Chapter 42: Broker
Hans embarrassingly led Ves away from the private room. "Sorry about that. I thought he'd be more respectful."
"I've faced plenty of rejection before. It doesn't bother me to get turned away again." Although he said this, Ves sighed with disappointment. "I'm in an extremely difficult position if I can't find a customer for my mech."
They both stayed silent for a moment before Hans thought up another idea. "Why not enlist the services of a broker?"
"I've already thought of it." He replied. "But I need a large influx of cash within two weeks. If the broker takes his cut, I'm not sure I'm able to pay the bills that are due very soon."
"Oh relax. I know a woman who might cut a deal with you. Anything's negotiable. You should really think about it since brokers know their clients best."
Hans had a point. Many small-scale mech designers often relied on specialized brokers and dealers to manage their sales and customer support. These crafty salespeople spent a lot of effort building up a network of customers and other contacts. They trained their bargaining and negotiation skills to a terrifying level.
To be fair, despite the substantial cut they took with each successful sale, they were an indispensable part of the mech industry. That was why Ves allowed Hans to lead him all the way to the center, where a large crowd of well-dressed men exchanged their opinions about their favorite pilots of today's event.
"Marcella Bollinger! Over here!"
"Oh hey Hans." A pudgy, dark-haired woman greeted the test pilot with a hug. "How's work?"
"Same old, same old. I'm not here to talk about my work. I'd like you to introduce you to an interesting fellow I met today."
The woman raised her eyebrow and took an appraising look at Ves. "You're the Larkinson mech designer, aren't you? My, my, you're quite the big young man now. How's fame treating you?"
"Not well since it isn't of much use in my current situation." Ves shook his head. He found the woman to be more approachable than he thought. "Hans told me that you're a mech broker. It happens that I have a new mech variant that I'd like to sell."
"Ah, so it's business this time, eh?" Marcella's smile turned a little predatory. "On account of Hans, I'll hear you out. Let's bring you somewhere quiet first."
As they entered an empty private room, Marcella took a seat at a couch and patted her side. "Take a seat young man. Don't worry, I don't bite."
Sitting so close to Marcella discomforted Ves. Marcella's stocky frame underneath her prim and formal business suit hinted at a military or mercenary background. Though he couldn't detect the killer vibes from her amiable smile, he was certain that this woman had been through a lot. With his extensive knowledge and experience in mechanics, he sniffed out the presence of prosthetics in her right arm.
"Let's start from the beginning. What kind of business are you taking part in and why do you need my services?"
Ves gave her the same story he told Colonel Ares. Since he couldn't hide things from a broker for long, he also mentioned his debt and interest payment situation. While giving out such sensitive information gave her a lot more negotiating power in any agreement they reached, it would prevent misunderstandings from happening in the beginning. Ves was willing to give up a few percentages of profit if it meant building up a solid relationship based on trust. Any broker recommended by Hans shouldn't be too shady, he hoped.
"Okay, I see." Marcella tapped her manicured finger to her chin. "Lay down the cost structure for me. A mech armored with HRF plating shouldn't carry an extravagant price."
"If I want to build the Marc Antony from the ground up, I need to use up 18 million credits worth of resources. The raw material cost of the HRF amounts to about 11 million, but I already received a stockpile of resources that's more than ample enough to armor a single unit. I can scrounge up the rest for about 7 million from the open market."
"That doesn't sound too bad, but you've left out your taxes, licensing costs, depreciation of your machines, and etc. Your real cost should be at least fifty percent higher."
Ves nodded to show his agreement at her remark. "Those costs aren't relevant to me in the short-term. I don't pay any further costs for my production licenses, and the taxes and other stuff can be taken care of at the end of the year. Right now I'm desperate for a quick infusion of cash so I can meet my impending interest payment on my massive debt."
"That's business for you. At least ninety percent of all mech designers who start their own businesses don't get to make it this far. Production licenses are ridiculously expensive to obtain if you don't have any backing. It's kind of impressive that you received two of them as grants. That puts you in the same starting point as designers with a fully original design in their hands. That alone makes it worthwhile for me to invest in you."
