I help a lot of small companies who have proprietary products which they make in China. Most of these companies have just a few employees and very modest but consistent sales. They are trying to grow their businesses and that is why they come to me. They need new suppliers so they can deliver better quality to their customers at more competitive prices. When we have Skype conferences we usually do so from the comforts of our home offices. Nothing fancy here. But sometimes in talking to clients I am astounded at the cost it has taken them to start their businesses, a piece of info they sometimes relate to me. They have to register their companies, get product safety insurance, do product testing, pay for a marketing plan, hire a sales rep, attend trade shows, find a contract warehouse in the US to store their product, pay for patents and trademarks etc etc. These costs add up quickly.
On top of this they have to pay a vendor in China to make the product (usually with MOQs) and then ship it to them in the US or Canada. This is where it gets really expensive and I cite my own example. Sometimes I have ideas for products. I figure that it should be easier for me than for most because I don’t need to pay someone to find me a vendor in China and manage my sourcing. I can easily do it myself. Last year, I had an idea for a kids product and I asked some vendors in China quote on it accordingly. The result was that I estimated it would have cost me $ 20,000 just to meet the MOQ from vendors and buy 2000 units of the product. I did not have that kind of money so I had to let it drop.
But to illustrate this best here is an example from a customer of mine. He said he forecasts 800 K in sales this year. This is based on projections from his current customers. That is great, I think to myself. But in order to make 800K in sales, he tells me, he has to come up with 400K to make the product and have it shipped to his warehouse. So he has to go to the bank for a loan. And not all banks these days are willing to lend someone 400K based on projected sales.
Small business equals big investment.