Exporting is Easy


Exporting is Easy 

Contrary to popular belief, exporting is quite simple. Admittedly there are a few differences, and a few extra steps but for the most part it is a simple process.

Let’s look at a bullet point process for a domestic or local sales (transaction) process:

  • You find a potential customer
  • You negotiate terms
  • Agree on terms
  • Effect the sale (exchange goods and payment)

Yes, we know more goes into it than this but, these are the basic points.

Depending on your commodity (the word commodity is use very frequently in the global marketplace – commodity = product or item), you may find that there are few differences to the above flow.

Let’s make some assumptions…

We will assume that you are familiar with your product (after all, it is your product).  You have a good grasp on who your customers are, what their needs are, and who your target customer is. We will also need to assume that you have basic business knowledge of your industry. You are familiar with your competitors, their products and their target customers and how your products differ from the competition.

When you are shipping internationally, you are basically following the same steps (Global mindset difference in blue).

  • You find a potential customer – Only in another country and the communication can be via Skype (or the like), email, chat, BBM, etc.
  • You negotiate terms – Need to consider the cost associated with shipping your product internationally.  Review any possible regulation(s) (if applicable).
  • Agree on terms – Confirm with your buyer any requirements that they might have in their country for importing the product and identify your Incoterms®.
  • Effect the sale – Exchange of goods and payment – (credit card, bank transfer, cash against documents, terms, etc.).

So now, you have an international opportunity!  Congratulation!  You are ready to take your company global! Your customer base just became borderless and your business opportunities almost limitless.

This is exactly the point where most individuals and companies’ fear and doubt start to set in.  Both direct and indirect concerns immediately begin to arise.

Don’t let irrational fear keep you from growing.

Let’s assume you are selling widgets. You are the widget guru!

A local widget retailer in Canada (let’s call him John) saw your website and is interested in buying the new multicolored widget on your website.  John read an article on the new widgets and is interested in selling them in a store.

Although your website has a shopping cart and is capable of handling domestic orders, you had never considered shipping internationally therefore your site is not set for international customers. So John reaches out to you via the contact us page/or phone.

John would like to buy 5 boxes of widget for his store in Québec.

So let’s go through the steps:

  • You find a potential customer (we will have several articles as well as podcasts covering how to find customers in a global marketplace)

You and John log on to Skype. You begin to discuss the widgets in more detail. John would like to receive some more details on the widgets. He currently sells widgets and is familiar with them but the new multicolored widgets are new to him. As you are “Skypeing” with John, you e-mail him the web link to your site with the specs of the new multicolored widgets.

John is interested in the widgets, but in typical business negotiations, he thinks the widgets are priced a-bit high. Again, in typical business negotiation, you remind John that they are not the same price as a regular widget because they are the new multicolored widget and there is additional cost to manufacture the widgets. You also remind John that the per-widget cost is less if he buys more widgets.

This exchange, your customer interaction and communications are the same whether the business is domestic or international.

Global mindset adjustments

Time zone differences.  Please be cognizant that your buyer may be halfway around the world. Be respectful of their time as it relates to time zone differences. Perhaps the best time to communicate with your buyer is at 9 PM or at 7 AM.

Language differences. To the benefit of the US, the global business language is English. This being said, please understand that English may be your customers 2nd, 3rd or even 4th language. When communicating with foreign buyers/customers do not assume that they speak perfect English.  Keep your communication, whether in writing or verbal, simple and clear.

Local calendar. When working globally, it is important to consider your customers calendar. It is important for you to take a glance at any upcoming holidays or celebrations. This will allow you to sell more widgets (if applicable) in preparation of an oncoming holiday (examples: Christmas in the US/Chinese new year/carnival in Brazil). It will also help you in positioning your shipment schedule in order to avoid backlogs and delays due to holiday scheduling by customs in the destination country.

