The contents of this Startup Kit are excerpted from How to Start an Import/Export Business, an Entrepreneur Startup Guide. Visit SmallBizBooks.comfor more information.
Resources The American Association of Exporters and Importers
The Federation of International Trade Associations
International Chamber of Commerce
The International Federation of Customs Brokers Associations
International Organization for Standardization
International Small Business Consortium
World Trade Centers Association
Books
Entrepreneur's business startup guide Creating a Successful Business Plan
Entrepreneur's business startup guide Financing Your Small Business
Entrepreneur's business startup guide Successful Sales and Marketing
Importing Into the U.S.
Helpful Government Agencies
Bureau of Industry and Security
Business Information Service for the Newly Independent States (BISNIS)
Commercial Service, Canada
Commercial Service, Mexico
Country Commercial Guides
The Export Legal Assistance Network
Foreign Agricultural Service
International Trade Administration
Overseas Private Investment Corporation (OPIC)
Showcase Europe
Ex-Im Bank, Small-Business Programs
U.S. Census Bureau, Foreign Trade Division
U.S. Customs and Border Protection
U.S. Department of Commerce
U.S. Commercial Service (The Commercial Service)
Magazines and Publications
The Journal of Commerce
Tradeshow Week
From importing exotic fashions to exporting light fixtures, the international trade business will take you all over the world and into all product niches.
International trade is one of the hot industries of the new millennium. But it's not new. Think Marco Polo. Think the great caravans of the biblical age with their cargoes of silks and spices. Think even further back to prehistoric man trading shells and salt with distant tribes. Trade exists because one group or country has a supply of some commodity or merchandise that is in demand by another. And as the world becomes more and more technologically advanced, as we shift in subtle and not so subtle ways toward one-world modes of thought, international trade becomes more and more rewarding, both in terms of profit and personal satisfaction.
Importing is not just for those lone footloose adventurer types who survive by their wits and the skin of their teeth. It's big business these days--to the tune of an annual $1.2 trillion in goods, according to the U.S. Department of Commerce. Exporting is just as big. In one year alone, American companies exported $772 billion in merchandise to more than 150 foreign countries. Everything from beverages to commodes--and a staggering list of other products you might never imagine as global merchandise--are fair game for the savvy trader. And these products are bought, sold, represented and distributed somewhere in the world on a daily basis.
But the import/export field is not the sole purview of the conglomerate corporate trader, according to the U.S. Department of Commerce, the big guys make up only about 4 percent of all exporters. Which means that the other 96 percent of exporters--the lion's share are small outfits like yours wil be--when you're new, at least.
Why are imports such big business in the United States and around the world? There are lots of reasons, but the three main ones boil down to:
Availability: There are some things you just can't grow or make in your home country. Bananas in Alaska, for example, mahogany lumber in Maine, or Ball Park franks in France.
Cachet: A lot of things, like caviar and champagne, pack more cachet, more of an "image," if they're imported rather than home-grown. Think Scandinavian furniture, German beer, French perfume, Egyptian cotton. Even when you can make it at home, it all seems classier when it comes from distant shores.
Price: Some products are cheaper when brought in from out of the country. Korean toys, Taiwanese electronics and Mexican clothing, to rattle off a few, can often be manufactured or assembled in foreign factories for far less money than if they were made on the domestic front.
Aside from cachet items, countries typically export goods and services that they can produce inexpensively and import those that are produced more efficiently somewhere else. What makes one product less expensive for a nation to manufacture than another? Two factors: resources and technology. A country with extensive oil resources and the technology of a refinery, for example, will export oil but may need to import clothing.
Sunday, February 10, 2008
Types of Import/Export Businesses
First off, let's take a look at the players. While you've got your importers and your exporters, there are many variations on the main theme:
Export management company (EMC): An EMC handles export operations for a domestic company that wants to sell its product overseas but doesn't know how (and perhaps doesn't want to know how). The EMC does it all--hiring dealers, distributors and representatives; handling advertising, marketing and promotions; overseeing marking and packaging; arranging shipping; and sometimes arranging financing. In some cases, the EMC even takes title to the goods, in essence becoming its own distributor. EMCs usually specialize by product, foreign market or both, and--unless they've taken title--are paid by commission, salary or retainer plus commission.
