How to Start an Import and Export Business?
Steps to Start an Import and Export Business
Looking to start an Import and Export business? Follow this article to know how to start your own import/export business.
International trade is one of the hot industries of the new millennium. But it’s not new. Think Marco Polo. Think the great caravans of the biblical age with their cargoes of silks and spices. Think even further back to prehistoric man trading shells and salt with distant tribes. Trade exists because one group or country has a supply of some commodity or merchandise that is in demand by another. And as the world becomes more and more technologically advanced, as we shift in subtle and not so subtle ways toward one-world modes of thought, international trade becomes more and more rewarding, both in terms of profit and personal satisfaction. Starting an Import and export business is relatively straightforward and easy if you this follow this step-by-step guide.
The Export Path
Once you have made a decision on becoming an exporter, the following is what exporters mostly do:
⦁ Generate the pro forma invoice. This is a quote to the importer, detailing more about your merchandise. It also involves negotiating.
⦁ Receive the letter of credit from your bank.
⦁ Fulfill terms of the letter of credit: Have the merchandise manufactured if necessary; make shipping and insurance arrangements. Pack the merchandise and have the merchandise transported.
⦁ Collect shipping documents.
⦁ Present shipping documents to your bank.
The Import Path
Once you have made a decision on becoming an importer, the following is what exporters mostly do:
⦁ Receive the pro forma invoice from the exporter and negotiate if necessary.
⦁ Open a letter of credit at your bank.
⦁ Verify that the merchandise has been shipped.
⦁ Receive documents from the exporter.
⦁ See merchandise through customs.
⦁ Collect your merchandise.
A Day in the Life of a trader
What does a trader’s day look like? What do they do from preparing pro forma invoice, requests for letters of credit and shipping documents?
⦁ First hour: Read statistics printed overnight by the computer to see if each representative/agent has fulfilled his plans, and initiate changes if necessary.
⦁ Work on the internet for one to two hours to see what inquiries have come in, then answer them personally or forward them to past or present clients who may be interested.
⦁ Has a short meeting with colleagues to see if assistance is needed, then support them or troubleshoot.
⦁ Look at the day’s newspapers to see whether there is any movement within the industry where I should act fast.
⦁ Take a coffee break.
⦁ Look at the mail and handle or forward items.
⦁ Discuss problems and/or chances for the future with prospects and/or business partners.
⦁ Look again at e-mail and the Web for news and new opportunities.
⦁ At the end of the day, there should be about an hour to discuss again with colleagues how the day went and/or problems that came up.
⦁ One or two evenings a week, attend business events or meetings with partners for discussion.
On the Road
A trader is not always at home behind the desk. What do they do when out on the road? As an international trader, your mission is sales in two different but overlapping areas:
a) Selling yourself and your company to clients as an import/export manager for their products.
b) Selling the products themselves to representatives and distributors.
Success in any of these areas automatically contributes to your success in another. Once you have established a favorable sales record with one client’s goods, you will have a record of accomplishment with which to entice other clients. Moreover, of course, each success will contribute to your own self-confidence, which will in turn lend, give you more confidence to your negotiations with new prospects.
You have located foreign manufacturers or suppliers whose products have U.S. sales potential. Now you have to sell them on the idea of entering the U.S. marketplace and convince them that you are the person to invite them. How do you do this? The same way you will pitch domestic manufacturers, with a direct-mail campaign. Only in this case, you will do better to think of it as a direct fax letter. Although many traders rely on international mail, unless you are sending to regions or countries with highly developed infrastructures, such as Canada or Western Europe, you will be surer of your missive reaching its destination if you send it by fax.
Whether you are planning on exporting or importing, be prepared to present your prospective client with a marketing plan. If the manufacturer is close to home, you will naturally present it in person. If she is overseas, you may still have to (make that get to) arrange a personal visit to close the deal. If you feel strongly enough about the product’s U.S. potential, the trip will be worth the time and expense.
To prepare your marketing plan, you will need the information you have already asked for: pricing, product brochures or literature, and samples. If your prospect balks at supplying these materials, tell her that you will need them to further explore the market potential and develop a presentation for the client, outlining the marketing strategy you plan to pursue.
Once you have the materials in your office, sit down and figure out every possible expense you will have so you can arrive at your sales price. Then, if you have already been in contact with distributors or representatives, find out if this price will sell in their market. If you do not have any representatives yet, you will need to locate one and determine if he can work with that price. Assuming the answer is yes, you have a viable product.
How to Start an Import and Export Business?
The following are the steps to start a successful business:
1. Swimming the trade channel. Familiarize with the players and take a swim in the trade channel. The merchandise travels from manufacturer to end user by this means. A manufacturer who uses an intermediary who resells to the consumer is paddling around in a three-level channel of distribution. The intermediary can be a merchant who purchases the goods and then resells them, or he can be an agent who acts as a broker but does not take title to the merchandise.
2. Get the right staff. Not everybody is supposed to be an international trader. This is not a career for people afraid of doing sales. Whomever you hire and work along with, must be someone highly organized, dedicated and takes initiative in doing tasks. This is the only way you are likely to succeed.
3. Identify Your Customers. Any manufacturer, supplier, crafter, artisan, importer, exporter or retailer is a potential customer. You can go after companies that deal with heavy construction equipment or delicate jewelry, gourmet goodies or pet food, telecommunications or toys. The only essential requirement is that they want to sell their merchandise or buy someone else’s.
