6 Things to Keep In Mind When Starting an Export Business
Exporting is a major business activity, which requires one to consider several factors like market location, laws and regulations, logistics, customer perspective, capital, cost, and insurance of the business among others. Due considerations to all these factors can help in setting up a successful exporting business. Indeed, if the fundamentals are right, an export business can undoubtedly be very rewarding.
Here are the key factors you need to keep in mind when starting an export business:
1. Define your export strategy
What, where, and why to export must be clear. To that end, you must conduct thorough, data-backed research. Be conscious of the product you want to export and the reasons for doing so. Explore the consumption and import figures of products similar to your own, the economic growth of the place where you will export, and its evolving demands. This data can be found for free for many countries via the customs websites. Many third party data aggregators like exportgenius and importgenius also provide this data for a cost.
2. Check the rules and regulations
If you think one can start exporting the products after researching the market, then you are wrong. It is important to understand the import and export regulations as well in all the countries where you want to sell your products and make a realistic cost-benefit analysis. Because a violation of any rules or regulations can cause your product to get banned from the country’s market and your business may face a major loss as a result. Adhering to the destination country’s quality and safety standards is equally important.
If you have decided on your line of product for export, you should go through the rules and laws thoroughly related to that product in different economic regions and countries. Some animals and plant-related products, as well as certain dangerous chemicals, are banned in the European Union.
Also, get all the requisite legal documents in place before entering the market. This may include but not be limited to export control license, product compliance certificates, internationally valid liability cover, intellectual property rights, and registered trademarks.
3. Find feasible transport and logistics
You will also need to find out the most feasible ways or logistics to export your product into the destination country for the long term. Most of the international export-related shipments are done by sea. Another mode of transport for the export of goods is air.
It is important to optimise the cost of logistics to keep the overall cost of the product attractive. Although sea freights have recently become very expensive during the pandemic, sea transport is typically much cheaper than air, especially for bulky products. Many logistics aggregators like cogoport provide transparent freight rates and quotes instantly, which can be very useful for small and medium businesses.If the price is kept too high, the product may not be able to form a larger customer base.
4. Decide the mode of payments
It is important to offer secure and trusted methods of payments to your clients, especially if you are starting out a new export business. Typical options for large transactions greater than USD 100k are Letters of Credit but they are not always accessible to all buyers. Today there are other digital options available like Tazapay escrow which offer secure payment options for all transaction sizes and are available to all SMBs.
5. Invest in marketing
Marketing can also play a vital role in bringing exposure to the brand and making the product more attractive to customers. Companies rely on different modes of paid advertisements to promote their products which can be expensive. Be mindful of the target audience, expected expenditure, and return on investment. An alternative is to create a website with content relevant for the target market. Global social media sites such as LinkedIn, Facebook, and Twitter can also help in promoting your message quickly and free of charge. However, they need serious time investment. Nonetheless, make sure that your company website and contact details are always updated.
Another option is to list on B2B marketplaces like Indiamart, Thaitrade etc. targeting your customer base. These marketplaces charge a commision on sales but take care of marketing to drive more buyers for your products.
6. Keep in mind the price variables
Export price is fixed after due consideration to many variable costs. One needs to keep in mind a bunch of factors like currency, taxes, shipping, etc. and make appropriate estimations before quoting your price to potential customers. Remember, the cost of the product is important in attracting customers as cost influences the decision-making of the people.
Do consider getting your business insured because the product might get destroyed or damaged during its journey to a foreign country, due to natural calamity or any other reason. Try to get a brief idea about the evolving market conditions from suppliers present in the foreign country. This can help counter unforeseen expenditures and cost escalations.
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6 Things to Keep In Mind When Starting an Export Business
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