Introduction
Selling across international borders is not a new form of trade. It dates back to the biblical age, where cities traded in luxury merchandise like spices, textiles, and precious metals. It further goes back to the prehistoric era, when men traded inexpensive commodities among different tribes. For as long as man has existed, there’s been trade.
International trade ensures that goods from countries with rich supply are distributed to other countries in need. It’s a complex web of importing and exporting, and it’s how we’re able to get food, drinks, and other products from around the world. Since there is always a demand for goods, import/export is a highly lucrative industry.
As the world advances technologically, import/export trade has not only become more rewarding; it has also become easier to start. Right from the comfort of your home and with a little investment, you can begin your import/export business.
However, to enjoy the rewards, you’ll need to learn every aspect of the export import startup process, just as you would for any business. For instance, how do you pick the right goods to buy and sell? How do you set up a trade route and simplify your transactions? You’ll also need to keep up with trade laws and government policies. In this article, we’ll teach valuable lessons on how to start an import/export business.
Types of Import/Export Business
Before starting any business, it’s essential to understand the major players in the industry. It’ll give you an idea of the aspect on which you should focus. In the import/export business, there are three important players, and they include:
1. Export Management Company
An export management company or EMC handles all the details for a domestic company willing to ship goods overseas. The EMC hires the dealers, creates marketing and promotional content, and handles shipping logistics.
2. Export Trading Company
An export trading company (ETC) identifies foreign buyers’ wants and then locates domestic firms who’ll export them.
3. Import/Export Merchant
An import/export merchant is a free agent with no specific client base or one particular product line. He purchases merchandise directly from a foreign or domestic manufacturer and resells them around the world.
First Steps in Your Import Export Business
Many importers and exporters started their import/export ventures from home, before expanding into successful businesses. It’s financially rewarding, but it’ll take some time, dedication, and hard work.
It might be helpful to have a background in business, finance, or international relations. However, if you don’t, you must be an enthusiastic salesperson and organized enough to track receipts and invoices. If you’re not interested in sales or any related kind of work, you may want to think twice about international trading.
If you’ve decided that import/export is the right business for you, here are some steps you’ll need to take to kick off.
1. Pick a Product
A vital part of your preparation to start a business is analyzing different product ideas to pick the right one. To begin, you’ll want to find out which products are in high demand in a particular market. For instance, top imports from China into the U.S. are machinery, electrical equipment, furniture, and plastics. From here, you can get a list of possible items to sell.
Then you’ll need to consider a product that you’re passionate about, and you think you can sell. A good rule of thumb is to choose a product that you would buy for yourself or that you know very well. It’s essential to pick the right product because it’s fundamental to your business’s success.
Also, ensure to find out details about the product before you start trading. Obtain the product manual, descriptive information, or technical data sheet of the item and study them. If possible, get samples of the product from the manufacturer and use them or test their potential in the market.
2. Register Your Business
If you’re starting a business, however small, you must register your business with your state. Before purchasing commercial merchandise into the U.S., you may need to have an import/export license.
The U.S. Customs Border and Protection typically don’t request for a license. Your social security number or company’s internal service revenue number may be sufficient. However, other government agencies and your local port of entry may request a permit, and you should get one.
Similarly, if you’re interested in exporting goods to China, you’ll need to register with the Chinese Chamber of Commerce.
3. Source For Suppliers
Once you’ve decided on a product you want to trade, you’ll need to find a manufacturer from whom you can buy. Sourcing for suppliers in China is relatively easy with the concept of B2B trade platforms like Alibaba, Global Sources, and Tradewheel. Through these platforms, you can find hundreds of suppliers for any product you want to purchase.
You can also request customization or product improvement to differentiate your products from competitors. After selecting a supplier, request for a proforma invoice or a quote for your items. This document should include the product’s description, the quantity of purchase, amount, weight and dimension of products, and shipping terms.
It’s important to discuss the shipping terms with the supplier. Ensure that it’s a free carrier (FCA) or free on board (FOB) rather than Ex-Works (EXW). With FCA or FOB, your goods will get to the supplier’s nearest port or airport, which will reduce your shipping fee.
4. Establish Shipping Arrangements
You’ll need to establish a shipment method, either by air or sea, depending on the nature of your merchandise. The supplier can link you with freight forwarders who’ll handle shipping and delivery, or you can source for them yourself.
Generally, transporting goods overseas takes time. From China to the U.S. may take between 14 to 28 days. Be aware that shipping by sea takes longer, and it’s best to make your order three months before you need your products.
5. Price Your Product or Service
Import/export companies typically use two methods to price their services; commission and retainer. With the commission structure, you’ll usually earn around 10% for every sale. So, if the product is $200, your commission will be $20. However, you’ll need to add other costs such as shipping and insurance to the final price when selling.
The retainer model pays you a monthly fee for your service. When asking for a retainer, you should include market research and overhead costs to your profits. Usually, it’s best to choose the commission structure if you think the product is sellable. If the item is challenging to sell, a retainer might be best.
However, import/export merchants don’t need the commission or retainer models. Since they’re distributors rather than representatives, their profits usually come from the revenue generated from selling the products. In setting a price, the markup shouldn’t exceed what the client can pay, neither should it be too low such that there’s no profit.
Conclusion
There’s more to learn about international trade and how to run your import/export company fully. However, these are the fundamentals on how to start, and they should give a head start.