…haven’t really found the need for it. Just normal paper you buy at Staples is fine. Anyways, I fax them an official invoice within a few days after taking the order. Nope, no legal paperwork. Business is business, and there is a degree of trust in everything you do. The signature helps keep people from cancelling orders, but I do get canceled orders occasionally-which suck. Yes, and they can choose when they want the product, but when they preorder for the spring or summer the earliest they can get it this year is April 15.
Cheers,
Brian
Cool man, good info. So I’m guessing you recommend Quickbooks, and also how do you come up with a price to sell to retailers? And do all retailers buy from you for the same price? I know you have to at least charge enough to cover production and shipping, but is there a specific way or percentage you use to come to an agreement on price? I know some of it has got to depend on your product, and how much you can mark it up depends on the demand and perceived value.
Anyways, hope you’re having a good weekend!
-Adam
@Adam,
Sorry for the delay responding to you, I’ve been without internet access at this tradeshow Im at in VA.
Yes, I recommend quickbooks…best by far.
I come up with wholesale prices to sell to the retailers by not only evaluating how much it costs to make the product, but also all other costs of operating a business need to be calculated in. Also, I evaluate what the market is willing to pay for a certain product. Also, how much I charge determines who my customer will be and what my brand will represent. Do I want to be high-end, low-end, mid-range…pricing determines all of this. Sand Shack is an affordable luxury, so I price it in the mid-range. I toyed with high end and decided that mid range is where I belong. So there are a lot of factors that go into product pricing…at the end of the day the main thing is you have to be making money.
I give some retailers discounts, but this is a case by case basis. Most buy for the same wholesale price.
Cheers,
Brian
What a facinating article. I’m looking for a marketing expert to help with a project, could you help?
Hi – I’m really enjoying your articles about sourcing overseas and entrepreneurship in general. Wondering if the online book about outsourcing you were writing has been released and how I can view it…thanks!
Virginia
Virginia, sorry for the late reply! Your comment slipped through the cracks. The book is complete but it hasn’t been released. I plan on releasing it in 2010 once I have some more time to promote it. I’ll let you know when you can get it. Thanks for your interest in outsourcing!
I am negotiating with suppliers in India for sourcing organic futons/cotton mats for yoga and bodywork therapies.
I have received samples from the 3 suppliers on my shortlist. Next step is final negotiate on product details and prices. I will let them know that I have a few competitors on my shortlist. How much (in %) do you think are the prices negotiable from the first initial price offer they send to me?
Thank you
Cheers
Wolfgang
PS: Inspiring work, great brand concepts!
Thanks Wolfgang!
It really depends on who you are working with and what type of quotes they give you. Sometimes I don’t go down on price at all, while others you can get 40% off sometimes. I would say you should always be able to get about 15% off if you push for it, but sometimes, if you have, or want, a good relationship, not being pushy about prices can be favorable in the long run.