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EP 357: The Science of Successfully Sourcing Products From China (Ft Nathan Resnick)
Seven years, hundreds of products, and three 7-figure businesses: Being a foreign exchange student in China, Nathan Resnick has mastered the art and science of product sourcing.
In his career, Nathan Resnick has brought hundreds of products to the market and established many businesses. Now, he is the CEO of the fastest-growing B2B manufacturing platform Sourcify. Nathan has helped scale numerous companies by focusing on supply chains. He has been featured in major media outlets like CNBC, The New York Times, The Huffington Post, Entrepreneur Magazine, and more.
In this episode, Nathan shares how Sourcify tripled in size in the past year. He shares their secrets to accelerating company growth and how they started. He believes manufacturing is the most significant hurdle business founders face and takes us into the process of product sourcing and how you can scale an eCommerce business.
Tune in to this episode to uncover the science behind manufacturing and product sourcing!
Nathan Resnick’s Bright Ideas
- Figure Out How to Produce
- Utilize Startup Acceleration Programs
- Build Your Content Marketing Program and Network
- Utilize the Power of Software
- Take Advantage of Referrals in Customer Onboarding
- Master the Science of Product Sourcing
- Think Outside the Box
Figure Out How to Produce
In this episode, Nathan shares the story about Sourcify’s beginning and how it found success.
He says that the key to handling companies’ supply chains is figuring out how to produce. Here’s the method they follow that you should take notes of:
- First sample
- Production management
- Quality control
- Importation
- Freight forwarding to get products to the warehouse
Utilize Startup Acceleration Programs
Nathan shares that three years ago, they participated in Y Combinator‘s three-month program. He says, “It’s like the go-to accelerator program for startups.” Through this program, you can boost your network with other founders and raise capital. For Sourcify, they raised around $2.5 million through Y Combinator.
Here’s how it works: they value $120,000 for 7%. You can then raise this amount to around $6 to $15 million valuations.
But then, Nathan says this has its ups and downs. He explains, “I think fundraising can be a double-edged sword in some sense, and it’s really attractive for a lot of founders. But I’d also caution those that are looking to fundraise—that really means you got to be on a high growth trajectory.” Raising venture capital might not be an option for people who want a lifestyle business.
Build Your Content Marketing Program and Network
With no track record to show, the key to getting customers is by prioritizing valuable content before selling. Instead of pitching, walk people through your subject matter expertise through blogs and Facebook groups. Nathan says, “Always, always focus on value.” Fill the gap you see in the content space.
To write on major eCommerce blogs, Nathan had to reach out to their owners and writers. He had to build a relationship with them before anything. The formula here is to:
- Provide value.
- Provide more value.
- Then, you can ask something from the other person.
Remember: if you can’t introduce someone in your network, maybe the network isn’t valuable.
Utilize the Power of Software
When Sourcify first launched, they just charged companies upfront. However, they saw no recurring revenue in this process.
With that, they built a software tool around product management for sourcing teams and manufacturing. Nathan explains, “Obviously, SaaS is so big when it comes to B2B businesses.” Now, companies rely on them to manage their production and factory work.
Software tools can empower your team, and your customer to perform better and have more visibility. That said, there are advantages to building your software tool instead of using an existing one:
- You can configure it in a way that’s specific to the process of the manufacturing industry.
- You can sell the project management system under the brands you manage.
Nathan says that “Software is a bit of a cheat code.” In terms of valuation, it translates to three to five times of growth than eCommerce companies.
Take Advantage of Referrals in Customer Onboarding
Sourcify’s growth mostly comes from referrals and word of mouth. Upon proving their effectiveness, they ask clients if other eCommerce founders could use their help. The key here lies in asking. Something as simple as that grew Sourcify by 300% in the past year.
Now, to give you an idea of their customer onboarding process, here’s how it goes:
- A company sends their product specs/samples to Sourcify, and their team sends them to their main office in Guangzhou.
- They send these out to multiple factories to see which one fits the product best.
- Once approved by the customer, the production starts.
- Before shipping, they do third-party inspections on all products.
Nathan says, “I always tell this to eCommerce founders and sourcing team members. It doesn’t matter if you’re working with us or someone else; that third-party inspection is like your insurance.”
