8 Crucial Things New Exporters Must Know Before Starting An Export Business
Decades ago, it used to be very difficult to venture into the export business in many countries around the world. So many bureaucracies were involved and if anyone knew you were into international trade, the conclusion would either be you are worth at least one million dollars or have top government connections.
Today, everything has changed as even a person still living with their parents and with a computer in their bedroom halfway across the world can easily venture into the export business today and earn thousands of dollars monthly without having to go through so much stress as it used to be in the past.
That said, starting an export business today is so much easier and even more lucrative than it has ever been because there is always a constant movement of goods between countries located all over the world and the trade process is so much easier, traceable, and secure than ever.
If you want to venture into international trade and build a successful export business like thousands of other people around the world have done, here are 8 things you must know before you start an export business:
1). You Must Know What Markets You’re Targeting & The Types Of Products You’re Selling:
When you decide to start an export business, the first things you need to find out are what types of products you easily have access to and what parts of the world are buying.
If for instance, you have access to a community that produces a lot of ginger, you’d know you can easily source and export ginger from Nigeria or wherever you are in the world to international buyers. In the process, giving you a great reason to first only search for buyers who need the commodities you can easily source.
The easiest way to first know where most buyers of certain commodities come from is to check your local country’s export statistics to see which goods are being exported the most and to where.
When you have this information, you can proceed to find locations of purchase for these commodities and to search for buyers of these commodities.
In the course of interacting with most of these buyers, you’d learn of other products they also buy and can then expand your sourcing reach within your country to also cover those items.
2). You Must Develop An Optimum Selling Strategy:
An optimum selling strategy is essentially a method with which you’d use to acquire a lot of customers.
Several companies have different optimum selling strategies. Some get a bulk of their clients from trade shows; others, social media; some SEO; and a lot of the rest through direct marketing.
You’d need to find an optimum selling strategy that works for you and invest a lot of your marketing resources into it.
In the beginning, you won’t have an optimum selling strategy because you’d be experimenting with a lot of export sales techniques till you find what works for you, but the sooner you start experimenting, the better, so that you can quickly find what gives you the best results, and so put in a lot of efforts into it.
But irrespective, the ideal way to start any export business is to first mimic what already works in your industry, then build up from there.
3). You Must Know How To Price Your Products:
Pricing your products right is a key step to guaranteeing profitability and reaping the lucrative rewards that the export business provides.
In every product sale, there are some things you must consider, which consist of but are not limited to:
- Local cost of purchase
- Cost of processing & bagging
- Inspection costs
- Logistics & warehousing costs
- Security costs
- Insurance costs
- Forwarding costs
- international price
And so much more.
When you factor in all costs that will go into preparing the goods, you can then know what your exact cost price is in comparison with the common international price, and can then know how best to price your products.
4). You Must Understand Import/Export Regulations Of Your Delivery Nation And Export Nation:
Different countries have different import/export policies, and beyond this, incoterms also govern how international trade is done if referenced in the purchase contract.
To be successful, you must have a good understanding of the various international trade regulations, how it affects your business, and what you can do to give yourself the best chance of succeeding within the trade laws and terms.
Failure to have a good understanding of international trade laws could cost you your investment as ignorance is no excuse to any law.
Some things to understand are export licence requirements, embargoed nations, restricted parties, incoterms, and so much more.
5). You Must Understand The Right Way To Prepare Your Goods For Shipping:
You must understand how to package the goods, meet product specifications, select the right freight forwarder, select the best shipping line, understand the product labelling requirements of the destination country, understand insurance requirements, and so much more.
Preparing your goods the right way for shipping can make or mar the success of any export transaction, as the wrong packaging could cost you your payments.
6). You Must Learn How To Secure All Legal Export Paperworks:
In every export transaction, there are various documents that are required to be submitted by the exporter to their bank for further forwarding to the importer’s bank. Also, there are other local paperwork and registrations that must be completed before goods can sail from the country of origin.
Understanding which paperwork is required to successfully execute your export transaction is very important to having a hiccup-free export process.
In many cases, if the wrong documents are not gotten, you just might not get paid.
Using agricultural export as an example, some of the paperwork required are:
- Product inspection certificate
- Certificate of Origin
- Bill of Lading
- Phytosanitary Certificate
- Fumigation Certificate
- Commercial Invoice
- Packing List
- Insurance Certificate
And much more depending on what is requested.
7). You Must Ensure You Can Secure Your Payments:
What’s the point of going through the entire export process with the hope of getting paid without actually getting paid? None!
It’s important that before you expend any time, energy, or money to source commodities for export, you must first secure payment for the goods requested. This doesn’t mean that you have to collect the full sum upfront, but you can ensure the buyer guarantees the payments in the form of a Letter of Credit or a partial payment.
Asides just securing payment from the buyer, you should also secure export credit insurance with your local Export-Import bank or with any insurance company that provides the service. This way, you can be certain of receiving your payments if anything were to go wrong.
8). Not All Exports Are Cost-Intensive:
Finally, you should know that not all exports are cost-intensive; that is not all export transactions cost millions of dollars. In fact, most of them cost just a few thousands of dollars and if executed monthly could generate at least $10,000 in income for you every month depending on what commodity you’re shipping, where you’re shipping it to, the international price of the commodity in the destination country, what quantity you’re shipping, and much more.
It’s only a myth that all export transactions cost millions of dollars. You, on the other hand, can start with as little as $5,000, and if $0 if you first set out as an international commodity broker.
What are your thoughts on these 8 things you must know before you start an export business? Let me know by leaving a comment below.
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