How to start an import/export business in 9 simple steps
When starting an import/export business, there’s a lot to think about – financial management, product sourcing, market research, shipping, logistics, taxes…
Where should you start?
If you don’t have a birds-eye-view of the process from start to finish, you could miss an important step and create problems which may arise in the future.
That’s why we’ve put together this guide. In it, we explore ten essential steps to starting an import/export business.
But first, let’s set the scene.
What is an import/export business?
Import/export businesses facilitate the trade of goods internationally. Owners of importing/exporting businesses sit between suppliers and buyers – helping suppliers to sell goods in foreign countries, and assisting buyers to obtain goods from abroad.
Import/export businesses typically trade two types of product: goods that are unavailable in a certain country (for example, importing Russian caviar into the UK) or goods that are cheaper when imported than when manufactured at home (such as Chinese electronics).
So, how can you start an import/export business?
How to start importing and exporting in 9 Simple steps
1. Identify product/market fit
First things first: Before you can start an import business, you need to find a product that satisfies a market demand. This is called product/market fit – and finding one will lay the foundations for a successful enterprise.
As the billionaire founder of Intuit, Scott David Cook, said, “In my view, product/market fit is the most important thing to get right as a startup entrepreneur. There’s a variety of ways to do it, but without solving some pain point that the customer gets so excited about they tell their friends, it’s really hard in the modern age to get any liftoff.”
So, how can you find a promising product/market fit?
In essence, look for a problem to solve and make sure that the market is currently underserved – this is the foundation of all successful businesses. Here are a few question to ask yourself to help clarify your business strategy:
- Problem: All businesses solve a problem of some kind – what pain point will you address with your import/export business?
- Solution: This is what you import/export and then sell – how can you create value by solving a problem?
- Demand: Have other companies already saturated the market, or is there room for your solution? If the market’s saturated, do you have such an innovative product idea that you could use it to steal market share?
When you find a promising product/market fit, validate it with market research and testing before you start importing/exporting.
2. Research the market
When creating the business strategy for your import/export business, you need a clearly defined target market that you understand well.
The famous marketing consultant Philip Kotler explains: “There is only one winning strategy. It is to carefully define the target market and direct a superior offering to that target market.”
You also need to understand the competition so you can strategise where to position your company in the marketplace and how to differentiate your product and brand.
So, once you’ve found your product/market fit, dig deeper into the details:
- What are your target market’s demographics and psychographics?
- What problem do they have, and why do they care about solving it?
- Why does your product appeal to them?
- Who are your key competitors and why?
- How is your product superior to your competitors’ products?
- Where will you position your brand in the marketplace?
Gather the information you need to create a superior offering that will resonate with your target market.
3. Set up a company and get a licence
Once you have a solid strategy in place, it’s time to break ground and set up a company.
There are countless ways to do this, many of which involve an enormous amount of bureaucracy, paperwork, and waiting periods.
But if you’re looking to hit the ground running, consider incorporating with Neat.
We’ve eradicated many of the obstacles you’d face when dealing with traditional financial institutions by providing a simple, all-in-one, fully online incorporation package.
Instead of dealing with frustrating bureaucracy, you only have to fill in one online form. Then, Neat will create and submit all the necessary documents, and handle the fees on your behalf. Finally, Neat will email you digital copies of your documents.
Plus, the whole process is fast – you can apply online in just 15 minutes. Within a week, you will have a limited company and a Neat account.
Depending on which countries you plan to do business in, you may need a licence. Check the requirements and obtain the necessary documents.
4. Find a supplier
Once you’ve created a company and have defined your product/market fit, it’s time to source your products.
There are many different ways to source products to import/export, but using an online marketplace is one of the easiest methods when starting out. Here are some of the most popular B2B marketplaces in the world:
You may wish to consider sourcing products from a country that has free trade agreements with your import country so you won’t need to pay tariffs and duties.
Unfortunately, not every supplier is trustworthy or legitimate, so do your due diligence when sourcing products to import/export.
Ask many questions and investigate thoroughly before submitting an order. For example, you could verify the supplier’s legitimacy by confirming their address, reviewing their business documentation, and asking for references.
What’s more, before importing and exporting products, it’s always good practice to order samples to ensure the products meet your expectations, specifications and quality standards.
Finally, consider labelling.
Each country has specific labelling requirements you must meet. For example, when labelling food products for sale in the UK you must list all ingredients and highlight allergens in bold.
Double-check what labelling requirements you must adhere to and make sure that your supplier is also aware of them.
