3. Business Basics
If entrepreneurs are dedicated to starting an import/export business, they may want to review your business basics and know-how. This depends on their level of experience and if they have started or run a business before since there is some overlap. Individuals will want a name for the company that fits their products and is eye-catching. They will want to secure a website and domain name and get established on social media. Registering the business in the state where the business will be located is also on this list, as well as procuring business licenses. Also, starting an import/export business is just like starting any other company: entrepreneurs will need a detailed and comprehensive business plan.
Much of these nuts and bolts can be applied to any new business, yet one unique aspect of an import/export business plan is to make sure that it covers the specific regulations and rules of the market you have chosen. Individuals need to take the time to research the regulations surrounding the goods/products that they have chosen to import or export. Whenever a business is going to deal with other countries, they must take into account additional legal requirements and make sure that everything is coordinated with federal guidelines, including insurance.
Energetic entrepreneurs who are interested in importing exporting will also need access to substantial capital. Depending on the type of company you are starting and what you are importing and/or exporting, a little research into startup costs for a new business can go a long way.
4. Choosing a Product
A crucial next step for a prospective importer/exporter is fairly apparent: what is the product that you want to sell? What industry are you passionate about, and what goods do you think you could sell in international markets or import and sell in your US location? This search depends on the nature of the entrepreneur. What are your interests, and what ideas have your diligent research yielded? While it is always a good idea to follow your passions and work with concepts that you know and are familiar with you, there is another angle to this. Where is the demand? For example, if you are considering importing bicycle tires made of rubber that is exclusively made in Europe, take a step back before placing your first order. Is there enough demand for high-quality bicycle tires in the area (physical or online) where you plan to make your first few sales?
When choosing a product, you may want to consider a few different traits:
- Availability: Where is the product made, and are there places that cannot produce it? How much demand is there for this product in the areas you wish to serve?
- Image: From German beers to Italian pasta, some products come with a sense of image and cachet. Likewise, people will pay more for imports with a certain idea. Where does your product stack up?
- Price: With the main example of Chinese electronics, some products are more inexpensive to import than others, meaning that they might be profitable for you to look into.
Generally, countries that import products that are either produced more efficiently elsewhere have an image that is related to that country or are actually of better quality because of the natural resources or traditions they contain, as is the case with Egyptian cotton. On the other hand, countries export goods that they can produce inexpensively, hoping to create a favorable profit margin. There are two factors that make products easier and less expensive for one country to create than another: technology and resources. Is it any wonder that so much oil comes from the middle east?
5. Target Market
Once you have decided on a product or series of products, the next task is to identify the market. A business simply cannot exist without its customers, so you will need to plan out who your clients will be, where they will be drawn from, and how you will entice them. So, it is back to the books for more research. Market research, if done well, can help increase profits and prepare you for the first day of sales. While the first few months of a new business can always provide challenges, knowing your target market and being able to focus on them makes things easier.
Are you able to spot trends, or is someone on your team able to predict which products will become popular next? Generally, the top products for an importer/exporter are those that are right on the verge of becoming popular. Promising product lines can create a splash for your business when they suddenly catch fire, and you want to be first to the party, not last. Test out your ideas, solicit opinions on your products, and even try giving some away at first for reviews and feedback. All of this preparation will prepare you for your exciting foray into importing/exporting.
6. Research for Marketing
Each of these areas will warrant some deep research:
- The nature of the service or product you plan to sell
- The countries or countries you will deal with/export/import from
- The channel of trade you will employ (distributor, representative, or direct sales)
- The client you have decided on (government, business, mass-market, hospital or medical or others)
Diving into these categories and including some of this information in your business plan will help you to become an informed and competent importer/exporter and increase your chances of quickly becoming a profitable company.
7. Locate and Lock Down Suppliers
Once you have decided on the product you would like to trade, the next step is to locate a local producer or manufacturer that makes your product and discuss partnering up with them. Relationships with suppliers are essential to success. Finding these suppliers can be difficult, but there are companies that allow you to search out specific suppliers and even can help to match you up with them, such as Global Sources. However, it is up to you to show the supplier that you have strong ideas and that there will be benefits for them if they enter the US market (or the market you are selling to).
The goal here is to figure out all of the logistical challenges and requirements associated with moving the product from a local facility to one that might rest on the other side of the globe. However, some importers/exporters become their own suppliers, and if you can create the product yourself and have the proper infrastructure in place, this can be a great option.
8. Products Need Prices
Knowing how much to charge potential customers is essential, but figuring out the exact amounts can be difficult. Generally, entrepreneurs will need to understand both the volume of units sold or what can be expected and the commission their company will gain based on that volume.
To start out, it makes sense to price your products so that the markup, or what will become the commission, does not go over the price a customer is willing to pay. However, making the price too low will sap your expected profits. Balance is key.
Research tells us that in the importer/exporter business, usually, companies go with a 10% to 15% markup over what the manufacturer charges them for the raw product. Do not be afraid to experiment and see where different price points get you; many startups all around you are doing the exact same thing.
9. Startup Costs
One of the first things to understand about being in business for yourself is that you need revenue to make money. Therefore, you need capital in order to afford to begin operating the business you have been working so hard on. Generally, these costs range from $5,000 to more than $25,000 for the import/export business, but this is an approximation since we do not know what type of business you are running. If needed, you can begin with a home office, low inventory, and only a few employees. These considerations will help you hit the ground running without too much overhead. You will need things like a computer, printer, and wifi, but many of us already have these things. Research tells us that many traders begin with a small home office and a laptop and go from there. At first, the two most valuable things you can put towards your business are your work ethic and intelligence.
