Plan of the visit:
1. Visit business project owners2. Learn more about the industry of the business project
3. Learn more about plans of business owners
4. Make a conclusion
Eugene:
#1 Visit
I came to Medan on Oct 4th, contacted Robert who came to my hotel and picked me up on his car with driver.We directed to Kisaran, small city 5 hrs driving from Medan where the business is located
eugene 3:13 PM 10/08/12
During the journey we talked in 3, with Robert's business partner. I figured out that the gentlemen are familiar with uinvest concept, with uinvest rates and how things are handled here at uinvest. They realize and understand that they will have to pay dividends right from the start of the project and that they must follow our rules.
eugene 3:16 PM 10/08/12
During the next 48 hrs we talked a lot and I can tell that they are very informed businessmen. They know details of the business, understand prospects and possess experience.
eugene 3:20 PM 10/08/12
#2 Industry
The business is about extracting palm oil from the fruits of palm trees. I was informed with details about demand on the oil, its main buyers, problems of suppliers. The palm oil is widely used in cooking and cosmetics. The business is quite simple (in its idea) - there are palm trees that are growing all around the Sumatra (island where the business is located). Each tree may give fruits for 20-30 years. Because there are no seasons, each tree bring fruits 3-4 times per year.
eugene 3:22 PM 10/08/12
so, people harvest fruits, bring them to collection centers where they get paid
eugene 3:24 PM 10/08/12
Collection centers grade fruits with categories depending on quality and send to mills where they also get paid.
Mills process fruits and extract oil. After refinery the oil goes to oil buyers, most often they are big foreign companies
eugene 3:26 PM 10/08/12
Robert's business takes a few chains of this cycle:
- Buy fruits from small suppliers who do harvesting;
- Process them on own collection center;
- Send the processed and graded fruits to mills.
eugene 3:28 PM 10/08/12
Profit cames from difference between
- price Robert pays to small suppliers who prefer to get paid fast and sell all the fruits wholesale.
- and price Robert sells his fruits to mills who don't want to deal with lots of small suppliers
eugene 3:31 PM 10/08/12
#3 Plans
Current mills are loaded about 10-20% of their capacity. I was taken to a mill and I was talking to its manager face to face. He confirmed they have to deal with lots of suppliers and amount of fruits is not enough to load even 1 shift.So, Robert plans to accumulate small suppliers and become a "general" partner for mills.
eugene 3:33 PM 10/08/12
Second plan is to build its own collection center (where the fruits collection will be done). I was taken to a place owned by Robert and saw the construction works. I was told that the building will be completed within 6 weeks from now.
eugene 3:35 PM 10/08/12
Accumulating fruits, building quality collection center will give Robert competition advantage although nobody in Kisarin seem to care about competition: lack of educated and equipped suppliers is a fact I was able to see.
eugene 3:41 PM 10/08/12
#4 Conclusion
a) The owners of the business are well prepared professionally, they possess knowledge, experience and "links" which is very important in this country. They know how to run business in practice.eugene 3:43 PM 10/08/12
b) The industry is worth attention, it really can give high profit to businessmen. There is a great demand on the palm fruits. Suppliers don't seem very strong although they take a large portion of the market (about 40%)
eugene 3:49 PM 10/08/12
c) When we talked with Robert, we agreed on legal details of the deal: we will start with 20% security deposit and later, when we see cash flow, we might reconsider it lower. Robert should email me a draft of debenture agreement which will regulate our relationships.
eugene 3:49 PM 10/08/12
I have no hesitation to confirm business and will recommend to our management to have it started as soon as paper is signed.
