Welcome back to another episode of Steal This Tutorial.
I'm so glad you joined me today.
Today I'm going to show you
how to handle suppliers, especially when you're struggling to trust them.
You know how it feels.
Imagine you're taking this big chunk of money
and you're going to send it halfway around the world
to someone you never met in person.
That's hard to do.
It's risky. It's kind of like taking on a bench press.
A lot of weight you've never done before and you are trusting the spotter
to spot you and to be there.
You are putting your trust in someone else to make it happen.
So today I'm going to give you guys three things you can do to help
you make the right decision and to trust your supplier.
Here we go.
Number one, you need to shatter the piggybank mentality.
You need to let it go.
Because if you are holding on to your money like a little piggy bank
and you dropping in all those coins
and you're always worried, you got to have that security.
Guess what, guys? You will not succeed as an entrepreneur.
I'm not saying you shouldn't have calculated security.
Yes, you need to have some level of security, of course.
Don't make stupid decisions.
What I mean, though, is if you're holding on to it, imagine this.
You're hanging from a cliff for your dear life and someone and you're about to fall
and someone reaches over the edge to give you a hand and you're hanging on.
In order to grab their hand, you have to let go with one hand and grab
with the other one.
In other words, you have to let go of some kind of security
in order to gain something greater. I promise you this.
If you're building a business,
your security is going to be so much greater.
So you must shatter the piggybank mentality.
In other words, you're going to take a risk.
Become its friend. Give her a kiss. Give her a hug.
Call her your girlfriend.
Risk is your new friend. You're going to take her on dates.
This has got to be part of your life, my friend.
That is the first step.
And I'm telling you, if you can get over this first step,
these next two are simple because they're just logistical.
They're just facts. They're things you need to do.
And that's it.
Number two, you need to tell your supplier exactly what you need.
Now, I know this sounds silly.
Like, seriously? You're telling me to tell the supplier
exactly what I need?
Yeah, I am. Well, why are you saying that?
I'll tell you exactly why.
Because if you don't, and if they get the order wrong, you are out to sea.
This is really important. If you tell them exactly what you need.
For example, what is the color of the product?
What is the quantity? What is the plastic? Is it just regular stainless steel?
Is it 301 stainless steel? Is it corroborated rubber?
What are all the details?
The better you know the details and the specs, the safer you are.
Because what's going to happen is they're going to produce it.
You're going to send a product inspection to go and inspect it.
And if they didn't get something right, you now have grounds for combating that
and for getting it fixed.
Instead of having it shipped Amazon's fulfillment center, in surprise we have a problem
in your entrepreneurial business, is that major risk.
So you need to be super specific.
Listen, if you're doing this for your first time and you think you're
specific enough, you need to take it one level deeper.
Be extremely specific.
The dimensions, the quantity, the weight, the size, the material, the exact color.
If you just say: “Oh, I want it green.” Well, that sounds nice.
What if they go with forest green? But you were looking for lime green.
You have to give them the specific.
In fact, one of the best ways to do this,
the first time my wife and I really, truly private label something well,
it was not the cremation urn, that was really cool
and it worked out great, but we really didn't differentiate them.
What we did is we took a sample of the product that we were selling through arbitrage
and we shipped it to China and said: “We want our product to be like that one.”
Now they actually had a physical copy.
Then we told them to come back to us and tell us what's the material?
What's the size?
In other words, we were letting them tell us what specs they would give to that
based on what they were physically holding in their hands.
If you tell them what you need that goes in the contract.
If you use Alibaba when you're ordering the products,
it's going to give you a contract automatically.
And right there in that little white box, you just going to write in
exactly what you need.
Number three… First, we said shatter the piggybank mentality.
Number two, we said, you need to tell your supplier exactly what you need.
Number three is use the 30/70 rule.
Now, let me explain what I mean by the 30/70 rule.
I think you guys are going to appreciate this.
The 30/70 rule means you're not putting all your money upfront
because you're smart and that gives you leverage.
I have seen some really trusting and God bless them,
they're trusting, but overly trusting
entrepreneurs send all their money to the supplier.
So you have no leverage once you've paid them everything.
Like if a supplier ever says: “Hey,
I want all the money upfront.” Something is majorly wrong.
I mean, even for industry standards worldwide, you just don't ever pay
for the whole thing upfront.
So what you're going to do
is once you have established exactly what you want built and how you want it built,
you're only going to send them 30% of the total cost.
Now, just for simplicity's sake, let's say the cost is $100
for all the products, and naturally it's probably going to be more than that.
You're going to send them $30. There you go. Boom! Done. $30.
Then they're going to build the product.
Then you're going to have someone inspect it.
And by the way, if you're looking
for a product inspection company, join Just One Dime, get in the community,
find out what people recommend.
There was a time where I like to recommend specific companies,
but companies come and go and some who are good go bad and vice versa.
You never really know.
So the best way I found is if you jump into a community
and just ask around, ask them what they're using,
it's so much easier.
Because then you're using someone that is actually working for someone,
you can trust them.
After the inspection is complete, they're going to send you a report.
The inspection company.
You're going to look at the report and it's going to tell you how good,
how accurately that supplier built your product.
Once you approve
and let's just say there's like, you know, 5% of them were defective,
they have to remove those,
they have to replace them,
once you approve it, then you're going to send the remaining 70%.
