Do you need a sourcing agent? Is the sourcing agent a right fit for your business? It might! Let’s review the options.
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Full Transcript:
Welcome to the Sourcing 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.
How are you, my friend? How is your day? I hope you’re having a great day. Today’s video is to answer a most frequently asked question, should I use a sourcing agent? If you are on your Amazon FBA business journey, or you are doing business with overseas companies in general, I bet this question has crossed your mind because sometimes it is stressful and challenging to deal with the suppliers overseas. So in today’s video, I’m going to share some of my perspective to help you decide, should I use a sourcing agent? And if I do decide to use one, what to watch for? So coming up, let’s take care of the business.
Okay. In order to figure out whether or not we should use a sourcing agent to help with our business, we first have to figure out exactly what business and personal situation we are in. Let’s say we have three achievers. The achiever number one. The achiever number one, don’t have a lot of money. He may have $2,500 to start. He wanted to try Amazon FBA business. He doesn’t really have a unique product design, but he wanted to find out if he could make money quickly through Amazon FBA journey. The achiever number two, this guy has some money. Not only he has some money, he’s willing to invest $10,000 because he has a very innovative design. It’s so unique. He has his dream bet on it. Because of that, he wanted to take control of his business and he wanted to build a long-term business. And he wanted to make a lot of money out of it.
And then this achiever number three, he has a lot of money. You will see a lot of people who has a lot of money. They wanted to try Amazon FBA business. Let’s say this guy has more than $50,000 to invest, and he doesn’t have time to do any hands-on work and he wanted to play in a bigger scale. Now, think for a moment, which one of the situation is similar to your situation? Are you at the very early stage of exploring business ventures?
You don’t have a lot of money to start, but you wanted to find out if Amazon FBA is a good path for you or you have a solid design. You have savings to invest. You wanted to build a long-term business, or you are well set up. You have a lot of money to invest. The Amazon FBA is just one of the diversification for your investment. Think about what situation you are in because the situation you are in is going to determine whether or not using a sourcing agent is a good idea for your business.
Another factor we need to be clear in order to figure out whether or not we to use a sourcing agent to help with our business is to be super clear with the two type of sourcing agent relationship. The first option for you to have that relationship with the sourcing agent is to pay upfront. Whether you pay them hourly or monthly, you pay them the money upfront. Then they will find the factory either number one, or number two for you. In this relationship, you only have a transactional relationship.
The other option is you don’t pay this agent upfront, but you pay them later in a percentage way, whether it’s in commission or as a building percentage in your product. In this relationship, this is no longer transactional. You have a direct relationship with the agent and the agent is performing just like a supplier. So in option number one, you do all the relationship with the factory because you’ll pay this sourcing agent upfront with the dollar amount. So you will do all the relationship with the factory either is factory number one or number two, it doesn’t matter.
But for the option number two, you do not all the relationship with the factory. Your relationship is with the agent. The agent is just like your supplier, who they use, whether it’s factory number one or number two or number three, or they switch the factory later on, it’s none of your business because you are paying them a percentage. You are issuing the purchase order to the sourcing agent company. Now, we’re clear with the two type of sourcing agent relationship and know clearly whether we have the relationship with the factory. Now, we can decide whether or not we use a sourcing agent and what type of relationship we wanted to establish with the sourcing agent should we choose to move forward.
For the achiever number one, you have a little bit of money to start. You don’t really have a unique product design idea, but you wanted to find out if Amazon FBA is a way for you to make some quick money? If you are in this kind of situation, I would say, why not use a sourcing agent? In what way you should pay them, upfront, with some hourly work? I wouldn’t say actually option number two. Pay them a percentage. Let them take the cut out of your product price to help you get on and figure out this business quickly.
If you are the achiever number two, not only you have some savings saved up to invest into this business, you also have a very great design that you are betting your dreams on it. On top of it, you also wanted to take control of your business so you can build a long-term business. If you are in this situation, I wouldn’t think that you wanted to use an agent. It really doesn’t matter how you wanted to pay for the agent. You wanted to all a direct relationship between you and the factory. You wanted to take the design from concept to product and launch this product.
In between the concept to product, they’re going to be design change, sample change, maybe some tooling invest. You wanted to know who is the factory, how trustworthy this factory is, so you can really build this product for a long-term business success. So when you were tempted to use a sourcing agent to help you solve the temporary problems, I would suggest you keep the bigger picture in mind and say, no, thank you for now, not to use a sourcing agent.
