Want to be successful with your import business? Don’t make these 5 importers mistakes.
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Full Transcript:
Welcome to the Goodlife Warrior podcast. I’m Yuping. We make sourcing easy, fun and profitable for you. This episode was originally aired as a video on my YouTube channel, youtube.com/goodlifewarrior. As always, high quality professional sourcing content delivered to you with passion and my unique Chinese accent. Enjoy.
Quick question, are you in the importing business? Where are you selling your product? In your retail shop? Maybe you’re thinking about Amazon or Shopify or eBay. It doesn’t matter what business model you pick. If you are importing product from overseas, this video is made for you because I’m going to reveal five fatal mistakes that could make your business fail.
Is this your first time visiting? Welcome. My name is Yuping. This is your Goodlife Warrior channel, the place where the powerful sourcing knowledge and the positive attitude to life is channeled to you. If you love this channel, be sure to subscribe. And wait, maybe you could pick a star to become a member to support me and to support this channel. I would love to have you in this one big Goodlife Warrior community. Now, let’s back to the serious business we’re talking about, five fatal mistakes that could fail your business.
Mistake number one when sourcing products from China, fail to calculate the correct duty. Tax and duty used to be like a staple ingredients for your cooking. It’s like the salt and pepper in your dish. You don’t have to think about it because it’s part of the recipe. Now, because of the trade war between China and the United States, you have to think about it. If your regular tax and duty rate is 5%. Now, added 25%, you have to pay 30%. If you are already importing product, how you are going to absorb this cost increase? Are you going to be able to pass on to your end users? If you haven’t started the importing business, how this is going to impact your margin? So, I suggest you mark the tax and duty as the first one on your checklist. For those of you who don’t know how to find the exact tax and duty rate for your product, I’m going to make a video to show you step by step. Make sure you turn on the notification bell, so you will be notified when I release that video.
Second mistake when sourcing products from China, act like a gambler, going in blind on the investment dollar. I’m going to use gambling as the analogy for this mistake because it could be devastating. Say, you have $150. You walk into a casino. You’re so excited. You sit down on a blackjack table, quickly you’ve lost the $150. Now, you’re upset. Don’t be upset. This is called gambling. This is called entertainment. Starting a business, owning an importing business is not a gambling, is not an entertainment. You not only need to know how much money you need to start the business but also how to sustain and carry out this business. Taking Amazon FBA as an example, there are so many information on the internet telling you, you only need a $500, you only need a $900 to start at the Amazon FBA business. And then, you’re going to make a lot of money. Well, I fundamentally disagree with this get rich quick mentality. Because as a business person, you cannot treat this even if it’s a $500 as a gambling experiment.
The chooses, the real success, normally it doesn’t come in on the first try. It may take the second time or the third time for you to be super successful. For those of you who wanted to start the Amazon FBA business, this is extremely important. For this reason, I have made a specific video to show you exactly how much money you need to start and to sustain your Amazon FBA business. The best part of this video, it comes with a workout sheet where you can do your own budgeting and planning. Make sure you visit sourcingwarrior.com website, download your copy.
Third mistake when sourcing products from China, not knowing your rate of return. Any smart savvy investor, I can guarantee you they have two eyes. One is watching exactly how much this is costing me. The other one is watching what is my rate of return for my money. In our company, when the sales people discount the product hugely, making us feel like we’re losing money on that product, I often make this joke. Do we work for this company or we work for the customer for free? You, owning your own importing business, you need to ask yourself this question. Do you work for yourself or you work for your customer for free? You need a minimum rate of return to make this effort worth well. What is your rate of return? Do you know? Most people going into the business don’t even know what is the rate of return? I understand because you’re new to the business. So for this reason, I have made the Quote Master, the Sourcing Warrior’s Mastermind. They all teach you how to do the Landed Cost Analysis.
You know how much this product is selling for on the market. If you know your total landed cost, then you can figure out your rate of return. That is your profit margin. Exactly what profit margin you should be looking for? To know what rate of return you’re looking for, you have to know how to benchmark your rate of return. If you’re investing in the stock market, you can get average 8%. Depending on the industry, depending on the product, the rate of return vary hugely. The rule of thumb is this. The smaller the business, the higher is the return because the risk is higher. If you are in the Amazon FBA business, I would suggest, that’s my personal opinion, you look for minimum 18% to 24% on net return. That is three times on the money if you were to invest in the stock market. The bottom line is this, know your rate of return before you’re committing your money to your suppliers.
Fourth mistake when sourcing products from China, which I consider fatal, that is wrong order quantity. So many gurus are teaching students, buy a small quantity, airfreight in so you can test the market. My question to you is, are you testing or you are gambling? If you have a plan for your second shipment, that includes how many I know well I’m going to buy the second shipment that is testing. But if you don’t have a plan for your second shipment, you are simply gambling because I have seen so many people perpetually run out of stock. They pretty much put themselves back into a corner, either they pay another airfreight to airfreight another small quantity, which make them lose money because the airfreight will eat all the margin, or they have nothing to sell. This means the first order quantity is wrong. You are gambling this quantity. You’re gambling away your money.
In the Mastermind course, I teach student how to plan out the first order quantity, the second order quantity. Once you know how to do the inventory planning, you would be able to use your cash wisely. When you make your purchase order, you need to know exactly why you are buying that quantity. Otherwise, you are putting yourself in a gambling mode, hoping things will work out. It could be a mistake which you’re going to have to pay the price great.
Mistake number five when sourcing products from China, that is not having a marketing budget. Particularly for those of you who are the Amazon FBA sellers, a lot of you who don’t even budget the PPC as your marketing cost, that is a mistake because doing business on Amazon is getting very competitive. You cannot expect your product to be the rockstar. It just take off on its own. You have to help this product by giving it some field to help lift this product until it gains some momentum and can sell on its own organic traffic. For this very reason, in the Sourcing Warrior’s Quote Master and The Sourcing Warrior Mastermind, specifically in the step number three, in the Landed Cost Analysis, I teach you how to add the PPC cost in the net margin analysis, not only the PPC but also your returns, and defects should be taking into consideration.
So for you to own a successful importing business, I suggest you make a checklist to avoid these five fatal mistakes. Do I know my duty rate? Do I know exactly how much money I need to invest to sustain the business, not just the first 500? Do I know my rate of return for my money? Do I know why I’m buying this order quantity? Do I have a plan for the second order? Finally, do I have a marketing budget to sell and promote this product? This is how I think and this is how I teach in Sourcing Warrior Mastermind‘ courses. If you’re a part of the course, you know when I answer your questions, not only I’m helping you to solve the specific problems, I don’t lose the perspective of seeing the business as a whole.
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