Import/export companies provide a unique opportunity, not only for more giant corporations but also for smaller businesses. In fact, for the individual merchant who wants to test out the waters of trade, the importing/exporting world can offer lucrative profits, exciting adventures, and a chance to utilize one’s creativity. However, willing entrepreneurs should also be aware that starting an import/export business requires hard work, dedication, and attention to detail. This article discusses how to start an import-export business.
In 2021, research told us that the United States exported $228.1 billion dollars of goods and registered $308.9 billion in imports. There are profits to be made out there, but many entrepreneurs are hesitant to begin. They wonder what they need to leap into the import/export game and if the alluring world of international trade is right for them. They also may think that before they draw up a comprehensive business plan, they will need to rent or purchase an office, hire employees, make investments and purchase a ton of equipment, and these concerns keep them on the sidelines.
Remarkably, if an excited entrepreneur is interested in taking part in this booming industry, we tell you that it can be a surprisingly low-key process. One can start the business at home, creating a home office, and with minimal resources and just a little investment and capital, they can be off to the races. Below, we present our brief step-by-step guide to starting an import/export business from home, covering all of the finer points of this new and exciting step in a business career. Whether an individual has experience in the field of trade or is just starting to test the waters, this list will help explain concepts, show how to start an at-home business, and cover the rest of the bases. At any time you need help starting a business, please contact our California business attorneys.
If joining the booming trade industry appeals to you, here are some tips on starting an import/export business from the comfort of your own home.
Brad Nakase, Attorney
1) Choose a Product To Import/Export
We’ve started with one of the most important categories of all. Once you commit to the idea of joining the trading world, the first task to complete is fairly obvious: you will need to choose a product. Going along with this, you will need to figure out if you will be importing it or exporting it (and from where, or two where). Let’s take this step by step. One main rationale for choosing a product is that you have solid knowledge or proof that it will sell. Another is that you enjoy, like, or use the product and have experience with it.
However, just because you like a product and think it will sell does not mean that you can trade the product. This is when research comes into play. You will want to spend some time figuring out if the product is traded internationally and by whom, and also try to gauge the profits. If it appears that the product can be traded and there is demand for it, you are on your way.
If you know you want to be involved with importing/exporting but are having trouble finding a product, think in terms of your interests. What industry are you passionate about, and what goods do you think you could sell in international markets or import and sell in your US location? This search depends on the nature of the entrepreneur. What are your interests, and what ideas have your diligent research yielded? While it is always a good idea to follow your passions and work with concepts that you know and are familiar with, there is another angle. Where is the demand? For example, if you are considering importing bicycle tires made of rubber that is exclusively made in Europe, take a step back before placing your first order. Is there enough demand for high-quality bicycle tires in the area (physical or online) where you plan to make your first few sales?
Generally, countries that import products that are either produced more efficiently elsewhere have an image that is related to that country or are actually of better quality because of the natural resources or traditions they contain, as is the case with Egyptian cotton. On the other hand, countries export goods that they can produce inexpensively, hoping to create a favorable profit margin. There are two factors that make products easier and less expensive for one country to create than another: technology and resources. Is it any wonder that so much oil comes from the middle east?
When choosing a product, you may also want to consider a few different categories:
- Availability: Where is the product made, and are there places that cannot produce it? How much demand is there for this product in the areas you wish to serve?
- Image: From German beers to Italian pasta, some products come with a sense of image and cachet. Likewise, people will pay more for imports with a certain idea. Where does your product stack up?
- Price: With the main example of Chinese electronics, some products are more inexpensive to import than others, meaning that they might be profitable for you to investigate.
Lastly, we want to emphasize two ideas from this section. The first is research. As we’ve said, the trade industry is demanding, and here is your first chance to do some real work. The more you know about the products you are considering and their current role in international trade, the better. Second, the idea of demand is crucial. As is the case with all sales, and really all business transactions, if there is not a solid sense of demand for this product where you are going to be either sending it or receiving it, then this just isn’t going to work. However, sometimes demand must be theorized, and you need to take a chance. If people haven’t been exposed to your product before, then study similar markets before you take the plunge. For example, you might not know if people in Paris will buy hot sauce made in San Diego, California. Do your best to find out, and then take a chance with a small shipment and see how your sales and profits stack up.
2) Secure a Domain Name and Set Up a Website
These days, even businesses that are not started from home rely on their websites for nearly everything, from new customer discoveries to exposure, to sales. Since you are starting your import/export business from home, at least at first, you will want to get a domain and a website figured out as soon as possible. Of course, before you can secure a domain, you will need an eye-catching yet appropriate name for your new business. These concepts go hand in hand. Before you commit to a name, do some more research to make sure there are not any other businesses with the same title, as this could cause problems later on.
