Wednesday, August 14, 2019

How David ruined his business by continuous waiting

Being in business for almost 10 years, David knows how fund plays a crucial rule in business operation. 5 years ago, business is easy to do, he can make a lot of profit by importing and selling in his local country.

The purchase department had negotiated business with his business partner in China for almost 3 months, they had decided to buy and they know the product is a lucrative business and could bring a lot of business opportunities if put in the market locally. However, David is a shrewd businessman, he has some hesitations before he could finally decide to send the deposit to make the supplier to make his goods immediately.
First, David thinks the current market situation is unstable, the global economy is bad, so he thinks the best way to solve it is to keep the money in the bank to wait until the economy turns good. Second, David is waiting for a buyer, he thinks the best way to do business is to have the buyer who takes the goods immediately away after arriving in his warehouse. No stock is always the best choice. Third, he thinks the current supplier’s price is a bit high even he can make 10% to 15% profit, by procrastination a bit time could push his supplier to lower the price down so he could buy at a cheaper price and make more profit.

In the fourth month, David gets a report from his sales department. They said they didn't meet a buyer who can buy one container or two containers per time, but all the buyers before, their purchasing quantity combined together could make more than one container. The purchase department argued if they could get one container of goods in the first month, in the fourth month these goods would be divided to those buyers. 

In the five to six month, the sales department reported to David that the market situation seems to turn to worse, the before 10% to 15% profit goods seems pushed to 5% to 6% due to the bad economy and increasing competitors. There is no buyer who can make one container or two containers per time, but all the buyers purchasing quantity plus together could make two to three containers. Since David didn’t have the stock of those goods, he was unable to harvest those businesses.

During the six months, the financial department reported to David that his company had lost twice the money he can place the order to the supplier they had negotiated for 3 months. The first thing is the bank interest is low, even the smallest profit of his order could be much higher than the bank interest. The second thing is his company is consuming themselves, there are huge expenses every day, and the only way to compensate it is profit. The financial department suggested to David that the money for a business is used for buying and selling if, without those activities, it could be gradually consumed away by the daily expenses. David should aware of it, waiting seems not to be a good choice, but in one hand a waiting-business is consuming itself, in another hand, the market is not waiting, a waiting-business is losing business opportunities.

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