Export trading company (ETC): While an EMC has merchandise to sell and is using its energies to seek out buyers, an ETC attacks the other side of the trading coin. It identifies what foreign buyers want to spend their money on and then hunts down domestic sources willing to export. An ETC sometimes takes title to the goods and sometimes works on a commission basis.
Import/export merchant: This international entrepreneur is a sort of free agent. He has no specific client base, and he doesn't specialize in any one industry or line of products. Instead, he purchases goods directly from a domestic or foreign manufacturer and then packs, ships and resells the goods on his own. This means, of course, that unlike the EMC, he assumes all the risks (as well as all the profits).
Swimming the Trade Channel
Now that you're familiar with the players, you'll need to take a swim in the trade channel, the means by which the merchandise travels from manufacturer to end user. A manufacturer who uses a middleman who resells to the consumer is paddling around in a three-level channel of distribution. The middleman can be a merchant who purchases the goods and then resells them, or he can be an agent who acts as a broker but doesn't take title to the stuff.
Who your fellow swimmers are will depend on how you configure your trade channel, but they could include any of the following:
Manufacturer's representative: a salesperson who specializes in a type of product or line of complementary products; for example, home electronics: televisions, radios, CD players and sound systems. He often provides additional product assistance, such as warehousing and technical service.
Distributor or wholesale distributor: a company that buys the product you've imported and sells it to a retailer or other agent for further distribution until it gets to the end user
Representative: a savvy salesperson who pitches your product to wholesale or retail buyers, then passes the sale on to you; differs from a manufacturer's representative in that he doesn't necessarily specialize in a particular product or group of products
Retailer: the tail end of the trade channel where the merchandise smacks into the consumer; as yet another variation on a theme, if the end user is not Joan Q. Public but an original equipment manufacturer (OEM), then you don't need to worry about the retailer because the OEM becomes your end of the line. (Think Dell Computer purchasing a software program to pass along to its personal computer buyer as part of the goodie package.)
Export management company (EMC): An EMC handles export operations for a domestic company that wants to sell its product overseas but doesn't know how (and perhaps doesn't want to know how). The EMC does it all--hiring dealers, distributors and representatives; handling advertising, marketing and promotions; overseeing marking and packaging; arranging shipping; and sometimes arranging financing. In some cases, the EMC even takes title to the goods, in essence becoming its own distributor. EMCs usually specialize by product, foreign market or both, and--unless they've taken title--are paid by commission, salary or retainer plus commission.
Export trading company (ETC): While an EMC has merchandise to sell and is using its energies to seek out buyers, an ETC attacks the other side of the trading coin. It identifies what foreign buyers want to spend their money on and then hunts down domestic sources willing to export. An ETC sometimes takes title to the goods and sometimes works on a commission basis.
Import/export merchant: This international entrepreneur is a sort of free agent. He has no specific client base, and he doesn't specialize in any one industry or line of products. Instead, he purchases goods directly from a domestic or foreign manufacturer and then packs, ships and resells the goods on his own. This means, of course, that unlike the EMC, he assumes all the risks (as well as all the profits).
Swimming the Trade Channel
Now that you're familiar with the players, you'll need to take a swim in the trade channel, the means by which the merchandise travels from manufacturer to end user. A manufacturer who uses a middleman who resells to the consumer is paddling around in a three-level channel of distribution. The middleman can be a merchant who purchases the goods and then resells them, or he can be an agent who acts as a broker but doesn't take title to the stuff.
Who your fellow swimmers are will depend on how you configure your trade channel, but they could include any of the following:
Manufacturer's representative: a salesperson who specializes in a type of product or line of complementary products; for example, home electronics: televisions, radios, CD players and sound systems. He often provides additional product assistance, such as warehousing and technical service.
Distributor or wholesale distributor: a company that buys the product you've imported and sells it to a retailer or other agent for further distribution until it gets to the end user
Representative: a savvy salesperson who pitches your product to wholesale or retail buyers, then passes the sale on to you; differs from a manufacturer's representative in that he doesn't necessarily specialize in a particular product or group of products
Retailer: the tail end of the trade channel where the merchandise smacks into the consumer; as yet another variation on a theme, if the end user is not Joan Q. Public but an original equipment manufacturer (OEM), then you don't need to worry about the retailer because the OEM becomes your end of the line. (Think Dell Computer purchasing a software program to pass along to its personal computer buyer as part of the goodie package.)
