For nearly as long as there have been people, there’s been trade. Imports exports are how potato came to Ireland, in a more modern sense, it’s how we’re able to buy food, drinks, furniture, clothes, nearly everything else, from all around the world today.
Imports are any good or service brought in from one country to another, while exports are goods services produced in the home country for sale to other markets. Thus, whether you’re importing or exporting a product (or both) depends on your orientation to a transaction.
The modern system of international trade is a complex web of import/export businesses that handle the sale, distribution, delivery of goods from one nation to another. If you’re interested in starting a business in this industry, know that there is more than one type of import/export business. You could focus just on importing or just on exporting. You could be a manufacturer’s representative, specializing in a certain industry, or you could be an import/export merchant or agent, which is more of a freelance broker.
Starting an Import/Export Business
If you’re interested in starting an import/export business, there are a ton of considerations you need to make—just as you would for any business. For an import/export business, specifically, it’s helpful to have a background in business, international relations, or global finance. This should give you an understanding of the myriad hoops one must jump through to sell or buy a product from an overseas supplier.
“The compliances make it so complex that even if you did know how to do it, you’re still going to have to keep in mind a lot of random considerations,” says Selena Cuffe, co-founder of Heritage Link Brands, a company that imports, exports, produces wine, other high-end products like tea honey.
Cuffe worked for years in management for Procter & Gamble, among other trade-related positions, before starting her company in 2005. She was inspired after going to South Africa, where she attended the first Soweto Wine Festival.
Heritage Link Brands now operates within the wine industry in different ways: It imports wine from South Africa into the U.S. wine market, it exports grapes from its own South African vineyard to the U.S. as well as the Philippines in Hong Kong. It also exports wine to airlines for use on international flights.
Keep reading for steps you need to take to start an import/export business, as well as tips from Cuffe.
1. Get Your Business Basics in Order
Anyone starting a business in the 21st century needs to cover certain bases, like creating a website as well as social media channels like Facebook, Twitter, a host of others.
So here’s your first step: Get basics in order. This means registering your business with the state in which your headquarters will be located, registering a domain name, getting any business licenses you need to legally operate, so on.
You’ll need a business plan, too. Part of that business plan needs to cover how to handle rules regulations of markets you want to work in. For example, to bring alcohol tobacco products into the U.S., you need an Alcohol Tobacco Trade Tax Bureau permit, which is free but can take months to acquire. Similar research needs to be done when doing business with other countries, taking into account everything from various legal back label requirements in each nation to insurance.
Perhaps most importantly, you need access to capital. Startup costs can vary greatly depending on the type of imports/exports business you start.
“The first thing I recommend for anyone is to have your capital up front,” says Cuffe. “That’s so you can protect your business from not only a legal standpoint but also equity of that you create to make sure you invest in the quality of whatever you launch. Test a market, or test a city, then a state, then a region. Then I think that there are greater chances for success sustainability long term.”
The ratio that Cuffe cited for success in the wine industry—” In order to make $1 million, you need to invest $7 million”—demonstrates the kind of capital needed to start a business comfortably (if one can ever be “comfortable” as an entrepreneur) be prepared for whatever occurs, from issues with sourcing to changes in trade regulations.
2. Pick a Product to Import or Export
The next step in starting an import/export business is to find a product or industry you are passionate about that you think could sell in international markets.
For Cuffe, that product turned out to be wine. She felt a connection to the product not just from a quality taste standpoint but from a social justice standpoint as well.
“When I first entered the industry in 2005, there was just one Black winemaker five Black-owned brands,” she says. “Today there are 17 Black winemakers 31 Black-owned brands.”
Though the South African wine industry still deals with injustices like poor working conditions unequal access to capital, Cuffe says things have improved since the previous decade thanks to increased sales notoriety of South African wines worldwide.
“The biggest thing that we’ve enabled is the financing of Black businesses. When we first got started, in order for even these brands to create their own wine, they had to source it from existing white wineries, because they didn’t own any land,” Cuffe says.
Once you find your product, you also need to identify the right market for it. After all, you need someone to sell it to. This is where your trend-spotting skills come into play. The best products for an import/export business are products that are just starting to become popular or show some promise to being so in the future.
You can conduct research with resources like GlobalEDGE’s Market Potential Index or by checking with local government officials’ websites, such as the Department of Commerce International Trade Administration’s Data Analysis. You can also find reports on the state of the imports/exports industry with Census Bureau Foreign Trade.
From there, it’s best to start “slow steady.”