Once you are ready to move forward with your domain and website, be aware that one of the main roles of your site is allowing you to network with customers, prospective consumers, and other businesses. The key here is to create a simple, easy-to-use site that allows you to grow your customer base as you sell products. If you do not have the budget for a web designer, that is not a problem anymore. There are numerous options that are affordable and easy to navigate for even the least tech-savvy among us, including GoDaddy, where you can purchase a domain and website. In addition, Squarespace or WordPress are great platforms that enable you to create the website you have always wanted and tailor it to your new import/export business.
Remember that while a web presence is an integral part of your business, you should place special emphasis on it as a new company. Be sure to include a contact page with all of the relevant information about your business and easy-to-find ways to get in touch with you directly. In the future, you may have employees fielding these emails, messages, and calls; but right now, it is all you. Learn more on how to advertise your business.
Also, do not skimp on your website or think you can get by with a Facebook page or something similar. A quality website that includes digital marketing and proudly displays your products, providing information about your company and its role in trade, will have prospective customers finding you. Lastly, establishing company social media accounts has become ubiquitous with success since this is one of the chief ways a customer can and will interact directly with a business. If you are not well-versed in posting on Instagram, Twitter, and the like, when you are able to begin hiring people, we suggest finding someone who is.
3) Documents and Licenses
In order to begin importing goods, certain licenses will need to be procured. These depend on the location of the country you are importing into or exporting from, as well as the nature of your company and its products. In the US, permits and import licenses may be required, and an entry form for Customs and Border Protection is always necessary. In terms of documents, a government-issued form that authorizes your business to legally complete certain import/export functions and transactions is known as an export license. How does a company or individual obtain one? This license will be issued by the appropriate and corresponding agency once your company and its transactions have been reviewed. Here’s where to start: once you have a CIN or company identification number, contact the Department of Commerce.
What is the big picture here? In order to run a successful import/export business, you will probably need to obtain an import/export business license. While we cannot say for sure exactly what documents or licenses you may need, we do not know what you are planning to import/export and where you will need to conduct some more research as you look into this. Once you’ve researched what type of licensing is needed, you can then look into whether any specific national or international regulations are associated with the product you plan to trade. You’ll want to make sure you stay informed regarding specific regulations every time you start trading with a new country.
Since you’re starting an at-home business, there may be no one to help you with the research yet, so we suggest hitting the books early in the process, so you can focus on your product and business launch when it comes. Preliminary research also tends to help companies avoid costly mistakes down the road.
4) Market Research
Once you have decided on a product or series of products, the next task is to identify the market. A business simply cannot exist without its customers, so you will need to plan out who your clients will be, where they will be drawn from, and how you will entice them. This type of market research, if done efficiently, can help increase profits and prepare you for the first day of sales. While the first few months of a new business can always provide challenges, knowing your target market and being able to focus on them makes things easier.
Are you someone who can easily spot trends and predict which products will become popular next? Generally, the top products for an importer/exporter are those that are right on the verge of becoming popular. Promising product lines can create a splash for your business when they suddenly catch fire, and you want to be first to the party, not last. Test out your ideas, solicit opinions on your products, and even try giving some away at first for reviews and feedback. All of this preparation will prepare you for your exciting foray into importing/exporting.
Research Tips
Each of these areas will warrant some research inquiries:
- The nature of the service or product you plan to sell
- The countries or countries you will deal with/export/import from
- The channel of trade you will employ (distributor, representative, or direct sales)
- The client you have decided on (government, business, mass-market, hospital or medical or others)
Diving into these categories and including some of this information in your business plan will help you to become an informed and competent importer/exporter and increase your chances of quickly becoming a profitable company.
5) Locate a Supplier
Once you’ve selected your product, named your company, set up your website, performed product and market research, and finalized any necessary documentation and licensing, you’ll next need to find a supplier. Luckily, reputable platforms help businesses network in this manner, such as Alibaba and Global Sources. These websites are suitable for finding wholesalers, manufacturers, buyers, suppliers, exporters, importers, and more.
We cannot emphasize this enough: relationships with suppliers are essential to success. Finding these suppliers can be difficult, but in addition to the companies we have mentioned, it can be extremely beneficial to network with other companies and find out where they get their supplies. At the next networking event, or in your next company social media post, make the goal to communicate with similar companies. Even your closest competitors might spill the beans regarding their top suppliers, but you have a better chance if the business is not importing or exporting the exact goods that you are. In any case, many business owners enjoy helping out the new kid on the block, so it is worth a shot. You may be able to learn from their mistakes, as well. However, it is up to you to show the supplier that you have strong ideas and that there will be benefits for them if they enter the US market (or the market you are selling to).