The Right Stuff
Not everybody is cut out to be an international trader. This is not, for example, a career for the sales-phobic. If you're one of those people who would rather work on a chain gang than sell Girl Scout cookies, or if you blanch at the thought of making a sales pitch, then you don't want to be in import/export. This is also not a career for the organizationally challenged. If you're one of those let-the-devil-handle-the-details types whose idea of follow-up is waiting to see what happens next, you should think twice about international trading.
If, on the other hand, you're an enthusiastic salesperson, a dynamo at tracking things like invoices and shipping receipts, and your idea of heaven is seeing where new ideas and new products will take you, and if, to top it off, you love the excitement of dealing with people from different cultures, then this is the career for you.
It also helps if you already have a background in import/export. Most of the traders we talked with were well-versed in the industry before launching their own businesses. Peter P., who founded a Russian trading company, segued directly from his college major in international business to an operations position with an international frozen-meat trading company in Atlanta, which landed him in the right place at the right time.
"I speak both Russian and Ukrainian fluently," Peter says. "I'm of Ukrainian descent. I took Russian as a minor in college, initially as an easy grade. Little did I know when I graduated back in '89 that Russia would open up to the West shortly thereafter."
If, on the other hand, you're an enthusiastic salesperson, a dynamo at tracking things like invoices and shipping receipts, and your idea of heaven is seeing where new ideas and new products will take you, and if, to top it off, you love the excitement of dealing with people from different cultures, then this is the career for you.
It also helps if you already have a background in import/export. Most of the traders we talked with were well-versed in the industry before launching their own businesses. Peter P., who founded a Russian trading company, segued directly from his college major in international business to an operations position with an international frozen-meat trading company in Atlanta, which landed him in the right place at the right time.
"I speak both Russian and Ukrainian fluently," Peter says. "I'm of Ukrainian descent. I took Russian as a minor in college, initially as an easy grade. Little did I know when I graduated back in '89 that Russia would open up to the West shortly thereafter."
The Trade Hit Parade
According to the U.S. Census Bureau, the top 10 countries with which America trades (in order of largest import and export dollars to smallest) are:
Canada
Mexico
Japan
China
Germany
United Kingdom
France
Republic of Korea (South Korea)
Taiwan
Singapore
You needn't, of course, confine yourself to trade deals with importers and exporters in these countries--there are scads of other intriguing possibilities available, including the member countries of the Caribbean Basin and Andean pacts and the new kids on the Eastern Bloc, the former Soviet Union countries. But as a newbie on the international scene, you should familiarize yourself with our biggest trading partners and see what they have to offer. Then take your best shot, with them or with another country.
Canada
Mexico
Japan
China
Germany
United Kingdom
France
Republic of Korea (South Korea)
Taiwan
Singapore
You needn't, of course, confine yourself to trade deals with importers and exporters in these countries--there are scads of other intriguing possibilities available, including the member countries of the Caribbean Basin and Andean pacts and the new kids on the Eastern Bloc, the former Soviet Union countries. But as a newbie on the international scene, you should familiarize yourself with our biggest trading partners and see what they have to offer. Then take your best shot, with them or with another country.
Who Are Your Customers?
Every business needs consumers for its products and services to, as the Vulcans so eloquently put it, live long and prosper. Now that you know what running an import/export business entails, you need to plan, or target, your market, and determine who your potential clients will be, which geographic areas you'll draw from, and what specific products or services you'll offer to draw them in.
This is a very important phase in the mega-trader building project. The proper market research can help boost your trading company into a true profit center, and the more research you do, the better prepared you are before you officially open your doors, the less floundering you're likely to do.
Any manufacturer, supplier, crafter, artisan, importer, exporter or retailer is fair game. You can go after companies that deal in heavy construction equipment or delicate jewelry, gourmet goodies or pet food, telecommunications or toys. The only essential requirement is that they want to sell their merchandise or buy someone else's.
This doesn't mean, however, that your best technique is standing at manufacturers' gates, tripping them as they walk to their cars after work each evening. Targeting by definition means homing in on a specific group.
If you have previous experience in a particular field, for example, you should seriously consider targeting that market first. You'll feel comfortable with the jargon and procedures so your sales pitch--and your initial sales--will go smoother and easier. As an added bonus, you may already have contacts in the field who can either become your first clients or steer you to colleagues in that area.