10. Find Your Customer Base and Ideal Niche
An imports/exports business is just like any other company in that it cannot exist without customers. Again, we’ve discussed finding a target market, but this is different. Whether focused on importing or exporting, a thriving trade business must locate distributors as well as clients that are excited about the product and believe they can sell it to others.
If you have a quality website that includes digital marketing, prospective customers may end up finding you. But to get started, get accustomed to doing some cold-calling. Cold-calling is an alternative to the direct-mail approach and requires a certain amount of dedication. Some experts suggest using a script, especially if you are not used to this sort of call. Be friendly but determined, and deliver the information that you think not only best represents your business but will convince people and companies they should be involved. Also, be yourself, and do not get upset when people hang up or say they are too busy: it happens.
Contact your local associates and like-minded companies, even importer/exporters whom you admire. Also, try your area’s trade associations, embassies, and the Chamber of Commerce. What you are looking for is a list of contacts, including local and national businesses. Then, reach out to distributors who might want to work with you. For example, if you are importing salad dressing, call the local grocery stores. You might just make a quick contact that wants to take a chance on your organic balsamic that comes “all the way from Italy.”
Remember, any sort of manufacturer, crafter, supplier, retailer, or artisan is approachable and in play. When you choose to pursue a certain business, the only true requirement is that they want to move and sell their goods or purchase others’ products. The more you see yourself as the bridge between two parties, the better.
How do you know what products to focus on, then? If you have previous experience in a particular field, this can be helpful because you are already familiar with the procedures, products, and even terms and jargon. All of us speak more confidently and effectively about the things we are familiar with and passionate about, so this will help you in your pitch to prospective buyers or distributors. Also, many entrepreneurs come to the import/export world from other vocations. If an individual still has contacts in a specific field, they should absolutely utilize and exploit those contacts in the new venture.
Lastly: what is your niche? What is your specific category? The more specialized your business, the more unique the goods that you are moving, the more exclusive your company appears, the better. Your category or niche is the unique angle that will set your business apart and let your creativity and industriousness shine.
11. Pay Attention to Detail
The most interesting yet complicated aspect of exporting and importing is taking a product created elsewhere—let’s say, wine from France—and selling it in a completely and utterly different place. Wine drinkers might not contemplate how their French wine showed up in San Diego, California, but importers and exporters will.
Operating as part of a global supply chain is exciting, but it requires a strong plan and top-notch business acumen. Consider the coordination needed to make sure that every aspect of the process occurs on time, for example. New importers/exporters will find that communication is key, as is planning and strong attention to detail.
Another good idea might be hiring a global freight forwarder. This will provide a transport agent for moving your precious cargo and also can save a lot of time and consternation regarding getting products transported from the factory to the warehouse on time.
When dealing with a freight forwarder, seek out the companies with the best reputations since you will be providing them with valuable information about your company and products. In turn, they will arrange and process the insurance, shipping requirements, agreements, quotas that have to do with national and international trade, and sometimes even the permits and tariffs involved. This will allow you to focus on other aspects of coordinating, selling, and even laying down the ground plan for the next shipment. Keeping an eye on the future is key in this business.
12. Documents and Licenses
In order to import goods, certain licenses will need to be procured. These depend on the location of the country you are importing into or exporting from, as well as the nature of your company and its products. In the US, permits and import licenses may be required, and an entry form for Customs and Border Protection is generally always a necessity. In terms of documents, a government-issued form that authorizes your business to legally complete certain import/export functions and transactions is known as an export license. How does a company or individual obtain one? This license will be issued by the appropriate and corresponding agency once your company and its transactions have been reviewed. Here’s where to start: once you have a CIN or company identification number, contact the Department of Commerce.
A Complex Yet Rewarding Process
Research tells us that many import/export companies remain profitable, even with all of the challenges they face. In order to improve your business’s rate of profitability, it is essential to do the research and write—and revise—a detailed business plan. Make sure to really comprehend all of the costs inherent in this type of business since the charges can be numerous, and then figure out your prospective profit margins as you set prices.
The main goal, and the reason that importing/exporting can be lucrative, is that if you can sell your products for a higher price than you paid to the source or vendor, you will profit. If you establish a profitable supply chain and demand for your product and helpful distributors, you may find long-term success. However, there is a lot of work to be done before most importers/exporters reach that point.
Importing/Exporting: A Smart Business Choice? The Bottom Line
To many, the world of exporting and importing can appear exotic and lucrative. In reality, it is based on a lot of research and hard work. However, there will always exist demand on one side of the world for the goods, services, and products that shine on the other side of the globe. Importers/exporters are providing a service and making valuable connections, further spinning the wheel of global trade around and around.
If you are interested in becoming a part of the importing/exporting business, do not let the inherent challenges overwhelm you. The world of trade is open to anyone who is driven and willing to do the work. Conduct your research, write a top-notch business plan, document your successes and failures, and celebrate the milestones. You just might launch the next wildly successful importing/exporting business.
Questions about Starting an Import/Export Business?
Do not hesitate to contact the experienced, skilled business lawyers and corporate attorneys at Nakase Law Firm. We are here for all of your questions and offer free consultations.
