Profitable Income Business

From earning through foreign fashion to revenue from light fixtures, international trade businesses can take you around the world and into the hearts of all kinds of products.

International trade is one of the hot industries of the new century. But it’s not really new, is it? Think about Marco Polo. Think about the great caravans of the biblical era with their cargoes of silk and spices. Think about those long-gone tribes of the Sahara, trading salt and gold.Trade exists because one group or country has goods or products that another group needs.Trade exists because one group or country has goods or products that another group needs. As the world advances technologically and we move better towards a oneworld mentality, international trade becomes more profitable in terms of profit and personal satisfaction.

What’s Inside:

Introduction

  • Target Market
  • Startup Costs
  • Income and Billing
  • Operations
  • Marketing
  • References

Earning income isn’t just for lone wolves who live by their wits and their teeth. According to the U.S. Department of Commerce, it’s a big business these days – to the tune of an annual $1.2 trillion in Asia alone. That’s right, trillion. In just one year, U.S. companies exported more than $772 billion worth of goods to more than 150 foreign countries. Everything from beverages to commodes – and a staggering list of other items you might never imagine as global merchandise – are fair game for the astute trader. And these goods are bought, sold, represented, and distributed somewhere in the world on a daily basis.

However, the income/revenue field is not the exclusive domain of social corporate titans. According to the U.S. Department of Commerce, only 4 percent of all income earners – that’s right, 96 percent – are small organizations, like yours, when you’re just starting out.

Champagne and Kiwi

Why are incomes/earnings so big in America and around the world? There are lots of reasons, but three important ones are:

Availability: Some things are simply not available to you in your country and can’t be manufactured there either. Think bananas in Alaska, for example, or mahogany lumber in Maine, or ballpoint pens in France.

Kashat (Cachet): Many items, like kiwi and champagne, command a higher kashat when packaged than when produced domestically. Reflect on the design excellence of Scandinavian furniture, the brewing mastery of German beer, the fragrance expertise of French perfume, and the textile luxury of Egyptian cotton. 

Price: Some products are cheaper to produce outside of your country. Korean toys, Taiwanese electronics, and Mexican apparel, some of which require some assembly, are often manufactured or assembled more cost-effectively in foreign factories than in your own country.

Besides cachet items, countries generally export items and services that they can produce inexpensively and import those that are produced more efficiently somewhere else. What makes one item a better deal for a country to import than another? Two factors: resources and technology. A country will export those items that can be produced using its abundant factors of production – be it land, labor, or capital – and will import items that can be produced more efficiently elsewhere. For example, Japan has few natural resources. But it has a high-tech workforce that produces efficient automobiles and consumer electronics. Therefore, Japan must import lumber and wood pulp for its daily newspapers.

Types of Income/Revenue Businesses

First, let’s take a look at the players. When you get right down to it, there are lots of variations on the income/earnings theme:

Export Management Company (EMC): An EMC handles export operations for a domestic company that wants to sell its product overseas but doesn’t know how (and possibly doesn’t want to know how). The EMC does it all – hiring dealers, invoicing customers, distributors and representatives; advertising, marketing, and promotions; overseeing marking and packaging; arranging shipping; and sometimes arranging financing or contracting out for a credit insurance policy. In some cases, EMCs may handle export operations for other companies, just as export agents would.

Export Trading Company (ETC): When an Export Management Company (EMC) has goods for sale and is using its resources to find buyers, an Export Trading Company (ETC) attacks from the other side of the commercial coin. It signals that foreign buyers want to spend their money on something and then exploit local resources for profits. ETC sometimes takes ownership of the goods and operates on a commission basis.

Income/Revenue Merchant: This is a kind of international business agent. It doesn’t have a specific client base and isn’t skilled in any particular industry or product line. Instead, it directly purchases goods from local or foreign manufacturers and then packages, ships, and resells them. This means that, indeed, unlike EMCs, it accepts all risks (along with all benefits).

Navigating the Commercial Channel: Now that you’re familiar with players, you’ll need to navigate the commercial channel, the channels through which commercial goods travel from manufacturer to consumer. A manufacturer, using a model that sells to consumers, operates in three-tier distribution channels. The model can be a trader who buys and then resells goods or an agent who works as a broker but doesn’t take ownership of the goods.

Your choice of partners will depend on how you arrange your commercial channel, but any of the following can be included:

Manufacturer’s Representative: A salesperson skilled in a particular line of products or consumer goods. Contemporary homes are furnished with items like TVs, radios, CD players, and state-of-the-art audio systems.They often provide additional assistance with products, such as warehousing and technical services.

Distributor or Wholesaler: A company that purchases your income-producing product and resells it to either retail or other agents for further distribution until it reaches the end consumer.

Agent: A conscious salesperson who presents your product to retail or retail consumers. Different from a manufacturer’s representative in that it doesn’t necessarily specialize in a group of products or goods.

