You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your import & export business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an import & export business?
Fortunately, carving out your niche in the global marketplace requires very little start-up capital. The business can be run from a home office. Successful entrepreneurs report starting out with zero capital, while others indicate they incurred costs as low as $5,000 to $25,000. Your basic necessities are: telephone, Internet, a logo, and a website.
If your strategy is to start out as a distributor, you will need to include additional monies in your budget to cover inventory costs.
What are the ongoing expenses for an import & export business?
In addition to low start-up costs, most business owners in the global marketplace experience little to no overhead costs. You will face the standard costs that come with running any business, such as Internet, phone, and website maintenance costs. You will also need to budget for logistics costs, such as transportation of goods. These costs vary, depending upon the item specifics, where it is going, and where it is being transported from.
Who is the target market?
Your target market will vary, depending upon the product being delivered. As a result, market research should be an integral part of your daily routine. Diligence and preparation will ensure you properly identify potential customers, what geographic areas will play a part in your business, and what products offer the highest profit potential.
How does an import & export business make money?
An import & export business receives a commission for each import and export they facilitate.
How much can you charge customers?
Your prices will vary from product to product. There are two factors that will play a part in what you decide to charge: volume and profit on that volume. The goal is to find the sweet spot - mark the product up where you are satisfied with your profit, without exceeding the price consumers are willing to pay for said product. Most importers/exporters have found that sweet spot at 10-15% over their cost.
How much profit can an import & export business make?
The average profit for an individual managing this type of business is $75,000, with many earning upwards of $200,000. There are a number of entrepreneurs who have built multimillion-dollar businesses, employing a staff of 5-10 people.
How can you make your business more profitable?
In this industry, the more involved you are, the more profits you will earn. Some entrepreneurs focus solely on importing, while others focus on exporting. To take full advantage of these opportunities, conduct thorough research and position yourself in the niches that need the most attention.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your import & export business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
The following link contains information regarding federal certification for importing and exporting. It is important to review this information to avoid any legal trouble.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an import & export business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market an import & export business
When building your website, be sure to hire a developer that understands the industry and can set up a SEO-driven site. Your site, combined with an informative blog and social media presence, should help drive customers to your business. As you continue to build sound business relationships in the industry, word of mouth will prove to be a significant resource for new clients.
Additionally, check with Chambers of Commerce, trade consulates, embassies, and the U.S. Commercial Service (CS) Gold Key Matching Service. These organizations can help match you with potential overseas customers, distributors, transporters, and business collaborators.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
As previously mentioned, your business’ success is reliant on the relationships you build and foster. Once a sale is final, follow up with the client. Strong global customer service is critical and will ensure clients keep coming back, even if their experience was less than stellar.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Import & Export Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
The individual who is seeking a unique opportunity that requires very little start-up capital, low overhead costs, and has significant room for expansion should consider this business endeavor. The entrepreneur who feels passionately about a particular product that is currently not being imported/exported, or is just now getting recognized, will be that much more likely to succeed.
What happens during a typical day at an import & export business?
While some entrepreneurs are happy with just importing/exporting one product, many choose to move on and work with several trades. This is a great way to expand your business and reputation. It does, however, take hard work and understanding your market. Market research will be an integral part of your day, as your business’ success relies on your ability to identify the best products, as well as the best potential foreign market for each product or service. The U.S. Census Bureau Foreign Trade and the Department of Commerce International Trade Administration’s Data and Analysis are both great resources for this research.
Your research doesn’t stop there, however. Once you’ve identified your goods and/or services, you will need to learn everything there is to know about that product. Which manufacturer makes the best? Are there improvements that could be made? Who will your supplier be?
The most important component to your business is the contacts you make and the relationships you are able to foster. Your research should help you in identifying upcoming trends. Once you’ve determined that, it’s time to get to work making the connections that will help you deliver those products to countries in need. There are a number of resources to assist you in making those connections. Commercial attachments for foreign consulates are often a great place to start, as their primary purpose is to establish outlets in the United States. The U.S. embassies in foreign countries are also a great resource, as are the Chambers of Commerce for your target cities.
A typical day in the life of an importer/exporter includes the following:
- Reviewing agent fulfillment, initiating any necessary changes.
- Reviewing all email inquiries, answering any questions that may come up.
- Reading news sources to determine if any changes and/or movement has occurred in your industry. Making decisions based on this movement.
- Analyzing movement and issues to determine your strategy moving forward. Devising a plan for new business opportunities.
- Attending networking events. This will often include travel and/or phone conversations with partners overseas.
While there are a number of items you will need to address each day, part of the appeal to many in this industry is that no two days are alike.
What are some skills and experiences that will help you build a successful import & export business?
Managing a successful import/export business requires attention to detail and strong interpersonal skills. The bulk of your day will be spent selling, marketing, and building business relationships, so it’s important that you fully understand the market. Your ability to root out and build relationships based on market needs is what will set your business apart from the rest. The Institute of International Commerce offers a training course that will help you understand the intricacies of trading in the global marketplace.
What is the growth potential for an import & export business?
According to the U.S. Department of Commerce, the global trade industry offers significant opportunity, both now and moving forward. $1.2 trillion in goods are imported annually, while $772 billion in goods are exported from the United States each year. 95% of this trade is represented by the small importer/exporter, leaving a significant amount of room for those interested in entering the industry.
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting an import & export business?
Successful import & export business owners caution against trying to take on too much at first. Identify a product or two that is in high demand and start there. This will give you a feel for the market, best practices, and help you determine the most effective methods for ensuring maximum profit margins. Large email campaigns will be a significant part of your business strategy. Do not send these emails as mass emails. Those using this strategy are often identified as spammers and are blacklisted from the market entirely.
How and when to build a team
Most import/export business owners are able to manage everything themselves, eliminating the need for employees. It is recommended, however, that you consult with an attorney or financial advisor to ensure all business is conducted by the books, yielding as much profit as possible. If marketing is not your strong suit, it is also recommended that you consider hiring a marketing team that is well-versed in the import/export industry. Most importantly, entrepreneurs realizing the most significant success consider each business connection an extension of their team, treating them as such.