Ves looked hopeful at the positive remark. "So you're willing to work with me?"
"Yup. But don't get too cocky. I'm only in charge of the sales. I sell dozens of mechs each month so I have no time to hold your hands."
"That's all I really need. I can take care of myself, don't worry."
"First, lets talk about accounting. You need to get that in order as soon as you have the time. I saw you got awarded privileged status. Make use of that today and contact your planet's tax office to get preferable rates applied to your business activities asap. Most tax offices tend to waver a bit and put up a couple of road blocks if you aren't an actual veteran. Best get that out of the way first before you're handed a much larger than expected tax at the end of the year."
Ves nodded in understanding. "Cloudy Curtain's in the middle of nowhere so their taxes are already favorable to businesses. If I apply for preferable rates, my tax burden will probably not improve that much compared to doing business here in Bentheim."
"For a startup like you, every credit counts. You don't want to have a dispute with the planetary government this early in your career. If they want to, they can make your life hell."
While Ves was skeptical that such a thing would happen in Cloudy Curtain, he nevertheless took the advice seriously.
"Second, while it might be too early to talk about this, but you really should find a better supplier for your raw material needs. The MTA's internal market is only a bulletin board for resource providers to dump their excess and for mech designers to fill up a gap in their regular shipments of resources. The ready availability of most resources in the market is only made possible by overcharging them by as much as 20%."
"It's not easy for a startup to get suppliers to take you seriously."
"That's why I said it's something to consider later on. The open market should be fine for now, but keep in mind that you're needlessly throwing away about two million credits for each Marc Antony you produce. That debt problem could be history if you solve your wasteful sourcing."
Marcella moved on as such a thorny problem couldn't be solved at this moment. "As for your variant's selling potential, I already have a handful of clients in mind. I'll warn you that without a track record, your new variant won't be able to demand much of a premium. Still, I can work some magic here. It helps that you designed your mech with some flair in mind. It looks almost as impressive as the genuine Caesar Augustus."
"What kind of price are you going to set?"
Marcella smirked at the question. "It's not polite to pry too much into a broker's secret. Suffice to say, you'll earn your dues even after my commission is taken into account."
"I'm not going to like what I'm about to hear, am I right?"
She tapped her fingers on her comm and summoned a standard contract detailing a business relationship between a broker and an independent mech manufacturer. "While I like you and you've got Hans to back you up, that's no reason for me to do charity. I run a business, you know. I have to little pipsqueaks back at home who I need to clothe and feed."
Ves turned on his comm and accepted the transfer. He opened the document and read over the details. His eyes practically popped out when he came across the sales commission Marcella demanded.
"Twenty percent of gross profit! That's-"
"That's a generous amount already if you consider how much work I have to put in to sell a niche lastgen mech with limited application."
"Is there any way you can give me a break? It's a little much."
"While I'm open to negotiation, I'm not budging on the remuneration. I'm also taking into account your sales volume. A small-scale mech boutique like yours won't be able to produce a lot of mechs annually. The scale of your business is really miniscule compared to my biggest clients. A one man show can only take you so far, and that means I'm perfectly justified to demand a bigger piece of your pie."
The huge amount of money Marcella skimmed off the top potentially dwarfed his debt burden.
If Marcella sold his variant at the bottom price of 24 million credits, then he'd earn 7 million credits in gross profit, which was the difference between the sales price and the cost of goods to manufacture the mech. Twenty percent of 7 million credits amounted to 1.4 million credits. If Marcella sold three more mechs, then she'd earn more than the bank.
Hans, who stood quietly against the wall, gave out his opinion. "Twenty percent is harsh, but you can expect Marcella to treat you fairly. Unlike other brokers who represent as much as over a hundred different mech manufacturers, she makes sure to represent your mechs with actual effort."
Nodding, Marcella explained her stance. "You're looking at the costs while neglecting the benefits. Sure, you can approach a public broker who will offer ten or even five percent of gross profits, but what incentive do they have to raise their sales volume? If you sign a contract with me for twenty percent, you can be damn sure that I'll work my ass off to sell as much of your mechs as I can. Right now, you need to have a visible market presence and develop a reputation for your business more than you need to maximize profits."
