Case Study - Swaziland-Based Client, Mr. G

Four Strategic Moves To Leverage USD 20,000 For A Transportation Contract To Be Worth Approximately USD 89.280 million

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​Swaziland-based Client’s Problem or Inquiry

After about six months from our initial conversation via email, Skype and WhatsApp, our Swaziland-based client, Mr. G, had requested a project loan in the amount of approximately USD 1.8 million, terms 3 to 5 years, fixed interest rate from 9 to 16%, with no pre-payment penalty (“Transporter”).

Use of funds: Purchase of eight new trailer trucks to fulfill the Transportation Contract (“Contract”) with Investments Company (“Company”).  The Company sells timber products located in the Kingdom of Swaziland to its customers at various locations throughout the Republic of South Africa.

Transportation Agreement/Contract: Initial term is five years and with a renewable indefinitely option; 36 Horse & Trailer trucks, INYALA Truck 4X4 - 74745 (“Truck”).  Company will pay Transporter approximately USD 41,333 per truck per month (“Contract”).  The potential monetary value of this Contract is USD 41,333 X 36 trucks X 60 months.

Learning more facts from Mr. G via tel-cc and subsequent follow-up through Skype-cc

Strategic Move 1:  After analyzing, verifying and confirming all facts from Mr. G’s business plan proposal, DAJK has advised Mr. G to request the Draft Contract with the Company first.  This approach will not only mitigate his capital risk in paying for a loan’s cost without a contract, but it also elevates Mr. G to a better position when he engages with the banker, lender or investor.

A few months later, with diligent work, Mr. G, has been awarded the Transportation Contract.  He has 45 days to firm this Contract by providing eight trucks within first six months.

Through further research, DAJK learned each brand-new truck costs approximately USD 223,000 and Mr. G has limited capital; it’s about USD 20,000.

This is a good problem to have!  Now what?
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Potential Revenue of This Contract

The Contract with the Company will generate gross revenue of approximately USD 41,333 per truck per month.

In the initial six months, it requires only eight trucks; therefore, eight trucks will generate approximate gross revenue of USD 1,983,984.

In the first year, this contract is potentially worth USD 3.968 million. His profit margin is approximately 10 percent or USD 396,800.

The Contract is for five years, or 60 months, with 36 trucks: USD 41,333 X 36 X 60 = USD 89.280 million or USD 17.856 per annum.

Mr. G’s projected annual net profit in five years is USD 89.29 X 10% = USD 8.929 million or USD 1.785 per annum.

This is a very encouraging and exciting fact! Now what?
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Recommendation/Solution

There are many ways to solve this problem; however, our objective is not only to ensure that Mr. G can learn the process so that he can resolve his future financial or investment problem, but also that it is at the least cost to Mr. G as well. (Use leveraging.)

Strategic Move 2:  After DAJK analyzed this Contract, we discovered the possibility of resolving it with Mr. G’s local commercial banks.  We recommended Mr. G engage and discuss the issue with all interested commercial banks.  Finally, The First National Bank, Manzini Branch (“Bank”), sent him the Letter of Approval of his loan request for the acquisition of eight trucks.

We have consulted with and instructed Mr. G in gathering some essential documents and guided him in what to request from this Bank, and how.   A few weeks later, this Bank provided him a term sheet for USD 1.6 million on the condition Mr. G is required to contribute USD 100,000 within 14 days at closing.

Please note Mr. G has no access to USD 100,000 at this time.  What would he do?

Strategic Move 3:  DAJK further analyzed and advised Mr. G in a couple intermediate steps.  They must be the most economical, and the lowest risk.  First, we advised Mr. G to negotiate with the Company that awarded him this Contract for a minimum of trucks in next six months.  The Company agreed on a minimum of four trucks in six months, then an additional four trucks can be amended in the next six months.

This is very encouraging news!

Strategic Move 4: Our next advice was to negotiate with the truck manufacturers who would agree to provide Mr. G with four trucks with a lease option to purchase.  Mr. G talked to four truck manufacturers/sellers.  Finally, two truck manufacturers offered him four trucks with a lease option to purchase within 12 months.  However, they need Mr. G’s deposits of approximately USD 7750 per truck for installing a security system on these four trucks.  Also, the truck’s lessor requires USD 1500 to be set aside for tire repair and replacement every four months.  Therefore, Mr. G’s lease cost for four trucks per month is approximately USD 9250 X 4 = USD 37,000.

Now Mr. G has reduced his required amount from USD 1.6 million to $37,000.  This is an exceptional reduction and manageable amount for a potential awarded Contract of USD 17.856 million per annum!
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Closing Strategy 

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Our next advice was to negotiate with Mr. G’s Bank for a short-term personal loan and private investor for USD 37,000, term of three months, no pre-payment penalty.  This short-term loan of USD 37,000 will be a deposit to one of the truck manufacturers who has agreed on supplying four trucks with the option to purchase and four more within six months. Mr. G has satisfied the Company’s requirements.
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Learned Lessons

From Mr. G:

• Mr. G has leveraged his own USD 20,000 for the potential contract USD 89.3 million.
• Mr. G has leveraged a power of networking, combining with internet’s application such email, Skype and Whatsapp.
• M. G has created approximately 100 employee and contribute tax revenue to his community
• Mr. G gains our trust and become our strategic partner in the USA.

From DAJK Inc.

• Our risk is 100% if we cannot help Mr. G satisfying his awarded contract.  It is paid off this time.
• More business opportunity:  Result of this experience, Mr. G has referred to DAJK another larger development/infrastructure project approximately USD 6.8 Billion located in South Africa.  It could be something or it could be nothing.  It is still too early to determine.
• DAJK would not know what project or who will show up.  The more we dedicate and commit to our client’s interest first, the luckier we are. 
• DAJK also gains a trust from Mr. G who now is our strategic partner in the Kingdom Swaziland and surrounding countries.  Mr. G is our valuable and strategic partner for DAJK.

 
From Marketing’s perspective

We invested approximately USD 6000 for 2 digital market systems and countless hours learning, tweaking and implement them.  There were numerous mistakes and missteps along the ways.  We did not know for certain whether or not it would work.  It was a leap of faith at that point.

There were numerous prospect leads.  We lost count; but it’s certainly more than 100 prospect leads.  We have treated every lead as an opportunity until our fact finding and due diligence results prove us otherwise.

At that time (Aug 2015), our company’s market is budgeted approximately USD 100 per month.  Our initial contact with Mr. G, it’s about 8 months marketing expenditure or USD 800.

Our estimated ROI is approximately 143%. 

Its lifetime client acquisition is definitely PRICELESS!
 


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