Purchase Orders and Valuation

My friend works in import and export.

Several months ago, he decided to approach Tory Burch. He had a wire transfer made from his client out in Korea for $1mm as a deposit. He had $3mm in pending orders for Tory Burch items.

He went to Tory Burch directly and said he wanted to become a distributor for them, along with LeSportSac. They agreed. The attorneys on each side started to draft up contracts. His liaison flew out from Los Angeles to New York to finalize out the deal.

The lawyers kept rearranging the paperwork for two weeks, until my friend just got sick and tired of the hassle and pulled out of the deal, thinking that Tory Burch would chase him back. They didn’t. He refunded all the money to his client and didn’t do the deal. Oh, did I mention his client already bought $500k in airtime specifically for the Tory Burch product because he already had confirmation that the deal was done? He’s probably going to get sued for that mix up. He did the same thing with LeSportSac. Nothing.

He had another client out in China who wanted to buy a million Samsung Galaxy S4’s. The client wanted to continually order more Samsung Galaxy S4’s than Samsung could produce. Big-ticket deal. The kind where you could make six to seven figures “overnight”.

He received the money and sent the money over to Samsung. The client was waiting on samples. There was a miscommunication in the process. Samsung didn’t deliver the samples on time. The client from China backed out. The deal fell through. Bridges were then burnt.

He had another deal with Best Buy. He showed them this, I don’t know… camera that you attach to your car that films everything and has a built in GPS in it. It’s like in all the cars in Korea. I think the item is stupid, but he thinks it’s the most amazing thing ever. Funny, he thinks the exact opposite about the things I show him.

He gave the product to his business partner who works directly with large retailers, such as Best Buy, Wal-Mart, etc. and has already done deals with all the major retailers.

Best Buy stated they wanted to pick up the product. It’s been two months since he had a for sure deal with them. The deal isn’t going through as originally intended.

Today, he’s right back where he started.

Sure, I mean he’s also the direct mandate for all these Chinese manufacturers who want to buy all the iron ore that they can find. Ten figures worth. He found a small portion of that order to fulfill. He got both ends to agree on the price. Now, it’s been two weeks and he can’t even find a shipping company to send the items over. What good is a purchase order for eight figures worth of a commodity if you can’t even get the item sent over within the time frame at the designated price? I’m sure that client is about to back out as well.

Personally, I went to a mandate for a toy company to present them with a product I wanted to allow them to carry and help market. I had a whole marketing plan, branding strategy, and a high level of interest. Basically to the point where they said get the deal done with the manufacturer, and you won’t have to worry about a thing. I went to the manufacturer to work out a deal with them. After two months of negotiation, they out priced me on all levels, to the point where the product would have been absolutely worthless, and no one would have made any money.

Something can always go wrong. In my friend’s case, everything that could go wrong did go wrong. A piece of paper means absolutely nothing. He can attest for that.

Originally posted on Quora.

Leonard Kim is Managing Partner at InfluenceTree. At InfluenceTree, Leonard and his team teach you how to build your (personal or business) brand, get featured in publications and growth hack your social media following.

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