In this episode, Josh interviews Nathan Resnick, founder of Y-Combinator a sourcing platform. Nathan shares expert advice on negotiating with manufacturers, building strong supplier relationships, and managing payment terms. He discusses the importance of understanding your value to factories, balancing primary and backup suppliers, and regularly re-evaluating product costs. Nathan also offers practical tips on warehousing outside the U.S. to save on tariffs and improve cash flow. The episode wraps up with actionable takeaways for business owners looking to optimize their supply chain and sourcing strategies.

Chapters:

Introduction to Nathan Resnick and Sourcing (00:00:00)
Josh introduces Nathan Resnick, his background, and the Sourcing platform’s mission and achievements.

Negotiation Tactics and Understanding Factory Value (00:01:00)
Nathan explains how to assess your business’s value to a factory and leverage it for better payment terms.

Factory Cash Flow and Forecasting (00:02:01)
Discussion on factory cash flow challenges, importance of forecasting, and mutual understanding in negotiations.

Choosing the Right Factory and Negotiation Leverage (00:02:58)
Advice on evaluating if you’re the right customer for a factory and when to consider switching.

How to Find Out Your Importance to a Factory (00:03:55)
Nathan shares practical ways to determine your share of a factory’s business and the value of building relationships.

Building Relationships and Guanxi (00:05:27)
The importance of personal, transparent relationships with manufacturers, especially in Chinese business culture.

Balancing Primary and Backup Suppliers (00:06:19)
Strategies for maintaining a primary manufacturer while having backup options and when switching is worthwhile.

Re-evaluating Product Costs and Sourcing Quotes (00:08:31)
How to revisit product pricing, get competitive quotes, and the realities of sourcing platforms like Alibaba.

Three Actionable Takeaways (00:10:42)
Josh summarizes key takeaways: building relationships, revisiting unit costs, and warehousing outside the US.

Warehousing and Tariff Strategies (00:13:43)
Advice on warehousing in Mexico to save on tariffs and improve cash flow, including 3PL recommendations.

Closing and Contact Information (00:14:30)
Nathan shares how listeners can connect with him and learn more about Sourcing.

Links and Mentions:

Tools and Websites
"Sourcify": "00:08:47"
"Alibaba": "00:10:23"
"Global Sources": "00:10:23"

Key Concepts
"Guanxi": "00:05:35"

Actionable Takeaways
"Build a Relationship with Your Manufacturer": "00:11:29"
"Revisit Product Unit Costs Regularly": "00:12:33"
"Start Warehousing Products Outside the U.S.": "00:13:43"

Contact Information
"Nathan Resnick" on LinkedIn: "00:14:44"

Transcript:

Josh 00:00:00 Today I am super excited to introduce you all to Nathan Resnick. Nathan is the founder of Sourcify, the fastest growing sourcing platform backed by Y Combinator that helps hundreds of companies manufacture products around the world. In the past, Nathan has brought dozens of products to market, ran three e-commerce companies. He's even sold one of them and has been part of projects on Kickstarter, raising over seven figures. He writes for media outlets like entrepreneur, The Next Web Business. Com, and can frequently be seen on CNBC. Nathan also used to live in China and he speaks Mandarin fluently. So with that introduction, welcome to the show, Nathan.

Nathan 00:00:41 Josh, thanks so much for having me on.

Josh 00:00:43 I'm sure with your experience you have probably some good negotiation tactics. you've probably have a few case studies of people that you've helped, navigate getting better payment terms with their manufacturer. So would you mind just kind of diving in and sharing more there?

Nathan 00:01:00 Yeah, totally. I mean, I think first off, you got to understand how valuable your business is to your factory.

Nathan 00:01:06 Right. So I would do that by really trying to understand, you know, you make up most of their production output, you know, of all the factories, production volume that you work with, what percentage are you? Is it 30%, 10%, 50%, 80%. You know what? What is it? And then you kind of understand where you're at from a negotiation position, right? Because if you're a brand that makes up the majority of a factory's output, obviously you have a much stronger lever to pull if you're a kind of minority customer for them or a smaller customer for them, then, you know, maybe that's not even the right factory for you to be working with because you don't have a strong lever to pull. So I think, you know, number one, you've got to see eye to eye to eye with them in terms of forecasting and helping them better understand. Well, hey, you know, this year, this is how many units I'm planning to produce. And I think there's a big disconnect between supply chain teams and factories when it comes to forecasting, because a lot of supply chain team members don't understand.

Nathan 00:02:01 There are a lot of brand owners don't understand. You know, that factory has to go purchase raw materials to produce your products as well, so they have their own cash flow challenges when it comes to, you know, making sure they have enough factory workers to produce your product, making sure they have the raw materials to produce your product, and then they aren't getting paid, you know, for 30 or 60 days to produce your product if you're negotiating your terms. Well. And so you've got to understand it from their standpoint as well of, you know, hey, how is this going to help their factory grow? Because it can also put them in a cash flow position, which is challenging. And so that's something you need to be aware of when you go into your negotiations. So I think number one, I would just make sure you're seeing eye to eye with that factory that you're working with to understand, you know, how big of a customer am I for them? You know, what does their cash flow look like? And have I done a good job making sure they understand my forecast? And that's when I would go into the negotiation of saying, hey, you know, we're trying to grow and to grow.

Nathan 00:02:58 We need more, you know, cash flow to scale up our ads, to get more customers right. And so that's how I would approach it. I think if you're a brand that is, you know, a smaller customer like sub 10% of a factory's output, it's going to be really hard for you to negotiate that. And honestly, in that position, I might actually, you know, kind of take my option to of, you know, trying to ask yourself, am I the best customer for this factory? And can I find a factory where I'm, you know, a much larger customer that I can grow with more? so that's that's another kind of question that I would ask of, trying to understand, like if you already know your small customer for this factory, are they even the right factory for you? and then, you know, it's just.

Josh 00:03:41 Real quick, before you continue on that, my question would be on that. How do you have that conversation to say, hey, by the way, how much of your business do I make up, right? Like, that could be an awkward conversat...