The goal here is to figure out all of the logistical challenges and requirements associated with moving the product from a local facility to one that might rest on the other side of the globe. Interestingly enough, some importers/exporters become their own suppliers, and if you can create the product yourself and have the proper infrastructure in place, this can be a great option.
6) Price Your Products
Knowing how much to charge potential customers is essential, but figuring out the exact amounts can be difficult. Generally, entrepreneurs will need to understand both the volume of units sold or what can be expected and the commission their company will gain based on that volume.
To start out, it makes sense to price your products so that the markup, or what will become the commission, does not go over the price a customer is willing to pay. However, making the price too low will sap your expected profits. Balance is key.
Research tells us that in the importer/exporter business, usually, companies go with a 10% to 15% markup over what the manufacturer charges them for the raw product. However, do not be afraid to experiment and see where different price points get you; many startups all around you are doing the exact same thing.
7) Consider Startup Costs
One of the first things to understand about being in business for yourself is that you need revenue to make money. Therefore, you need capital in order to afford to begin operating the business you have been working so hard on. Generally, these costs range from $5,000 to more than $25,000 for the import/export business, but this is an approximation since we do not know what type of business you are running. If needed, you can begin with a home office, low inventory, and only a few employees. These considerations will help you hit the ground running without too much overhead. You will need things like a computer, printer, and wifi, but many of us already have these things. Research tells us that many traders begin with a small home office and a laptop and go from there. At first, the two most valuable things you can put towards your business are your work ethic and intelligence.
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8) Consider a Freight Forwarder
Operating as part of a global supply chain is exciting, but it requires a strong plan and top-notch business acumen. Consider the coordination needed to make sure that every aspect of the process occurs on time, for example. New importers/exporters will find that communication is key, as is planning and strong attention to detail.
Another good idea might be hiring a global freight forwarder, which is simply an additional company that assumes the responsibility of being an intermediary between the shipper and the final destination. Freight Forwarders work via sea, rail, road, and air and provide a transport agent for moving your precious cargo. They can also save you a lot of time and consternation.
When dealing with a freight forwarder, seek out the companies with the best reputations since you will be providing them with valuable information about your company and products. In turn, they will arrange and process the insurance, shipping requirements, agreements, quotas that have to do with national and international trade, and sometimes even the permits and tariffs involved. This will allow you to focus on other aspects of coordinating, selling, and even laying down the ground plan for the next shipment. Keeping an eye on the future is key in this business.
9) Ship Your Products
We’ve reached the final stages of this list, and you are now prepared to begin shipping your goods. A home business is able to conduct its own research regarding shipping, and most of it can be easily done online. If you use a freight forwarder, the process will be much easier. However, if you have decided to save money and handle this yourself, you will need to figure out the most cost-effective manner in which to transport your products from the factory (or your home) to a warehouse.
We suggest finding two or three solid options and then calling each of them to get a feel for the company and compare prices. The advantage of reaching out over the phone as opposed to sending emails is that shipping/transport companies will want your business and may offer deals to win your account over their competitors. You will also get a sense of whether you are the right fit when dealing with an actual person rather than a website.
10) Once a Sale is Made, Your Role Resets
When you make your first sale or series of sales, it may be tempting to sit back on your laurels. There is nothing wrong with pausing for a beat to take stock of all that you have accomplished—after all, you are an international merchant now, and you may have achieved this from the comfort of your own home. However, finalizing a deal with a new customer is an important time that provides a key opportunity for your new import/export company. While continued sales and repeat customers are important in all industries, these things are even more essential in trade. Now is the time to grow your business and grow your relationship with the customer who has trusted in your products and services. A quick call or email to follow up with them and make sure that they have everything they need can work wonders for your reputation and boost future interactions with that buyer and others in the same network. As is true with your website, excellent communication is an indispensable skill for the importer/exporter.
Legal Questions About Your New Import/Export Business
At the California law firm of Nakase Wade, our corporate attorneys and business lawyers have advised and helped numerous new home businesses with every aspect of their journeys. Joining the trade industry as an importer/exporter is not without its rewards, but it is also a career full of challenges. If you need assistance with any aspect of forming the company, reviewing and signing documents, procuring licenses, or anything else, call us today for a free consultation.