The full potential of corporate trade becomes clear once it is understood that its primary purpose is to generate capital for its clients from purchasing they do through the trading company. The client purchases advertising or other goods and services through the trading company, and in return the trading company generates the funds necessary to purchase excess inventory, distressed real estate, and obsolete capital equipment at higher than market value.
The applications for the capital generated this way are virtually limitless, and include:
- Eliminating excess inventory
- Selling unwanted real estate
- Liquidating stock lifted product
- Generating capital for purchases or facility upgrades
- Selling obsolete capital equipment
- Selling current products or services at full price
- Selling gift cards for cash
- Selling off bankruptcy debt or vendor paper
- Paying slotting allowances
Here are a few examples that might be applicable to your company or organization.
Creating a budget for capital improvements
For the last few years, your company has needed to upgrade some manufacturing equipment. The upgrades would provide faster production and a lower cost, but the necessary $4.5mm has not been available in your capital budgets.
You and your advertising agency identify a portion of your broadcast media schedule that, over the next 3 years, will be placed by the trading company. The trading company writes your company a check at the outset of the agreement for $4.5mm. Your manufacturing equipment is purchased and put in place, and your television and radio advertising runs as planned just as if your advertising agency placed it themselves.
Selling excess inventory for which the current market is very poor
A sports beverage you introduced last year didn’t take off as planned. You have cancelled production, but have $2.3mm at original wholesale in inventory for which your best offer has been $750,000.
A new magazine advertising campaign has been planned for your latest snack product launch. It has been agreed that the trading company will place the campaign and put in place all of the merchandising and value-add programs that accompany the campaign. The trading company sells the inventory which you ship to an approved buyer.
The campaign ran as planned, which required $2.3mm less than originally budgeted since the excess sports beverage at its full wholesale value paid for that portion.
Eliminating lease payments for commited-to space no longer used
Since downsizing, you no longer use 2 floors of office space for which you have 3 years of remaining lease commitment equal to $1.8mm.
You and your advertising agency identify approximately $10mm in print and outdoor advertising that is planned to run over the next 14 months. The trading company writes you a monthly check for $50,000 which is equal to your monthly lease payments. Your advertising agency verifies that the advertising is running as planned, and you have eliminated your out-of-pocket expense for that unused lease space.