Starting an Export Business? Here are Top Six Things To Take Care of
An export business can flourish when you have a great product ready to be exported. But a lot of considerations are to be taken care of before you start off your business. There are these impending questions that need to be analysed thoroughly
An export business can flourish when you have a great product ready to be exported. But a lot of considerations are to be taken care of before you start off your business. There are these impending questions that need to be analysed thoroughly-
- How will the products be priced?
- How will the export take place?
- How rigid is the business plan?
- How can the business be protected in a difficult time?
All importers and exporters face these questions at some point when they want to achieve success in the marketplace. Here are few solutions to guide you through the process:
Know your Capital Adequacy: Starting an export business means having a full-proof plan of your capital allocation and adequacy. Know the adequate funding resources if needed. If you have the financial plan ready, it will be easier to allocate capital to each parameter. Chart out an export plan based on the following factors to assign the capital:
- Marketing strategy that includes international trade development
- Understanding of export payment mechanisms
- Product standards and regulations
Know about the Legal Requirements: When you want to start an export and import business, you are supposed to know all the Government's rules and regulations. Know about the required business documents.
To kick-start your business, you may need to have all the legal documents like PAN card, income tax details, company registration, trademark registration, business code numbers in place.
Find the Right Marketing Route: Entering into the export business needs sufficient clarity of how the product will be marketed and hence having this transparency is absolutely essential. Understand the nuances of payment and delivery system and develop the marketing route accordingly. You can opt for any of the following routes:
- Sell directly
- Take distributor's help
- Use a sales agent
Your marketing strategy will need to be tailored to each target market depending on its traditions, culture and legislation.
Quality should be the First Priority: Quality should be your 'Unique Selling Point'. So, cultivate a knack for spotting potential trends or even creating game-changing trends to improve the product quality.
Determine why your product should be in demand as compared to your competitors.
Know the Transport Logistics: In the export business, know your responsibility of product transport to your customer or supplier. Pick the best mode of transport depending on the type of goods and how quickly they need to be delivered. Understand the need for suitable packaging and labelling for transportation.
Get Yourself Insured: Having your export business insured is absolutely essential. What if your customer whom you have exported the product, defaults on your payment? Hence, to safeguard against customer insolvency, trade credit insurance is what you need.
A trade credit insurance can protect you and your export business against the risk of buyer's default or delay in payment due to bankruptcy or insolvency.
For your export business, trade credit Insurance is the best way to manage credit risk cost-effectively as it provides financial assistance and protects your profit & loss account and balance sheet against non-payment risk. It also gives you security in new markets and allows you to grow your business.
'Rudra Manufacturers' was an automobile parts manufacturing company, which did business locally as well as exported their products internationally. The business was booming for the company as the number of buyers increased day by day.
The company gave credit to the buyers on a regular basis and hence it had brought a trade credit insurance policy to protect itself against any bad debts or buyer's insolvency.
The company's credit department had given a credit line to a specific customer that amounted to 1,00,000 rupees. Due to insolvency, that buyer defaulted on his payment to the company. This was a massive loss to the firm and to cope up with the same, the company would have had to generate an additional sale to make up the loss.
However, the company had the trade credit insurance policy in place. It had approved an 80% limit on the same buyer. Hence the manufacturing firm got reimbursed 80% amount of 1,00,000 rupees, i.e. 80,000 rupees as per the agreed percentage of the default stated in the trade credit insurance policy. Thus, the company was able to mitigate the loss in this event of non-payment.
The business of Rudra Manufacturers was likely to be affected by the buyer's insolvency. However the trade credit insurance policy mitigated the loss for the company.