- Are you in the importing business?
- where are you selling your product?
In your retail shop? Or maybe you’re thinking about Amazon, Shopping Five or EBAY？
It doesn’t matter what business model you choose if you are importing products from overseas. This article is written for you. This article will list five fatal mistakes that could make your business fail.
Mistake number one: Fail to calculate the correct duty
Tax and duty used to be like a steeple ingredient for your cooking. It’s like the salt and pepper in your dish. You don’t have to think about it, because this is a part of the recipe.
For example, 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 products. How you are going to absorb this cost increases. 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. This article is going to show you step by step.
The second mistake: 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.
When you have 150 dollars, you walk into a casino. You are so excited and sit down a blackjack table quickly, then you’ve lost 150 dollars. Now you’re upset. Don’t be upset, this is called gambling, this is called entertainment.
But starting a business, owning an importing business is not Gambling or 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’s so much information on the Internet are telling you: you only need 500 dollars, you only need 900 dollars to start of the Amazon FBA business and you gonna make a lot of money. Well, a businessman should disagree with this getting rich quick mentality, because as a business person you cannot treat this even if it’s 500 dollars as a gambling experiment. The truth is the real success, normally, it doesn’t come 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.
Third mistake: Not knowing your rates of return
Any Smart investor, they have two eyes. One is watching exactly how much this is costing them, the other one is watching what is my rate of return for their money.
In our company When the salespeople discount the product hugely making us feel like we’re losing money on this product. We often take 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?
Most people going into the business don’t even know what is the rate of return. It can be understood if you’re new to the business.
If you know how to do a landed cost analysis, you know how much this product selling for on the market. If you know your total landed costs, 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 every 8%. Depending on the industry, depending on the product, the rate of return very hugely. The rule of thumb is the smaller of the business the higher is the return because the risk is higher at the same time. If you are in the Amazon FBA business, I would suggest that it’s my personal opinion you look for a minimum of eighteen to twenty-four percent on net return. That is three times on the money if you would invest in the stock market. The bottom line is this, know your rate of return before you committing your money to your suppliers.
Fourth mistake: wrong order quantity
So many groups are teaching students to buy a small quantity by airfreight, so they can test the market. Are you testing or just gambling?
If you have a plan for your second shipment that includes how many and when I’m going to buy the second shipment. That is testing.
But if you don’t have a plan for your second shipment, then you’re simply Gambling. Because it means you are going to perpetually run out of stock. You pretty much put yourselves back into a corner. Either you pay another airfreight to ship another small quantity, which will make you lose money because the airfreight covered all the margin. Or you have nothing to sell. This means the first order quantity is wrong. You are gambling this quantity and gambling away your money.
Once you know how to do the inventory planning, you would be able to use your money wisely. When you make your purchase order, you need to know exactly why you are buying at that quantity. Otherwise, you are putting yourself in the gambling mode, hoping things will work out. It could be a mistake, which you are gonna have to pay the price for this mistake.
Mistake number five: not having a marketing budget
Particularly for those of you who are the Amazon FBA sellers, a lot of sellers 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 rock star if you just take off on his own. You have to help this product by giving it some fuel to help lift this product until it gains some momentum and can sell on his own organic traffic. Not only the PPC but also your returns and defects should be taking into consideration.
At last, for you to own a successful importing business, I suggest you make a checklist to avoid these five fatal mistakes. If you are already preoccupied with other tasks it is a good option to consult a Top Guangzhou market guide or an experienced sourcing agent in China. They can help you minimize risks and reap more benefits while sourcing.
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 dollars. Do I know my rate of return from my money?
Do I know why I’m buying this order quantity? Do I have a plan for the second-order?
Do I have a marketing budget to sell and promote this product?
Do I have any reference for a market guide in China?
I hope this article can help you. Thanks for reading.