Things to Know Before Starting an Import/Export Business
I hope I am not dreaming. I heard you have a great product ready to import or export, now all you need to do is get it in the hands of a few good customers, and you are off to international trade nirvana. Wait, not so fast. How do you know the product will sell? Will you make money selling it? How should you price the product? All importers and exporters must face these questions at some point if they want to achieve success in the global marketplace.
Here are a few solutions to guide you in the process.
Have a Quality Product or Service
Start with a product or service that you know will sell—if not everywhere, at least somewhere. You will improve your odds of picking a winner if you cultivate a knack for tracking trends, spotting potential trends or even creating game-changing trends. Remember the popular line of stuffed animals called Beanie Babies (as shown), or the Cabbage Patch dolls? Had you realized those products’ export potential early on before they became best-selling products, you would have made yourself a millionaire four times over in a very short period. The same holds true for Japan’s Hello Kitty line of products, which is based on a fictional character produced by the Japanese company Sanrio in 1974. Had you found that product early on and asked for exclusivity from Sanrio to market it in the United States, your company name would be mentioned here as a success story.
That’s the kind of foresight needed to pick import and export winners.
Track Your Financials
No matter what form of business you run, you don’t want to wait until you get to the end of your calendar year to find out where you stand in terms of profit and loss. It’s best to prepare monthly financial—income statements, balance sheets, and cash flow statements—as you go.
If you haven’t made a sale yet, you are probably asking yourself at this point why you need to keep these detailed financial records. It’s simple: Even though you may have minimal sales, or none at all, in the first few months, you are still spending money. You have expenses. And sooner or later, every business needs working capital to grow.
Another situation that requires monitoring expenses would be one in which, after running your company for a few months, you decide to go to a bank for a loan to help grow your business. Before the bank decides if you’re a good credit prospect, it needs to see some details on your company’s financial history—namely, your year-to-date sales, expenses, profit-and-loss statement, preferably prepared by your CPA or a reputable accounting organization. This not only helps you control costs but also tells you at a glance if you are making money or losing it and where adjustments need to be made.
Develop Competitive Pricing
Whether you are importing or exporting, you must develop competitive pricing that includes your profit margin or commission, whatever the case may be. Consider the following criteria to determine just how high or low you can go on your markup:
- Uniqueness: Are you first to market—then price higher.
- Quality: Is the product quality upscale or marginal—price accordingly.
- Your Cost: If it’s high, keep your markup low.
- Newness: Price higher on newer and lower on established.
- Customer Contact: Did the customer ask for your product or did you approach the customer?
- Product Positioning: Place it in the best light to determine the price at which you will be able to sell it.
You can afford a higher profit margin.
Price to play (compete) in the global game.
- Government Policies:
Can have a direct and indirect impact on pricing policies.
- Are you associated with an internationally known celebrity? Consider yourself fortunate to be working with a celebrity, and go for the higher price.