So what about the achiever number three? What if this person has a lot of money wanting to play big, play big in scale in Amazon FBA business to diverse his money and he doesn’t have time to do any of this sourcing work, what should he do? I would suggest this wealthy person hire a sourcing agent, but I would suggest him hire a sourcing agent on hourly basis to pay this agent upfront, to do a lot of research work or hire two sourcing agent to compare their work. The reason I recommend to pay the sourcing agent on hourly basis instead of a percentage base is because he’s playing in scale. When there’s a lot of money invested, one percentage point could make a lot of impact to the dollar amount.
That is my perspective of whether or not you use a sourcing agent based on your situation. Now, let’s take a look, what you should be watching for when you do hire a sourcing agent. When you do use a sourcing agent specifically, option number two, you’re paying this agent a percentage. You don’t have the direct relationship with the factories the agent is using. In this case, I would recommend you watch for these things.
Number one is individual with this company. What does that mean? I’m talking about the agent. You would rather or prefer use a sourcing company for the financial stability and longevity of the relationship, because an individual agent could change their mind not to do the business anymore. And then you end up have to scramble to find the factory and reestablished that relationship if the agent do share that relationship with you. Instead, using a sourcing company, relatively speaking, at least you have some stability to it and some longevity to the relationship.
The second one is supplier treatments. What I mean by that is when you send your purchase order directly to an agent, this agent, it doesn’t matter whether it’s an individual or a company, he officially become your supplier. You need to treat this agent just like a supplier. For example, if you need the agent to sign the non-disclosure, non-compete and non-circumvention agreement, make sure he agrees to do so. Another example is how the defective situation is going to be handled. After you get your product, what if you find a whole batch of defective product? Is the agent going to refund you the money or credit you the money? So make sure you discuss all of these upfront, treating the agent, just like your supplier.
The third one is the factory access. This is a touchy subject because you’re sourcing products through an agent. You don’t have any access to the factory. The agent are concerned that if they share the factory information with you, you’re going to go behind their back to contact the factory directly. That is a reasonable concern. But for you, I would suggest you insist on having the factory access for two reasons. Number one, if you’re using an individual agent, what if this agent disappear? You don’t even know where your product is made.
Number two is you really don’t want your agent to switch out the factory without you knowing. Having the factory access, knowing exactly where your product is made, by whom, you have a little visibility to your downstream supply chain. So this gave a little bit pressure for the agent if they do switch the factory, they should let you know. The relationship between you and your agent should be open and trusting.
In my professional experience working in the supply chain field for almost 20 years, I know for a fact, a good sourcing agent never hide the factory information. I’m telling you this, a good agent never hide factory information. They are more than willing to give you the factory access. If you do visit the factory, they will take you to the factory. They will introduce you to the factory owner. So that is an open and trusting relationship. So for you, I would suggest you discuss this upfront with the agent to have factory access.
Now come back to our initial question. Should I use a sourcing agent? Yes, you can hire a sourcing agent by paying them a percentage of a commission. You can pay them on an hourly basis, or you can do it without a sourcing agent. If you wanted to take a hundred percent control of your business, wanted to learn the ins and out of your business, that’s fine too.
If you wanted to do this, but you’re concerned that you don’t have the sourcing skills to run your business, I suggest you take my Sourcing Warrior’s training course for the investment you are making to the course is going to help you so much along the way. Once again, I wanted to remind you, keep the bigger picture in mind. The course price right now is less than $1000. In the big scheme of things, I’m pretty sure, I’m hundred percent sure that you’re going to get your money back, especially you’re aiming to build a long-term business.
Okay, my friend. I hope this video has brought some clarity in helping you decide whether or not to use a sourcing agent to help your business. Before we say goodbye, let me just say one more thing. If you have a desire to be successful and wealthy, you are on your way already. Why I can say that, last night I was listening again, that audio book Think and Grow Rich by the famous Napoleon Hill. The first chapter, once again, remind us it is about that burning desire. Every successful and wealthy person start with the desire. So if you have that desire to be successful and wealthy, never deem the light of thy desire. Make it bigger, make it brighter. Let it guide you through challenges. Let it guide you to success. Until next video my friend, I’ll see you soon.
