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Thread: Advise for Independent agent.

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    Advise for Independent agent.

    Hi TFSA

    I need some advise with safeguarding my new venture.

    We are busy with a proposal to penetrate the retail market with a combination of niche products, FMC, fast moving consumables, and SMI, slow moving inventory. I need some advise with regards to the agreements between the manufacturer, A, the IA(independent agent), B, and the retailer, C.

    Some background and where I need some advise:

    We have challange of setting up a warehouse, aquiring stock and marketing the products, to support the supply chain of the sought after retail market. We currently market and sell products direct to the consumer/user with minimal stock, based on active clients and current orders only, limtiting the risk and cost of dead stock.

    We have found a sertain retailer which we can use to support this challenge, where the retailer stocks the products, wholesale, with our agents marketing the products independently, but through the retailer so to say, where agents support the sales of the area retailer.

    AND this is where I need the advise and only a idea at the moment, I am proposing that the retailer be supplied and invoiced directly form the manufacturer with the suggested retail price negotiated between A & B, creating a direct supply chain between them, until we have grown big enough to support the demand.

    The informal relation between all A's and B are great, before and after the retail suggestion, but I need some type of agreement to legally bound me with all the sales made through the marketing of B. At the moment we have full control as we are supplied and supply, but have no formal business model of this new type of venture to base negotiations and agreements on. As all business models flow into new markets, new opportunities arises and I need to safe guard us for the duration of the relationship between A and C.

    Is there a type of agreement you lay down before even pitching, what would stop A of saying no to B and walking into C's office the next day?

    Will appreciate any advise regarding the above mentioned AND?OR on any other/future challenges that comes to mind.

    This is my first thread, hope it makes sense!!

    Enjoy

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    Site Caretaker Dave A's Avatar
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    Assuming you're B - you could probably protect your interests by contracting for exclusive marketing and distribution rights with the manufacturer/supplier for the area concerned, with a clause allowing you to assign all or part of your rights to third parties.
    The trouble with opportunity is it normally comes dressed up as work.

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    lmnopb90 (11-May-12)

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    Thanks Dave!!

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    Diamond Member Blurock's Avatar
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    It appears as if you require some form of supply chain finance as you are still too small to buy stock and carry the debtors book as well.

    Once you allow the supplier and the retailer to communicate and invoice directly, it will be clear to both parties that they no longer need you as the middle man to inflate prices. Even with a sound contract in place this can be risky. You aught to speak to a good contract lawyer if you want to go this route.

    Alternatives:

    1. Offer the retailer a discount to pay COD. This will erode your profit margin, but will allow you to accelerate your cash flow . Proceeds can be re-invested in stock and as you increase your sales, more funds will become available to re-invest in purchasing stock to supply the retailer.

    2. Discount your invoices to the retailer. Providing the retailer has a good track record, a bank or factoring house will advance up to 80% of the gross invoice value on receipt of an invoice and a valid POD. This will have the same effect on accelerating your cash flow as in 1. The retention of 20%, less fees will be paid to you when the retailer pays the factor. Cost can be either a fixed fee, normally not exceeding 5% of the invoice value, or interest plus an admin fee as on overdraft.

    3. Obtain trade finance. This may work out expensive for you as finance houses require a minimum amount (about R10,000) per transaction. So while your volumes are low, it may not be a viable option.

    Speak to some factors about option 2. Factoring is an excellent tool to grow your business and the facility grows with your turnover. On an overdraft you will be restricted to the approved amount covered by security offered.

    Good luck with your venture
    Excellence is not a skill; its an attitude...

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