I enjoy negotiating prices mainly down to the fact I can calculate the deal in my head instantly giving the other side little time to react and normally end up with the price I want. This is the best part of doing any business deal and it is the most important as this is where the profit is created.
Over the last few days I have bee waiting for a email that ever arrived with regard to the textile waste which we need as the stuffing for the punchbags. The eco friendly deal we did with another company looks as though will have to be parked to one side as the material is just way too light. This could be used, but the cost factors do not make it economically viable even if it was for free.
With no email having been received I had too push the timelines and phoned and the original person who was going to email myself apologized and put me onto someone else. Time is of the essence right now and I do not need time wasters holding me up.
I was eventually given a price for the textile waste and this was R3 ($0.17c) per kilogram. I knew from my meeting last week with a possible partner that this was slightly more than what I had been told. When negotiating you never accept the first price offering and I countered with a target of R2 ($0.11) per kilogram. You have to bring down the numbers in your favor because you will eventually end up somewhere in the middle anyway. If you do not ask then you are a fool for not asking and why you have to shock people into thinking you know the real value of the item. A rule of thumb is you divide any price by 3 ad you will be close to the cost so they will be making a good R0.80 c per kg on the price I offered.
After an hour of phone calls going back and forth we settled on a price of R2.45 ($0.13c) delivered. This is for a minimum of 32 tons of processed textile waste that has been treated and shredded to the size of a thumbnail. This is pretty ideal as this will be easy to compact and should be a very fast process filling one punch bag.
This company processes roughly 1000 tons or 1 million kilograms of waste per month and by taking roughly 50 tons monthly this is 5% of their business. This is why I knew I could negotiate so hard because of the value we offer this company being a new client.
What this also told me is the future partner talks are off the table for a number of reasons. He was not open and honest about his costings and the volume he processes is just too small for the needs we require. In order to grow a business you need to know that the volumes required are available.
Finding this company has taken a good 3 months and why it is always worthwhile pursuing your target prices because they are out there somewhere. This price more importantly includes delivery which would cost in the region of 15K so the way I see it the 32 tons is actually costing less than R2 per kg and another R0.50 c for delivery totaling the final price of R2.45. My initial thumb suck of R2 per kg was not that far off and this price is seriously very good.
What this has now told me is this business is seriously viable with decent profits expected almost immediately without too many headaches. The trick here is the material is already a certain weight and being so fine should not be volumetric requiring serious compacting equipment or time.
There is a 10 kg sample being collected on Monday and the hope now is this is the size of half a punch bag and could be literally poured into the skin with minimal compacting required.
Profits are made when you do the purchases and not when you sell so if this is done correctly the business will be successful. We have two weeks before we need to start this new project and I literally cannot wait as this is another business opportunity and will be business number two with one more still to come. The trampolines have not started yet but fall under the main business being the warehouse. There are a few bits and pieces that need to still be arranged, but the biggest hurdle being the stuffing has now been sorted.