Starting and managing an import-export business requires:

1. Careful planning with solid foundation to reach the company's goal;
2. Commitment and sacrifice to overcome obstacles;
3. Knowledge of basic management skills and including government regulations;
4. Establishing a good relationship with buyers and suppliers.

There is no question that operating an import/export business is inevitably more complicated and risky than operating business in the domestic markets. Nevertheless, experiences gained in the domestic business could help jump start an import-export operation and it can be a logical expansion of the company's domestic business activities.

If your company has done well in selling or buying products or services in the domestic markets, the same basic strategy can be used to successfully enter overseas markets. Incorporating and better understanding the following four key areas will help increase your chances for success in the import-export business.

Planning

More companies around the world are gaining international experiences and are increasingly becoming successful and profitable through import-export trade. What all these successful companies have in common is a well thought-out import-export business plan. Planning is critical for buying or selling a product and helps prepare a company for the future. A sound plan is a continuous process, and it is a road map that can help a company prepare and take steps necessary to reach its goal. It is extremely important for any size company.

Your import-export business plan should tell where, why, when and how your company will reach its goal. The key sections of your business plan should include an overview of your company, marketing components, financials and an implementation schedule. By adding a cover page, table of contents, mission statement and references you will be well in your way to having a well documented plan. Remember, your export import business plan has to be written. Having it in your head is not enough.

Knowledge

Knowledge of import-export mechanics is an important consideration. The knowledge that you might have accumulated through education, running your business or other means will certainly help you in foreign trade. While many import-export companies depend on carriers, forwarders, Custom House brokers, bankers and insurance companies to assist them in preparing necessary documents, others have a good understanding of the processes and have in-house experts who are knowledgeable in the foreign trade. Whether you do it in-house or outsource different services the following are some of the key knowledge areas that your company should have a good understanding of to help it succeed in the import-export business.

Payment mechanisms - Payment options including advance payment, open account, consignment, documentary collection and letter of credit
Commercial document - Invoices, pro forma invoices, sales contracts.
Transportation documents - Bills of lading, airway bills, certificates of inspection, carrier certificates and packing lists.
Shipping - Containers, weights, intermodals, carriers and less than container loads.
Government documents - Certificates of Origin, Consular Invoices, license requirements.
Customs requirements - Valuation, classification using the Harmonized Tariff Schedule, Schedule B (U.S. only), marking, other agency requirements, Custom House brokers.
Insurance requirements - Insured value, all risk, free of a particular average, claims.
Distribution channels - Agents, distributors, export management companies, direct and indirect channel, trading companies, wholesalers and retailers.
Pricing product - Landed costs, hidden costs, incremental, discounts and allowances, price cuts and increases.
Promotion - Types of advertising, sale promotion events, public relations, direct marketing, personal selling, media options.
Financing options - Trade finance, short/medium/long term financing, government loan guarantee program, private lenders, angel financing.
International Commercial Terms (Incoterms 2000) - Identify the responsibilities of buyer and seller.
Countertrade - Barter, counterpurchase, offset, switch trading, compensation or buybacks.

Commitment

Becoming a successful trader depends upon the commitment and determination the entire company is willing to give to the endeavor. When compared to domestic transactions, there are more chances that international transactions can go wrong. For example, goods might be held by Customs over payment discrepancies, missing documents and many other reasons. To successfully solve these challenges requires a firm commitment by management.

It is very unfortunate that many small businesses consider import-export when their business slows in the domestic markets, or when they have access production capacity to sell to cover their domestic losses. The same companies, when domestic demands for their product increases, often forget their import-export business. Such an approach has no place in today's competitive markets. As with any type of business, long-term commitment is required to remain competitive and successful in foreign trade. Abandoning your import-export business prematurely because of increased domestic results reflects a lack of commitment.

Relationship

Establishing a solid relationship with your supplier or buyer is important in domestic business and even more so in the import-export business. Cultural differences play a pivotal role in buying or selling and establishing ongoing relationships. The hard sell that may be effective in the domestic market might not produce the same outcome in foreign markets.

In domestic business, your buyer or supplier most likely speaks the same language, has similar culture and does business by the rules that are familiar to you. In the international markets, however, your buyer or supplier might be operating in a different legal, political, cultural and economic environment, including different businesses practices and languages. Simply put, you will have to work hard to understand and gain your buyer or seller's trust.

If companies are to remain competitive and profitable in foreign trade careful planning, long-term commitment, in-depth knowledge and solid relationships are key considerations to reap the rewards from a successful import-export venture.

By Tekle Sebhatu