4. Identify Your Niche. Once you narrow the list of products you have targeted, it is time to find your niche, the unique angle that will set your business apart from the competition. This is where you can really utilize creativity and stay ahead of competitors and offer excellent services to say the least.
5. Choose a starting point. You may decide to start as an export management company (EMC). This is where you seek out buyers for domestic manufacturing firms, or as an export trading company (ETC), where you find domestic sources willing to export.
6. Research the Market. The following is a quick overview of your market research tasks. You will want to do some in-depth investigation into each of these areas:
⦁ The product or service you intend to sell.
⦁ The end user, you are aiming for (mass-market consumer, heavy industry, light industry, medical or hospital use, government, business or professional).
⦁ The country or countries you want to export to or import from.
⦁ The trade channel you intend to use (direct sales, representative, distributor or commission representative).
7. Have the necessary equipment. Starts up costs of the import/ export business are comparatively low. You have a serious advantage because you could do this job from home. This means you have saved greatly on office space and rent. However, you need some facilities to make your work run smoothly. The following are things you need to make things a bit simpler for you.
⦁ Computer system with modem and printer
⦁ Fax machine
⦁ Internet/e-mail service
⦁ Market research and/or trade leads
⦁ Stationery and office supplies
⦁ Travel expenses for conducting market research on foreign turf
8. Price your products and/ or services. As an international trader, you are an intermediary in the buying and selling, or importing and exporting, transaction. You must determine not just the price of the product, but also the price of your services. These two figures are separate yet interactive. Since you are a swimmer in the trade channel, the price of your services has to be added on to the product price, and that can affect its competitiveness in the marketplace. Since the fee for your services will affect the success of the product, you may ultimately decide to change your pricing structure. You do not want to undercharge your client so that you cannot cover your expenses and make a profit, but you do not want to overcharge and reduce the competitiveness of your company and the merchandise you represent.
Common Mistakes to Start an Import and Export Business (Info-graphic)
The import and export business is still the most lucrative industry anyone could venture into. Aside from the wide range of goods to choose from, playing a critical role as an importer/exporter can help you generate anywhere from a few thousand to millions of dollars monthly in revenue.
While the import/export business may be highly attractive to those who want to start a business with great potentials to generate large revenues, not playing your cards right or making petty mistakes can cause you to lose a great portion of you import/export business, here are six common import/export mistakes to avoid at all costs:
Lack of Knowledge in Import & Export Regulation
The lack of knowledge about import and export regulations by traders and importers can dramatically increase the cost of a trading business.
Without thorough understanding about the codes and procedures implemented by the Bureau of Customs, an importer or exporter may fail to clear their goods in time, attracting penalties which further reduce the scale of would-be profits from any given consignment or container.
Due to the number risks arising in international trade, the Bureau of Customs is actively implementing new programs to ensure cargo security. As an importer/exporter, you must participate fully or risk sanctions by the bureau.
Hiring an Incompetent or Inexperienced Customs Broker
Building good rapport with the customs officials is a must for anyone involved in the global trade business. However. it will be impossible to achieve without a reliable and expert customs broker.
An incompetent customs broker will break your business. They make sure all of your paperwork is appropriate and you are actually ready to import/export products from or to a given destination.
When choosing a customs broker you should be sure to ask for references from other companies the size of your own and follow up with them to find out how their experience with the broker was.
It is also important that the broker understand your business and industry, as the import and export regulations vary by product. Goods such as pharmaceutical products are much more highly regulated than others.
Not Declaring the Correct Value in Customs
In the import and export industry, paying the right customs duties and taxes does not only ensure a smooth flow of importation but also saves you from a lot of headaches in the long run.
Yet many business owners disregard the law and choose not to declare the correct value of the goods intentionally just to save amount on their import/export expense – not knowing the irreversible damage it can do to their company’s reputation.
Declaring the correct value in customs will not only give you the peace of mind when being audited by the Bureau of Customs, doing so can also help you achieve a more accurate tax filing, improved investor reputation, and , be a valuable member of the society.
Unfamiliarity of Intercoms
Incoterms are the laws the govern the global trading industry. These laws are important for they are used to regulate contracts used for the sale of goods internationally.
Without proper knowledge about what Incoterms are, you not only risk of getting underpaid for an export sale or be overpaid on an import, but you may also face a myriad of legal problems with the customs.
You could reach out to a global trade expert to guide you on every contract you intend to sign — regardless if it’s an import or export contract.
Failing to Properly Insure Goods
“Do I need cargo insurance?” is a common question amongst shippers and consignees. It is a common misconception that the freight forwarder or the ocean carrier is responsible for the loss or damage of goods while in their custody.
The truth is that all freight forwarders and carriers are severely limited in their liability, why it is highly recommended to insure the cargo.
Include in the commercial agreement between shipper and • consignee who is responsible for the insurance, and make sure to share a copy of the insurance contract and claims procedure.
Not Verifying the Legitimacy of the Supplier or Buyer of the Product
Part of importer’s/ exporter’s due diligence is to check the legitimacy of their customer or supplier before they sign any contract.
A lot of importers assume that a mere presence on global sourcing site automatically translates to a legitimate supplier.
The fact is that there are a lot of bogus suppliers plaguing these websites. So, it’s important to conduct a research on the internet to see if the prospective supplier has a business website in place which can somehow prove their legitimacy.
On verifying customers, aside from conducting research, it’s also important to seek the help of government officials to find out more on the customer.
Whether as an importer or an exporter, you must ask for references on the supplier or customer you are about to do business with.