Dan S. targeted the field of technology--specifically, software solutions for commercial use and computer cables--simply because he's worked in that area for more than 10 years. He knows the field and feels comfortable in it.
Wahib W., too, began in a field he knew well, runway and navigational lights, then went on to other international construction projects, importing railroad and telephone pole materials and construction services, as well as other heavy-equipment materials.
This is a very important phase in the mega-trader building project. The proper market research can help boost your trading company into a true profit center, and the more research you do, the better prepared you are before you officially open your doors, the less floundering you're likely to do.
Any manufacturer, supplier, crafter, artisan, importer, exporter or retailer is fair game. You can go after companies that deal in heavy construction equipment or delicate jewelry, gourmet goodies or pet food, telecommunications or toys. The only essential requirement is that they want to sell their merchandise or buy someone else's.
This doesn't mean, however, that your best technique is standing at manufacturers' gates, tripping them as they walk to their cars after work each evening. Targeting by definition means homing in on a specific group.
If you have previous experience in a particular field, for example, you should seriously consider targeting that market first. You'll feel comfortable with the jargon and procedures so your sales pitch--and your initial sales--will go smoother and easier. As an added bonus, you may already have contacts in the field who can either become your first clients or steer you to colleagues in that area.
Dan S. targeted the field of technology--specifically, software solutions for commercial use and computer cables--simply because he's worked in that area for more than 10 years. He knows the field and feels comfortable in it.
Wahib W., too, began in a field he knew well, runway and navigational lights, then went on to other international construction projects, importing railroad and telephone pole materials and construction services, as well as other heavy-equipment materials.
What's My Niche?
OK. You've narrowed the list of products you'll target. Now you'll want to find your niche, the unique angle that will set your business apart from--and above--the competition. This is where you can really let your creativity shine through.
You may decide to start as an export management company (EMC, remember?), seeking out buyers for domestic manufacturing firms, or as an export trading company (ETC), finding domestic sources willing to export. Or you might want to stick with the original Trader Sam formula, importing and exporting on your own as an import/export merchant.
In Florida, Lloyd D. has positioned his company as both an EMC and ETC, depending on his clients' needs. "[As an EMC, we] work directly for a manufacturer, or his exclusive distributor/manager for international sales, as a marketing and screening provider," Lloyd explains, "and will search for and locate overseas buyers-for-resale and/or qualified distributors/sales representatives. [Our] objective is to function as an extension of [our] principal's in-house export sales efforts."
Under its ETC hat, Lloyd says, "[my company] performs in a fashion similar to that previously described, except for a diminished principal relationship, and business is typically conducted on a case-by-case or ad-hoc basis. It is more a sourcing function for the buyer and the seller."
In Germany, Michael R. describes his company's role this way: "[We are] a worldwide consultancy to SMEs (small and medium-sized enterprises) that wish to increase their sales and profits by using the available world markets more successfully."
Market Research
Here's a rapid-fire overview of your market research tasks. You'll want to do some in-depth investigation into each of these areas:
The product or service you'll sell
The end user you'll aim for (mass-market consumer, heavy industry, light industry, medical or hospital use, government, business or professional)
The country or countries you'll export to or import from
The trade channel you'll use (direct sales, representative, distributor or commission representative)
You may decide to start as an export management company (EMC, remember?), seeking out buyers for domestic manufacturing firms, or as an export trading company (ETC), finding domestic sources willing to export. Or you might want to stick with the original Trader Sam formula, importing and exporting on your own as an import/export merchant.
In Florida, Lloyd D. has positioned his company as both an EMC and ETC, depending on his clients' needs. "[As an EMC, we] work directly for a manufacturer, or his exclusive distributor/manager for international sales, as a marketing and screening provider," Lloyd explains, "and will search for and locate overseas buyers-for-resale and/or qualified distributors/sales representatives. [Our] objective is to function as an extension of [our] principal's in-house export sales efforts."
Under its ETC hat, Lloyd says, "[my company] performs in a fashion similar to that previously described, except for a diminished principal relationship, and business is typically conducted on a case-by-case or ad-hoc basis. It is more a sourcing function for the buyer and the seller."
In Germany, Michael R. describes his company's role this way: "[We are] a worldwide consultancy to SMEs (small and medium-sized enterprises) that wish to increase their sales and profits by using the available world markets more successfully."