And I hope you like my seven there because he's just like a little weird, 70%.
In other words, the remaining $70.
Now that you sent the remaining 70, that's when they ship it to you.
My friends, if you do this, if you use this rule right here, not only
is it industry standard and expected, but what's really cool about it
is you have all the leverage.
They want, the remaining 70%.
And in other words, you're going to get the product inspection first,
you're going to approve it, then you send the rest of the money.
Now, a lot of people ask this question: “Well, Seth, how do I pay them?
What's the best way to pay?”
There are two ways I recommend.
Number one, and the best is if you're doing it through a supplier on Alibaba,
use what is called trade assurance.
You can actually do a wire transfer through trade assurance
and if something goes wrong, you can get your money back.
Alibaba uses a company that is very good about that.
If you're following the 30/70 rule, if you told the supplier exactly what you need..
You have to be extremely picky about it. It is worth it.
This is your time and money.
That's how you shatter the piggybank mentality.
You're not just saying: “Hey, I'm going to trust you guys
and jump off a cliff and expect everything to go great.”
No, you actually built some wings. You calculated. You tested.
Yeah. You're taking a risk.
You're running off a cliff, but you got some wings with you on the way down.
That's how you do this.
In other words, being an entrepreneur is not just jumping off a cliff blindfolded,
nor is it holding onto my money like a miser.
I have to keep on my…
No!
You have to have a balance.
So get a sledge hammer,
put that piggybank right there and crush it.
Just shatter it, completely shatter it.
Get rid of the security mindset where you're holding on too tight
and then make a calculated risk and you can absolutely make money doing this.
My friends, we have multiple
members on our team now who are millionaires and guess what?
They follow these rules in working with suppliers.
Last thing I want to share with you. This is a bonus.
I promised you I'll give you a bonus. So you ready for the bonus?
If you've been selling on Amazon for any time, you are very aware
that Amazon from time to time or a competitor will compel you
to produce what they like to call commercial invoices.
Now, if you're thinking PI performance invoice,
remove that from your mind and just think commercial invoice.
This is an actual industry standard thing.
All a PI guys is it's a quote up front. Like here you go, here's what it's going to cost,
send me the money the first 30%. That's it.
But a commercial invoice comes after.
And if you have a commercial invoice, Amazon will love you.
In fact, you will break through so many barriers with Amazon, you won't believe it.
“But how do I get that, Sethn? Do I need to generate my own?”
Well, legally you can make your own invoice, but the best way to do it is this.
So supplier ‘A’ just… His name is Bobby McGee.
He built your product. And your product is sitting here in China.
And you're waiting for it to be shipped to Amazon's fulfillment center.
For that to get through customs, you have to have two things.
A packing list and a commercial invoice.
And a commercial invoice and a packing list are almost identical,
except the commercial invoice includes two more things.
It includes dimensions and it includes weight.
They also include the quantity and the price and the basic details of the product.
So what you do is before you send this remaining 70%.
Remember I said, this is where all your leverage is?
This is how you keep yourself safe?
Before you send it, you say: “Hey, by the way, I am mandating, I demand,
I require a commercial invoice send it to me.”
When they send you that commercial invoice and you receive it, you can use that and keep it.
So when Amazon ever says: “Hey, we need a proof that you're
really working with a legit supplier.”
You can send them that commercial invoice.
Now you're going to probably say: “Well, wait a minute, Seth.
I don't speak Chinese. ‘Nee haow’, that's the only word I know.
So how in the world am I going to read a frickin invoice in Chinese?”
Some suppliers have English speaking staff. No problem.
Let's say they don't. And you've been using on your phone WeChat,
where you can hit the translate button.
But my goodness, you're not going to be able
to send a Chinese Mandarin invoice to Amazon and
expect their frontline staff to understand it.
Because last time I checked,
Jeff Bezos did not make that a requirement that all his staff learned Chinese.
That would be kind of cool, but we're not there yet.
Here's what you're going to do in that situation.
You're going to tell the supplier: “Hey, listen, I'm going to need this in English,
so I'm going to create a spreadsheet.”
Literally, guys, it's as simple as this, an Excel spreadsheet, simple as that.
You're going to create a spreadsheet, it’s going to include all the data.
I mean, Google commercial invoice, you have a template, no problem.
That's easy.
Then you're going to tell them, listen, I need your letterhead
so I can put the invoice on your letterhead.
Then you fill it in with English, you save it, and as soon as Amazon
requests it, you send it in.
For those of you guys who are just starting,
you're probably thinking: “Why do we need a commercial invoice?”
And I thought the same thing.
I promise the day will come where you need to have it.
It proves to Amazon that you are legit.
And you are legit, otherwise you wouldn't be watching all this right now.
Guys, I included something really special below for you.
There's a link below.
It will give you all of the main provinces of China
and the factory types, what kind of products they produce.
Let me just show you why this is so important.
Let's just say you're going for clothing.
There are certain provinces where if you know your clothing is coming
from that province, it's probably lower quality than this province.
The same thing with electronics,
the same thing with rubber, the same thing with plastic.
And we can go on and on. Fabrics, textiles.
All these different product types.
But if you use this spreadsheet, which is below, it's 100% free,
you can actually vet your supplier.
Just ask them: “Hey, what province are you from?”
Enjoy the ride. You guys have an awesome day.