Just six years after first setting foot in China, entrepreneur Pete Toms has turned a great idea and a set of good contacts into a $7 million turnover company. Gay Sutton goes to the horse’s mouth to find out how he did it.
We can all have great ideas, but how many people take those moments of insight and opportunity and turn them into successful companies? This is exactly what Pete Toms, owner and managing director of Source China, has done. Some seven years ago he was completing a 14 year stint working in Africa (the last three years in procurement and logistics for construction company Civicon in Africa). “For my last three years in Africa I was working in south Sudan, and toward the end of that period the war there was coming to an end,” he explains. “After three years working in a war zone I was ready to move on.”
That was the point at which the first elements of the idea began to form in his mind. “I could see there was going to be a build-up of purchasing for equipment in the region—not just in Sudan but across eastern and southern Africa; and I believed that it would present a great business opportunity.”
Rather than take a long exotic beach holiday to recuperate from the war zone experience, at the age of 36, Toms did something that we usually associate with adventurous students. “I wanted to do something different. So I got a backpack and moved to China—to a remote city in China to learn Chinese.”
The city was Kunming, in south-west China, near the Burma border; and for an entire year, Toms studied 20 hours a week on a language course, spending each afternoon embedding that knowledge by speaking with the many Chinese students keen to learn English. After a year, the lessons had paid off, and provided him with the skills to do business in China. “Now, I can read and write to a certain extent, and I can speak the language. I’m not fluent by any means, but my Chinese is good enough that I can use it for business, which opens doors in many ways.”
The first business break came towards the end of the first year in China. Having maintained close relationships with his old employer, Civicon, he learned they were looking to source prefabricated houses and tyres. Knowing their business and product requirements intimately, Toms went looking in China, travelling the country by train,bus, car—any means—to inspect factories and products. “Then, with a digital camera and a laptop, I sent them quotes, specifications and pictures, and they started purchasing from me.”
As they say, the rest is history. Toms formed the company Source China without needing to draw on any external financial resource. The company has since grown and diversified; today it supplies materials and equipment largely into the construction and transport industries, including cranes and rigging, trucks, trailers and cars, prefabricated houses and a very wide range of parts, materials and equipment. Last year, Source China recorded a turnover of US$7 million, employing just seven staff at its offices in Shanghai.
From the sourcing perspective, Toms has built very strong relationships with a number of suppliers and manufacturers in China. “Where we have found good products, we’ve continued buying from that supplier,” he says, “and we have built up great relationships with a number of companies who in turn have a great relationship with the factories. I wouldn’t say we haven’t had issues; but where we have, we’ve worked with the suppliers to solve the problems, to such an extent that many times suppliers have sent us clients, as they know we can deal with them at a higher level of customer service, and we then promote their products, with our services added.”
From the customer perspective the growth of the business has happened purely organically: by word of mouth. “My original client, Civicon, introduced me to their business partners and it’s grown from there. I spend a lot of time in Mombasa, which is the gateway into East Africa, and I deal with all the big transporters there. It’s a tight community,” he says.
That intimacy is great for business but can also have its downside. “Equally I’m aware that if something does go wrong, then the news will spread like wildfire.”
Toms has continuously been expanding the company’s reach—largely by building personal relationships, but also through two strategic partnerships. One of these is with Rodrigo Casadei in Brazil—originally an employee of a valued Brazilian client—who brings considerable industry knowledge and experience as well as impeccable contacts. “Brazil is a huge growth area for us, particularly as it’s gearing up in preparation for the 2014 World Cup and the 2016 Olympics. We will be opening an office in Sao Paulo this year,” he says. “My other partner is Gay Crossley who has a trading company in South Africa and operates from our office in Johannesburg.” South Africa, of course, has been through a massive phase of construction in the build-up to this year’s World Cup.
Having started the company from scratch and performed every aspect of the work himself—from building the website through to negotiating contracts and managing the logistics—Toms has now handed much of it to his second in command, 29 year old Chinese Helen Han, who works from the office in Shanghai, but has also travelled to meet clients in Kenya and Uganda. “I now spend much more of my time travelling to see clients,” says Toms. “Emails are fantastic, phone calls are great, but spending time with them face-to-face and understanding their business is what I want to do.”
This personal touch points directly to the niche Toms has identified in the market. “The Chinese can produce some very good products; but they have weaker customer service, and that’s what I’m aiming at.” Companies attempting to source directly from China find it incredibly difficult to access engineering expertise for the products they are buying, or indeed the spare parts they require. However, having acquired six years’ of experience and knowledge in China with Chinese spare parts, suppliers and engineers, Source China is in a position to be able to provide all.
Cranes are a great example of this. The company deals with XCMG cranes located in the city of Xuzhou—the third largest crane manufacturer in the world. “But they supply very limited services for anything they sell outside of China. So I buy either direct from the factory or from the market and supply them to my clients,” he explains. Then if there is a need for it, he can take Chinese engineers to the client to help with training and support.
“Two months ago, I took Chinese crane engineers to Angola with me to repair a crane which had fallen over and been damaged. They repaired it in three days and the clients had been working on it for two years. He also provided training on the crane. And because he only spoke Chinese, I translated for them.”
Supply of spare parts is also a major part of Source China’s activity. “We put our Source China plates on every single machine we sell,” Toms explains. “These specify the technical details of the machine. And we hold files that detail the specifications of the machine that carries that number. I can see exactly which hydraulics, cylinder heads, pistons and bearings a machine uses, so we can quickly identify the spare parts our client needs.” And because the company is very familiar with manufacturing in China, it is able to procure the parts quickly and inexpensively from the part manufacturer rather than the OEM.
In recent years, Source China has undertaken some interesting projects beyond its staple diet of construction and transport equipment. It is the largest supplier of wheelbarrows to Mozambique; has sold 47,000 bicycles to the Democratic Republic of Congo over the last two years; sources chemicals, injection moulding equipment and bicycle valves for Brazil; and is currently supplying 36 prefabricated houses and their contents for Angola—which will require the presence of Chinese engineers to oversee erection. This project took Source China to buy from 48 different suppliers, where they consolidated to four different ports, and shipped in 36 40HQ shipping containers—quite some logistical operation. And last but not least, it’s supplying marquee canvas wall sections for a company in Canada. “My third partner KevinSmith, who works completely in Chinese and operates out of our Shanghai office, has done a fantastic job on this project. I can’t believe how tenacious he has been on getting that right. Getting Chinese material to pass the California State Fire Marshal requirements is quite an achievement.”
There are still some mountains to climb. With very prescriptive procurement policies, “many of the very big companies are too big to deal with me for large items of equipment,” Toms says. “However, they order spare parts from me, and I’m hoping that I can move my way up the chain.”
In the long term, Toms has a whole range of options ahead of him. “China is definitely not dry: there are many more products there, for us to add our services to. But things are getting more expensive. Brazil has massive resources and major assets, so having a presence there will be a huge advantage, as will our presence in South Africa where there is some great low cost manufacturing,” he explains. “So I’m thinking in terms of Source Brazil in the future, or perhaps Source South Africa. Which way do I go? I don’t know yet.” www.source-china.org