Master the Science of Product Sourcing
When it comes to the product sourcing itself, Nathan’s primary approach is global sources like Alibaba. He shares some of the best practices and important notes on product sourcing:
- Search for suppliers in the same industry. Reach out to at least 10 to 20 in the marketplace and start communicating with them.
- Get samples from two to three factories. You don’t think of all the customization possibilities until you get a selection.
- Order products from other companies and analyze them. The best strategy is to look at bad reviews and see how you can improve the product.
- The 30-70 payment term means you’ll put down 30% initially, followed by 70% upon shipment. Before paying the remaining balance, make sure to have a third-party inspection.
- The highest-ranked supplier isn’t necessarily the best one. Note that suppliers can pay platforms to rank them higher on search results.
Think Outside the Box
This is Nathan’s key to building and getting attention. For instance, they recreated Conor McGregor’s FU suit a week after it went viral. They produced different products with FU stripes, which major media outlets covered.
These marketing stunts can drive potential leads and boost viral presence. While it’s not a long-term sustainable growth play, winning those customers can grow your ARR substantially.
What Did We Learn from This Episode?
- While venture capital is useful, it is not the best fit for every business.
- You have to provide value first before pitching and selling if you want to build a valuable network.
- Using a software tool translates to substantial growth in terms of valuation.
- Third-party inspection is your insurance in product sourcing.
- Sampling is the most complex part of product sourcing as it involves a lot of aspects.
- Viral marketing stunts can bring in potential leads and colossal revenue.
- The supplier with the highest rank in the platform is not necessarily the best factory.
Episode Highlights
[04:14] — Nathan shares how he started product sourcing
- His background as a foreign exchange student in China led him to import products from Asia.
- Sourcify is a B2B eCommerce manufacturing platform helping hundreds of high-growth eCommerce brands.
- Nathan is also the founder of Bubble Hotels.
[05:27] — Launching Sourcify
- They initially charged companies upfront to manufacture products for them.
- They have teams all over Asia handling supply chains of over 150 mid-sized eCommerce brands and numerous Fortune 500s.
[06:38] — How Nathan funded Sourcify
- They went through Y Combinator, which is an accelerator program for startups.
- Through the three-month program, they raised $2.5 million.
- Nathan was one of the only non-technical solo founders to ever go through Y Combinator. Most companies have co-founders and technical teams.
[09:25] — How they acquired their first customers
- Nathan used his content marketing background to put out valuable content.
- His approach focuses on providing value and bridging the content space gap instead of pitching.
- Within the first few months of business, he was writing in major eCommerce blogs. It was possible because he built relationships with the blog owners and writers.
[15:06] — How Sourcify increased its top of the funnel
- They built a software tool for product management and manufacturing.
- Their sourcing teams in Asia do the behind-the-scenes work.
- At the same time, they can also sell the project management system to the brands they handle.
[17:50] — Questions Nathan considers when building a business
- “Am I going to regret not doing this in the future?”
- “Is it going to be fun and enjoyable? Is it something that I want to learn?”
[18:24] — Sourcify’s source of growth
- Sourcify’s growth is all inbound and referral base.
- Sourcify comes up as one of the top search results when you search China or Vietnam manufacturing.
- They ask for referrals from existing customers after proving their success in their service.
[19:35] — Sourcify’s customer onboarding process
- The company sends their specs and samples, which they send to their main office.
- They’ll choose a handful of factories and assess which is the best fit to produce samples.
- After approval from the customer, they start the production.
- They make sure to have third-party inspections before shipping the product.
- Customers either already have specs and designs or want to improve an existing product line.
[22:17] — Gotchas and best practices
- The main approach is going to Alibaba and other global sources to find suppliers based on the same products.
- Nathan suggests reaching out to 10 to 20 factories and getting samples from two to three factories.
- Getting products from other companies or looking at bad reviews of products helps you see how you can improve — and later sell — products.
- The 30-70 payment term is the most typical in product sourcing and is where third-party’s importance comes in. The production generally takes 30 to 60 days.
- Supplier platforms have their internal advertising platform. Hence, the top search results are not necessarily the best supplier.
[28:44] — Going viral with FU
- During Conor McGregor’s fight with Floy Mayweather, McGregor wore a suit with FU pinstripes.
- When it went viral, Nathan had the idea to recreate it in other products.
- It was a success as their products went viral in a week.