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CHAPTER I.- EXECUTIVE SUMMARY
1.1 Statement of Purpose
This business plan has been developed in order to evaluate the feasibility for the start-up of an export trading company based in Honduras, Guanxi Trading LLC. The present will also serve as an operational framework and plan for the first three years that the company will be in business.
To achieve this objective, a partnership will be formed, where the two founding entrepreneurs need a start-up capital of US$58,211 which will be provided jointly in equal parts by the two founding partners.
This business plan will also serve to demonstrate the enormous potential that there is for trading between Honduras and Taiwan.
1.2 Background
Globalization is a reality and we must embrace it. With all the competitiveness that takes place in the local markets, companies must look for other alternatives. Trade exists because one group or country has a supply of some commodity or merchandise that is in demand by another.1 International trade offers a window of opportunities for companies and many of them are overlooked.
The reality is that most small to medium sized companies are not exporting their products.
This may be due to lack of overseas market knowledge, fear of the whole export process, lack of financial means, etc.
1 How to Start an Import/Export Business. www.entrepreneur.com
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The international trade industry is very susceptible to economic downturns. The risks involved in international trade are high, and not every company is able to manage the deal effectively. Imports are just as important as exports for growth and job creation. Honduras must open its doors to the world; show the international community what it has to offer and at the same time, look for viable ways to boost its economy.
That is where Guanxi Trading LLC comes into play. We aim to help companies export and import products between Taiwan and Honduras. In other words, we are taking a piece of Honduras to the Asian market, and bringing a piece of Asia to Honduras.
According to the absolute advantage theory which supports free trade among markets, countries produce goods more efficiently than others, and thus citizens should be able to buy cheaper products from abroad. Companies in Taiwan may have what companies in Honduras need to improve their services or products, and vice-versa, or at a much lower cost and Guanxi Trading LLC helps these companies exploit these opportunities and minimize threats.
Only firms that are not in liquidity constraints are bound to immerse themselves into the international arena. But this is not the only problem for small and medium business in Honduras; they also lack the technical knowledge for handling the hassles that are involved for exporting and importing.
The idea of Guanxi Trading LLC arose due to the founder’s recognition of this opportunity gap between Honduras and Taiwan; there is no single company that is dedicated to trading between these two countries and the Free Trade Agreement (FTA) signed between the two countries provides a world of trade opportunities among them.
1.3 Business Model
Guanxi Trading LLC will be a facilitator of export and import needs of small and medium sized companies in Honduras and Taiwan. We will be the intermediary between buyers and
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suppliers and will provide all the necessary arrangements for getting their desired products across from one point to the other.
Simply stated, we find the product that buyers need from overseas; we purchase it and then ship it abroad. We take title to the goods that we import and the income we receive is the trading margin, which is the difference between the manufacturer’s selling price and the price we offer it at.
To facilitate buyers in their search for products from the foreign market, we will have a website through which buyers will send quote requests on our selection of products. Once we receive the quote request, we’ll contact our supplier for lead times and additional details.
Additionally, if a buyer needs a specific product not found on our catalog, they can make the request and our team of experts will find an adequate supplier to meet their needs.
We’ll be the immediate contact of the suppliers and buyers we work with. In other words, there are no direct transactions between suppliers and buyers. Once the order has been placed by the buyer, depending on the credit terms we have provided the buyer with, an advance payment will be demanded from the buyer which will be passed to our local bank account.
Later, part of this payment will be transferred to our overseas office for subsequent payment to the supplier, if our supplier demands advanced payment. A payment agreement will be issued from the buyer to our behalf for the rest of the payment.
Since our local office makes the purchase and takes title to the goods, we will ship directly to the foreign port, where immediately after it is cleared for customs, the product will be invoiced again by us and then sent to the buyer.
Once the buyer has approved the receipt of the goods, we receive the rest of the payment to our account and then we will make the final payment to our supplier.
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Guanxi Trading LLC will be both demand and supply driven. As supply driven, we will help manufacturers and producers who wish to sell their products abroad. As demand driven, we will help buyers locate overseas the products they wish to purchase.
Because of the nature of our business, bootstrapping will be part of our business model, where we will to the greatest degree minimize our investments. For this, to pay our suppliers we will use the cash paid in advance by our customers and to the least extent use our own capital funds.
1.4 Target Market
As mentioned, Guanxi Trading LLC will start operations in trading products between Honduras and Taiwan. It will initially operate with two offices; one in San Pedro Sula, Honduras and the other one will be located in Taipei, Taiwan.
Guanxi Trading LLC will start by exporting coffee and coffee related products, tobacco and tobacco related products and cocoa and cocoa preparations from Honduras to Taiwan.
From Taiwan to Honduras, we will initially start trading cup-sealing machines, scooters and entertainment devices.
Therefore, the initial target market in Honduras will be distributors of electronics, motorcycles and food and beverage equipment. The initial target market in Taiwan will be distributors and factories in need of the raw materials and finished goods we export, such as coffee roasters and producers of coffee and cocoa related products.
1.5 Financial Forecasts
The financial forecasts show that Guanxi Trading LLC is a feasible start-up company with high potential for growth and success within the international trade industry in Taiwan and
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Honduras. It is estimated that the start-up will be profitable by the six month of the first year of operations.
Due to the difficulty of being granted a bank loan for start-up companies in this industry, a short-term line of credit will be requested until later in the year, in addition to a small amount in the second year.
Net profits are forecasted to increase by 18% and 36% for the second and third year, respectively. Starting from the first year, 20% of profits will be paid to each investor and the rest, 60%, will be reinvested in the company for future growth and expansion.
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