Chapter 9

Chapter 8

Liu Ming took a deep breath, unable to deny that Zhang Chen's calculations were spot on. Although his luck varied each month, the average was indeed not far off from what Zhang Chen had said.

"This income, at the moment, is considered a high income in Bincheng, of course, this is for office workers. But from a business perspective, this income is completely inadequate." Zhang Chen took out a cigarette, lit one for himself, and then offered one to Liu Ming.

Liu Ming subconsciously accepted the cigarette. Zhang Chen continued, "When I say it's inadequate, you might still feel不服 (unconvinced), right?"

Liu Ming nodded.

"The reason I say this is because your sales method is completely wrong." Zhang Chen blew a smoke ring, "You only consider the net profit per unit, but you don't consider the issue of capital turnover rate, which is your most fundamental problem."

"Capital turnover rate?" Liu Ming had never heard this term before.

"Yes, the capital turnover rate is the time it takes for your current capital to complete one cycle. For example, if you have 50,000 yuan in capital and you invest it in goods, how long does it take to sell these goods? The time it takes to complete one cycle is the capital turnover rate."

"In other words, if you sell 50,000 yuan worth of goods in one month, and if you sell them all in one week, your monthly income will be completely different, and the difference could be as much as 300%." Zhang Chen said with confidence.

"Wait, let me think." Liu Ming slapped his forehead, "Right, if I lower the price and sell 50,000 yuan worth of goods in one week, then my 50,000 yuan can turn over four times in a month. But if I take a month to sell the goods, even if I sell them at a higher price, the income will actually be lower."

"Exactly, that's the capital turnover rate." Zhang Chen nodded.

Liu Ming suddenly shook his head and said, "No, what you're saying is an ideal situation. If I lower the price, on one hand, other merchants in the market might be unhappy and might even gang up to squeeze me out, which would be disastrous for me. On the other hand, even if they don't squeeze me out, if I lower the price, they will follow suit, making it useless."

Zhang Chen smiled, "Brother Liu, you're confused. Who says good sales must come from lowering prices? You saw how I sold the goods just now, were the prices low? No, they weren't. If we work together, I believe I can help you sell at least five to six more units each month."

Liu Ming's eyes widened, "You're not going to school anymore? You're still a student, where do you get the time to do business?"

"I can use the weekends, which are peak times." Zhang Chen smiled, "And you don't need to worry about my studies; I'm a good student and a class leader."

Zhang Chen wasn't lying; he was the publicity officer in his class, responsible for organizing students to write bulletin boards.

"Also, your concern about being squeezed out by other merchants is valid, but!" Zhang Chen said firmly, "But the market competition will always have winners and losers. As long as we become big and strong enough before our competitors react, even if they gang up, it won't help them."

"Why are your upstream suppliers so dominant? Why do they require you to pay first and then receive the goods? Why can't you get the lowest price from the suppliers? It's very simple, because you're too weak! As long as we become big enough, what does it matter if others gang up? One step behind, and you're always behind. As long as we capture the largest market share and build a reputation, we'll become the dominant players, and they'll just have to follow in our footsteps!" Zhang Chen stood up and said with passion.

Liu Ming's eyes widened, and he only realized his cigarette was burning his hand. His mind was in turmoil. Where did this kid come from? At 17 years old, how does he know so much about the computer industry? Is what he says feasible? How risky is it? One question after another popped into Liu Ming's head.

But according to what this kid said, it might be worth a try. His main way of getting goods was still through market intermediaries. When someone wanted to buy a computer from him, he would then source the goods from various suppliers in the market. Although there was no risk of holding inventory, the purchase price was almost the same as the retail price. This time, he had invested 50,000 yuan in Intel goods, which was risky, but the purchase price was cheaper, and the profit was significantly higher than usual. His cash was just sitting in the bank, so he might as well use it to buy more inventory. The risk was higher, but as long as the turnover was fast enough, the risk could be controlled to a very small extent, and it would be easy to scale up.

Liu Ming's thoughts were racing, and he no longer dared to treat Zhang Chen as a 17-year-old boy but as an equal partner.

"Okay, what you say makes some sense. How can we quickly sell the goods?" Liu Ming threw another question to Zhang Chen.

Zhang Chen chuckled, "Brother Liu, I have to keep some secrets. If I tell you everything, what will I eat?"

Liu Ming was frustrated, this kid was too cunning, he wouldn't say anything when it came to the key points. The computer market at the time was far smaller than it would be in a few years. Not many people came to Qinghe to buy computers every day. The Qinghe Electronics Market was built three years ago by the Bincheng municipal government, modeled after the Zhongguancun Electronics Market in Beijing.

Zhang Chen continued, "The domestic computer market is just starting. In the next ten years, it will experience explosive growth. Currently, out of 1,000 households, not even one might have a computer. But in three years, the market will expand by several times, and in ten years, I can guarantee that in Bincheng, there will be at least one computer per household on average. Whoever can seize the opportunity in this market, a monthly income of over 10,000 yuan will be nothing, and annual profits of over 100 million yuan won't be surprising!"

"100 million!?" Liu Ming's breathing became heavy. In fact, Liu Ming had been quite comfortable over the past year. Although he didn't sell many complete computers each month, his average monthly income was indeed over 10,000 yuan. In 1996, the average monthly wage for a worker in Bincheng was less than 400 yuan. Although some people had become rich through business in recent years, "ten-thousand-yuan households" were still a title to be envied. Sometimes, Liu Ming would enjoy a drink and think to himself, earning 10,000 yuan a month, he was already considered wealthy.

But after Zhang Chen's description, the money he was currently earning was nothing. And what does an annual income of 100 million yuan mean? It would make him one of the richest people in China, right?

Liu Ming made up his mind. Damn it, I'm going to take this bet. He then said seriously to Zhang Chen, "Brother, just tell me, what are your plans? If we work together, what do you want?"

Zhang Chen smiled, "Brother Liu, what I just said is about the future direction. We've just met, and you might not fully trust me yet. Let's follow what I initially suggested. For the next three days, the customers I bring in, we'll split the profits 50-50. Give me an address, and I'll come to you on the evening of the eighth day of the first lunar month to discuss the future in more detail. What do you think?"