For more help on finding a supplier, check out our full guide on how to find suppliers in China.
5. Calculate your total landed cost
Now it’s time to break out your calculator and do some maths.
If you want to start an import business, you must understand your total landed cost.
The term “total landed cost” refers to the sum of all the costs associated with a product, from the moment you conceive the idea until it’s in the customer’s hands. These costs include things like:
- Customs duty and taxes
- Customs broker fees
- Shipping/freight charges
- Insurance fees
- Local transportation costs
- Storage charges
- Inspection fees
- Payment processing fees
- Currency conversion fees
It’s worth noting that the total landed cost is also often referred to as landed cost, landed price, net landed cost, and total delivered cost.
It’s essential to know the total landed cost before you start importing/exporting, as it allows you to plan your pricing and ensure that you’ll make a profit.
So, how do you calculate your total landed cost?
Well, one of the easiest ways is to use an online calculator, such as the Simply Duty Import Calculator. All you need to do is input the relevant information to receive a detailed breakdown of duties, value-added tax (VAT), and the total landed cost.
6. Price the product
Once you work out your total landed cost, you need to determine a pricing strategy that enables you to make a healthy profit – this isn’t an easy task.
“It’s probably the toughest thing there is to do,” says Charles Toftoy, associate professor of management science at George Washington University. “It’s part art and part science.”
So, spend some time evaluating different pricing strategies. There are plenty of pricing models for you to choose from, such as:
- Cost-based pricing: Add a percentage markup to your total landed cost, based on common industry practices.
- Market-orientated pricing: Evaluate how your product matches up to competitors, then set the price higher or lower accordingly. (Also known as competition-based pricing.)
- Dynamic pricing: Change your price often to take advantage of market fluctuations and your target market’s buying habits. (Also known as demand pricing or time-based pricing.)
To make things easier, you may want to stick to the pricing strategy that’s used most often in your industry. However, if you do this, you could miss out on additional profits.
So, consider pricing strategically to give your import/export business the best chance of success.
7. Create a brand
Next, you need to establish your brand and prepare sales materials.
When branding your import/export business, think about what will resonate most with your target market. For example, if your target market would resonate most with a minimal and powerful brand, consider a black and white theme with sans-serif fonts.
If you’re trying to keep costs low, consider using an online logo maker to create something quickly, such as:
8. Start marketing
Now comes the tough part: Finding buyers.
This stage will be much easier if you’ve already found a great product/market fit, understand your target market thoroughly, and have a superior offering.
There are countless ways to find customers for your import/export business. Here’s a quick rundown of some popular import/export marketing and sales methods:
- Direct outreach: Scour the internet and social media platforms to find potential buyers, then strike up a conversation that provides value to them. Once you’ve established contact, let them know about your import/export service and product offerings. You can use a tool like LinkedIn Sales Navigator to help.
- Paid advertising: Run paid internet advertising campaigns on Google Ads or LinkedIn Ads.
- SEO: Optimise your website to appear higher in the search engine results pages (SERPs). You can do this by creating useful content which is based on keywords that your target market searches on Google.
- Chambers of Commerce and export councils: Join relevant Chambers of Commerce and register with export councils to find business opportunities. (Here’s a link to the UK’s Chambers of Commerce.)
- Trade shows: Although COVID-19 has prevented many trade shows from running in 2020, it’s likely that new safety policies will allow trade shows to reopen. So, keep an eye on trade shows in your industry.
9. Transport your products and manage logistics
Once everything’s in place and you’ve solidified the terms of sale with a buyer, it’s time to get things moving – literally.
When the time comes to start importing and exporting your goods, you need to take into account factors like:
- Licences and permits
- Quotas and tariffs
- Regulations and restrictions
As a result, it’s often easier to hire a global freight forwarder when starting out. Although this route may eat into your margins, it’s a lot easier than managing everything yourself when you’re starting out.
Your global freight forwarder will move your goods from the factory to your buyer, taking care of all the necessary work in between.
Summary: Start Importing and Exporting
If you want to start exporting and importing, here’s a 9-step guide to help you get started:
- Identify a promising product/market fit
- Research your target market thoroughly
- Set up a company with Neat and obtain necessary licenses
- Find suppliers on a B2B marketplace like Alibaba
- Calculate your total landed cost
- Research pricing strategies and price your goods
- Create and establish a brand online
- Start marketing and find your first customer
- Arrange transportation and deliver the products
There’s a lot to take into account when importing and exporting. So, take it one step at a time and do your due diligence throughout the process.