Without a website, you can’t have a networked import/export business. Get yourself a platform that allows you to develop a presence online and grow your business beyond your wildest imagination. The goal is to balance the flow of communications, sell products online (or offline) and build your customer base to drive profits for your international business.
Pick a Product to Import or Export
When it comes to importing and exporting, you cannot be all things to all customers. Decide on something and stick with it. You have two viable reasons for choosing a product to import or export: you know it will sell or you like it. The business model for an import/export business is based on two critical elements within the international sales operation.
- Volume (number of units sold).
- Commission on that volume.
The goal is to price your product in such a way that your commission (markup on the product to customers) does not exceed what your customer is willing to pay and offers you a healthy profit. Typically, importers and exporters take a 10% to 15% markup over cost, which is the price a manufacturer charges you when you buy a product from them.
The more you sell, the more you make. Keep your product pricing separate from logistics because, at some point, you combine the two to determine a landed price per unit. A good transportation company can assist here. Don’t let this part intimidate you!
Transport Your Products
Your next step is to focus on logistics — transporting the product to where you will be selling it. By now, you have located a customer who loves your product, solidified the terms of the sale with them and established a means for getting paid. Now you must move your product.
The most common payment methods in exporting are:
- Payment in Advance
This is certainly the most preferred form of payment from the exporter’s point of view. However, it is the hardest to negotiate.
- Letter of Credit
Other than Payment in Advance, this is the safest method of payment in exporting. The customer arranges a letter of credit with their bank – known as the issuing bank. The letter of credit contains the instructions that must be followed and documentary evidence that must be supplied to a correspondent bank in South Africa.
- Bill of exchange
Documentary collections are probably the safest method. This is when an overseas bank, acting on your bank’s behalf, only releases the documents necessary for your customer (i.e. the importer) to take possession of the goods once they formally accept the terms of a bill of exchange. In accepting the bill of exchange, the customer essentially pays the overseas bank.
- Open Account
This is an agreement you should only enter into with a very good client – one that you trust. This is because you agree with the buyer that they only need to pay 30 days after receiving your invoice. With an open account, the exporter carries all the risk.
From the day an entrepreneur starts a business, he exposes himself to certain risks. Even before the first employee is hired, a business is at risk, making it important to have the right insurance in place.