Market Research
Here's a rapid-fire overview of your market research tasks. You'll want to do some in-depth investigation into each of these areas:
The product or service you'll sell
The end user you'll aim for (mass-market consumer, heavy industry, light industry, medical or hospital use, government, business or professional)
The country or countries you'll export to or import from
The trade channel you'll use (direct sales, representative, distributor or commission representative)
Startup Costs
One of the catch-22s of being in business for yourself is that you need money to make money--in other words, you need startup funds. These costs range from less than $5,000 to more than $25,000 for the import/export business. You can start out homebased, which means you won't need to worry about leasing office space. You don't need to purchase a lot of inventory, and you probably won't need employees.
Your basic necessities will be a computer, printer, fax machine and modem. If you already have these items, then you're off and running. Several of the traders we talked with started from ground zero. "We started from nothing," says Wahib W., but once they got a large project, that was all it took."
Peter P.'s company started from a similar financial position. "We had very little money in the bank," he says. What they did have was a carefully built relationship with suppliers, and this valuable asset the company was able to get up and running.
One of the many nifty things about an import/export business is that its startup costs are comparatively low. You have the advantage of homebased-ability, which cuts office lease expenses down to nothing. Unless you're starting as a distributor, you can get away with purchasing no inventory, which means no outlay of funds for pretty doodads to grace display spaces (you have no display spaces!). Your major financial outlay will go toward office equipment and market research expenses--and if you're like many moderns, you already have the most expensive piece of office equipment: a computer system.
But let's take it from the top. The following is a breakdown of everything--from heavy investment pieces to flyweight items--you'll need to get up and running:
Computer system with modem and printer
Fax machine
Internet/e-mail service
Software
Market research and/or trade leads
Phone
Voice mail or answering machine
Stationery and office supplies
Postage
Travel expenses for conducting market research on foreign turf
You can add all kinds of goodies of varying degrees of necessity to this list. For example, a copier is a plus. It's also nice to have bona fide office furniture: a tweedy upholstered chair with lumbar support that swivels and rolls, gleaming file cabinets that really lock, real oak bookshelves.
But let's consider that you're starting from scratch. You can always set up your computer on your kitchen table or on a card table in a corner of the bedroom. You can stash files in cardboard boxes. It's not glamorous, but it'll suffice until you get your business steaming ahead.
--------------------------------------------------------------------------------
The contents of this Startup Kit are excerpted from How to Start an Import/Export Business, an Entrepreneur Startup Guide. Visit SmallBizBooks.comfor more information.
Your basic necessities will be a computer, printer, fax machine and modem. If you already have these items, then you're off and running. Several of the traders we talked with started from ground zero. "We started from nothing," says Wahib W., but once they got a large project, that was all it took."
Peter P.'s company started from a similar financial position. "We had very little money in the bank," he says. What they did have was a carefully built relationship with suppliers, and this valuable asset the company was able to get up and running.
One of the many nifty things about an import/export business is that its startup costs are comparatively low. You have the advantage of homebased-ability, which cuts office lease expenses down to nothing. Unless you're starting as a distributor, you can get away with purchasing no inventory, which means no outlay of funds for pretty doodads to grace display spaces (you have no display spaces!). Your major financial outlay will go toward office equipment and market research expenses--and if you're like many moderns, you already have the most expensive piece of office equipment: a computer system.
But let's take it from the top. The following is a breakdown of everything--from heavy investment pieces to flyweight items--you'll need to get up and running:
Computer system with modem and printer
Fax machine
Internet/e-mail service
Software
Market research and/or trade leads
Phone
Voice mail or answering machine
Stationery and office supplies
Postage
Travel expenses for conducting market research on foreign turf
You can add all kinds of goodies of varying degrees of necessity to this list. For example, a copier is a plus. It's also nice to have bona fide office furniture: a tweedy upholstered chair with lumbar support that swivels and rolls, gleaming file cabinets that really lock, real oak bookshelves.
But let's consider that you're starting from scratch. You can always set up your computer on your kitchen table or on a card table in a corner of the bedroom. You can stash files in cardboard boxes. It's not glamorous, but it'll suffice until you get your business steaming ahead.
--------------------------------------------------------------------------------
The contents of this Startup Kit are excerpted from How to Start an Import/Export Business, an Entrepreneur Startup Guide. Visit SmallBizBooks.comfor more information.
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