  • You negotiate terms

Just as you would in a local/domestic transaction, the next step is to negotiate terms.  Once you have arrived at a cost/price you will need to also discuss the transportation of the goods and how the shipments will be moved to the final destination (to your customer’s door). Many US companies will pay for domestic transportation and the delivery in many cases is built in to the cost.  This is not the case in a global business environment. The transportation cost is a negotiable point. Many new exporters prefer to sell their products without transportation.  It is the importer’s/their customer’s responsibility to pick up the shipment at the US seller’s warehouse.  Although this may be a simple solution, it may also be a limiting factor as you grow your global business.  If you are selling your widgets to a season global company, it will be simple for them to arrange transportation. But, this may be a challenge if you are targeting customers with minimal global reach.

Put yourself in your customer’s (Global) shoes… Your customer is in a small town in Québec and is not familiar with any companies that can pick up the widgets in your facility, prepare the correct paperwork, transport the widgets to Canada, clear customs in Canada, and delivered to his door.

It is also important to negotiate sales terms. Although many US companies offer net 30-day terms, this may not be the case in a global business environment. You may find that to some destination countries the terms may be more like 90-180 days. Do not let this distract you. This is simply another point of negotiation. Perhaps you may need to increase the cost of the product in order to grant the longer terms or perhaps you may wish to work with the Import-Export bank in order to ensure your receivables (the cost of this may also be added to your sales price).

Please remember that in some cases the longer terms are not due to the solvency of the importer. Some countries have strict requirements on global money transfers.

Global Mindset

When working in a global environment you must always keep in mind that you must affix a currency to your transaction. Do not assume that you were both speaking in US dollars. In the above scenario John might be speaking in Canadian dollars and you might be negotiating based on US dollars (fortunately, there isn’t much difference between the two at this time, but this is not the case with other countries/currencies).  Also consider the benefits of costing your product in a different currency. Perhaps it would be beneficial for you to quote in Euros rather than US dollars.

Developing relationships with at least 2 freight forwarders, and a common carrier (FedEx, UPS, DHL) will allow you to quickly know what the transportation cost will be to ship your widgets just about anywhere in the world. Many companies have online tools that can facilitate a quotation all the way to the customer’s door in seconds.

Be comfortable in negotiating terms including the cost of insuring your receivables (you can insure your receivables up to 95%, there are banking requirements that you must meet).

  • Agree on terms

Once you have verbally agreed on the terms, you’re now ready to put it in writing. Please make sure that you keep the communication simple and clear. This is where a pro forma invoice (we will cover this in detail on a separate blog/article/podcast) comes in handy. A pro forma invoice will look just like an invoice and it’s prepared prior to the shipment taking effect (prior to the actual sale of the product). It is an excellent tool for both you and your buyer to review what you have both agreed upon prior to shipping.

Side note

Many years ago I had a seasoned exporter who had a miscommunication with his customer. Rather than spelling out that date (the month), both companies agreed that payment would be affected via wire transfer on 04/06/2010 (this is just an example). Unfortunately, this is not clear communication. In the US we are accustomed to a mm/dd/yy format, where many countries are accustomed to a dd/mm/yy format.  The US exporter expected to receive payment on April 6. The foreign buyer/importer expected to transfer payment on June 4. Everything worked out, but it made for and uncomfortable situation.  They did continue working together.

  • Effect the sale (exchange goods and payment)

Both you and your customer have agreed on terms and payment and you are ready to ship.  By this time you are both in agreement on the shipping cost, clearance cost, who pays for duties and taxes, etc. (We will have a checklist on a separate article/podcast/blog for you to download).

You export your widgets and received payment.

Congratulations!!!

You have officially confirmed that The World is Your Customer!

Exporting is easy. Once you complete your 1st transaction, you will have no doubts that you can replicate this process worldwide.  Remember only 1% of US companies export. You are part of an elite group of companies that have broken through a mental (and business) barrier and have removed a huge limitation on your business.

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As we grow the site, we will be adding podcast, video podcasts, articles and blogs. All of the information on our site is free and for your benefit.  Please remember to e-mail us with any questions.  Our email address is: questions@usexporthq.com Please share your successes and let us know what other articles, blogs or podcast you would like for us to cover.

Thank you for being part of our export community.

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