Ves had to admit that Marcella sounded reasonable. Of course, maybe Hans and Marcella were conspiring together against him and took advantage of his desperation.
"Also, the commission you leave me is nothing compared to what you will get in return. I might not be the biggest name around town, but I have a lot of friends in high places. You'll be paying me for my extensive network that I've invested many millions in building up. A lot of other brokers might sell a hundred mechs a month, but ninety-nine percent of those mechs are bottom of the barrel. You can forget about earning the big bucks if you take your business to the budget brokers."
"The contract also states that you'll be my exclusive broker for ten years. I don't recall this being a standard clause."
"Our business relationship is a two-way street." Marcella pointed out, gesturing her hand to Ves and then to her. "If you are prepared to invest in me, I'll do the same to you. The contract applies for ten years because I don't want to do the hard work helping you build up a name in the market, only for you to bail out on me a couple of years from now and take your business elsewhere. As I said before, this isn't a bad thing. A ten-year exclusivity clause means that your interests align with mine. Think of how big your name will be ten years from now, and think of who can make this all possible."
In other words, helping Marcella was equivalent to helping himself down the road. Ves understood the rationale, even if it left a bad taste in his mouth. What if Marcella neglected his products one day? He had very little recourse to force her to work her ass off if she focused on a shinier product from a competitor.
Marcella's eyes sharpened as she noticed his wavering expression. "I'll sweeten the pot for you. If you sign the contract this night, I'll guarantee you that I'll find a customer no later than twenty-four standard hours from now. I'll even hand you an advance of 7 million credits so you can purchase and take back the raw materials you still need to start building your mech."
"What if you can't find a customer within that time?"
"Then it will take two days." Marcella shrugged nonchalantly. "Trust a lady to know what she's doing."
"And what if it takes more time? Even if I fabricate the Marc Antony and let the MTA certify it within two weeks, if I don't have a buyer to take my product away I'll be in big trouble with the bank. Could you help me out if they come knocking at my door?"
"Sorry Ves, but I already told you that you should take care of your own issues by yourself. I'm only responsible for sales. The advance payment is just a one-time bonus. And frankly, I don't mind seeing you sweat a bit. How else can I be assured you'll have a mech ready for me to sell within two weeks?"
Ves suspected Marcella was fond of using monetary incentives to establish her business relationships.
"This is just the start of our partnership. If you don't trust me to keep my promises and do my job, then it's better if you look elsewhere."
"You have a point." Ves admitted with a resigned sigh. "
They spent an hour hammering out a basic contract. Ves even used some of his prize money to hire a legal expert on very short notice in order to make sure he wasn't being bamboozled. Sure, Marcella already screwed him up front. He only wanted to make sure she didn't screw him from behind at the same time.
After Ves, Marcella and their legal representatives all agreed the contract looked okay, they signed it and sent it off to be notarized. Marcella received the full blueprint of the Marc Antony along with detailed specifications, or at least as much as the simulations could determine. She even demanded the right to manage his Iron Spirit designer account.
"Why would you need something like that?"
"It helps if certain clients get to test drive your mech in the game. Don't misunderstand, they're not stupid or addicted to the game. While it's not an accurate representation, if they feel good about piloting a virtual mech that's about 90% similar to the real thing, they won't care about the 10% Iron Spirit unable to simulate."
"I guess you can also create some good promotional material for my mech."
"A visual example is very effective in generating initial interest in your product. We humans are primarily visual creatures after all. Watching a reasonable facsimile in action is a lot more visceral than extrapolating the performance of your mech from a dry spec sheet."
After they exchanged a few more words, they finally called it a night. Marcella Bollinger left the exhibition center with a new cash cow under her belt, while Ves still felt mixed about the contract he signed. He hardly bargained any additional benefits out of the bulldozer in action. He pretty much got run over during the entire conversation. He even felt it wasn't a bad thing getting taken advantage of. He reasoned that if Marcella wanted milked him dry, she'd have to put in an effort to squeeze a lot of value out of his work.
"Why am I imagining myself as a milk cow?"