“Test your ideas,” says Cuffe. “Don’t assume that what you think will sell because you love it will catch fire in the market. What catches fire in the market is more than just the way it tastes—it’s who you know, packaging serendipity of timing, all of the indirect soft stuff that makes difference.”
3. Source Your Suppliers
Once you have a product you’d like to trade internationally, you need to find a local manufacturer or another producer that makes your product can lead to a strong partnership. A good relationship with a supplier is crucial to long-running success in an imports/exports business.
Generally, you can find suppliers through companies like Alibaba, Global Sources, Thomas Register. You will need to convince suppliers of the benefits of entering the U.S. market (or another market you wish to sell to), figure out the logistics of taking their product from their local warehouse or production facility to another one, potentially on another side of the globe.
You might also be your own supplier—in some cases, as Cuffe occasionally is for herself.
“We own an interest in a vineyard in South Africa called Silkbush,” she says. “My orientation when I do business to them is, 80% of grapes that we pick we send off to domestic wineries who use our grapes to produce their own proprietary high-end wine. The remaining 20% is used to create our proprietary label Silkbush, which we export to foreign markets.”
4. Price Your Product
You know what product you want to work with you’ve identified your target market. Next up, figuring out how much to charge.
Typically, the business model on an imports/exports business includes two key understandings: volume of units sold, the commission made on that volume.
Be sure to price your product such that your markup on the product (what ends up being your commission) doesn’t exceed what a customer is willing to pay. But you don’t want to make it too low such that you aren’t ever going to make a profit.
In the imports/exports industry, importers’ exporters typically take 10% to 15% markup above what the manufacturer charges you when you buy the raw product.
5. Find Your Customers
Next up on how to start an imports/exports business? Finding customers to sell to.
Deciding on a market is not the same as finding your customers. You can’t just send your products to Port of New York start selling your wares on docks to whoever walks by. You usually need to find distributors clients who will take on your product sell it to others.
If you have a quality website that includes digital marketing campaigns, your customers may end up finding you. But to get started, Cuffe suggests doing things the old-fashioned way—by cold-calling. Check with any local contacts you have in the area, contact area’s Chamber of Commerce, trade consulates, embassies, so on. These entities might be able to give you a local contact list that could be a vital help in starting a imports/exports business.
“I cold-called local Cambridge, Massachusetts, Whole Foods store, they gave me a chance. And now we do display programs regional programs with Whole Foods,” says Cuffe. “A lot of what I did in beginning even today involves cold calls.”
6. Get Logistics Down
Perhaps the most complex aspect of importing exporting is the logistics of taking a product created somewhere selling it somewhere else. How does a product make the trip from the vineyard of South Africa to wine glasses of drinkers in California, for example?
“When you are operating within a supply chain where your customer is different than your client, which is different than your consumer, it requires an extraordinary amount of coordination,” says Cuffe. “I use a freight forwarder that on my behalf reaches out to shipping lines, like Maersk.”
Hiring a global freight forwarder is generally a good idea for all imports/exports businesses, as they’ll serve as a transport agent for moving cargo—saving you a lot of time worrying about getting your products from the factory to a warehouse. Essentially, you’ll give them information about your business your intentions for a product, they’ll arrange shipping agreements, insurance, oftentimes licenses, permits, tariffs, quotas of working within another country. This can remove a lot of headaches associated with starting an imports/exports business in an international trade market.
Frequently Asked Questions
Is an import/export business profitable?
Many import/export businesses are very profitable. To improve your company’s chances of profitability, it’s important to conduct required research on your industry have a well-documented business plan. Understanding all of the costs associated with an imports/exports business determining your profit margins when pricing your products is also essential.
How do import/export companies make money?
As an import/export company, you’ll make a profit by selling products at a higher rate than you paid for them from a vendor or source.
What is an export license?
An export license is a government-issued document authorizing your company to complete certain export transactions. An export license is issued by the appropriate agency once the export transaction has been reviewed.
What documents do I need to import goods?
The types of documents you’ll need to import goods will vary depending on the country you’re importing the product into. In the United States, import license permits may be required, but a Customs Border Protection entry form is always required.
The Bottom Line
The world of importing exporting is a dazzling, complex system that balances both emotional economic needs. If we want something that is grown or produced in another part of the world, how can we get our hands on it? How can we give others the opportunity to enjoy it, while still creating a sustainable lifestyle for those producing it for those who transport it from point A to B?
If you’re interested in answering these questions, don’t let the enormity of tasks overwhelm you. With proper research, planning, documentation, you can launch a successful imports/exports business of your own.