Retailer: The tail end of the commercial channel, where goods reach consumers. As a side note, if the end consumer isn’t Joan Q. Public but instead an Original Equipment Manufacturer (OEM), you don’t need to worry about retailers because the OEM is the end of your line. (Think of a computer deal package buying your personal computer to deliver to your end user.)

The Right Fit: Not everyone is cut out to be an international trader. It’s not a career, for example, for those who would rather sell Girl Scout cookies than work in a gang. Nor is it a career for those who contemplate sewing patches. It’s not even a career for those who challenge organizationally. If you’re one of those who will be challenged by the idea of following up with followers to see what’s next, you should think twice about international trade.

On the other hand, if you’re an enthusiastic salesperson, a dynamo at invoices and shipping receipts, and your heaven is seeing where new ideas and new products will take you, and if, to top it off, you have a passion for mixing with people from different cultures, then this is a career for you.

It also helps if you already have income/revenue in place. Most of the traders we talked to were well acquainted with the industry before starting their businesses. Peter P., who founded a Russian trading company, already had a direct operation position with a frozen meat trading company with the college’s big affiliate in Atlanta, which immediately Position him accurately at the exact moment and place required.

Peter says, “I speak Russian and Ukrainian fluently. I’m of Ukrainian descent. I started Russian as a language when I was still a minor in college. When I graduated in ’89, I knew very little that Russia would open up for the West right away.”

The Trade Hat Parade

According to the U.S. Census Bureau, the top 10 countries America trades with (in terms of both income and earnings in dollars) are:

  • Canada
  • Mexico
  • Japan
  • China
  • Germany
  • United Kingdom
  • France
  • Republic of Korea (South Korea)
  • Taiwan
  • Singapore

Certainly, you don’t have to limit your trade deals to these countries—they offer other interesting opportunities, including the Caribbean Basin and newly minted members of the Eastern Bloc. The former Soviet Union republics. But given the novelty of being on an international scene, you should familiarize yourself with our biggest trading partners and see what they’re offering. Then take your best shot with them or another country.

Target Market

Every business requires customers for its products and services, as Vulcans put it so eloquently, for a long and prosperous life. Now that you know what it takes to run a business in terms of income/revenue, you need to plan your market, set goals, and determine who your potential clients will be, from which geographical areas you’ll draw attention, and what specific products or services you’ll offer. Present them with your proposal.

This is a crucial phase in the Mega Trader Building Project. Proper market research can help promote your trading company as a hub for real benefits, and the more research you conduct, the better prepared you’ll be before opening your doors officially, and you may even secure less funding.

Who are your customers?

Anyone in the industry, suppliers, craftsmen, workers, income earners, profit earners, or food sellers is a fair game. You can target companies dealing in heavy construction equipment or delicate jewelry, exotic goods, or pet food, telecommunications, or toys. The only prerequisite is that they want to either sell their goods or buy someone else’s.

What’s Inside?

Introduction

  • Target Market
  • Initial Expenses
  • Income and Billing
  • Operations
  • Marketing
  • References

However, this doesn’t mean your best technique is standing at the doors of manufacturers, only to shoo them away when they leave after a hard day’s work. Targeting means being part of a specific group.

If you have prior experience in a particular field, for example, you should consider seriously targeting that market first. You’ll feel more at home with the jargon and procedures, making your sales smoother and easier. As a bonus, you may already have contacts in the field that can either become your first clients or introduce you to colleagues in the area.

Dan S. targeted the technology sector – particularly software solutions for commercial use and computer cables – simply because he had been working in the field for over a decade. He’s in his element within the field, thanks to his knowledge and comfort.

Similarly, Waheeb W. started with what he knew well, ran events and neon lights, and then expanded into other heavy equipment and materials for construction projects, railroads, and telecommunications.

What’s Your Niche?

Alright. You’ve narrowed down the list of products you’ll target. Now, you want to find your place, that unique angle that sets your business apart – the place where you can really shine.

You can start by deciding whether you want to launch your company as an Export Management Company (EMC, remember?) that works directly as a manufacturer, or their exclusive distributor/manager for international sales, marketing, and screening providers, reaching out to foreign buyers and finding- and qualifying representatives, for instance.

Under your ETC hat, Lloyd D., in Florida, says, “[My company] generally operates as a manufacturer, or its special distributor/manager for international sales, marketing, and screening suppliers,” he adds, “and we will seek out and search out foreign buyers and- for sales and/ or qualified distributors/sales representatives within the foreign market.”

In Germany, Michael R. describes his company’s role like this: “[We are] a global consulting firm for SMEs (small and medium-sized enterprises) who want to utilize available global markets more successfully for their sales and profits.”

Market Research

Here, a quick overview of your market research tasks is in order. You’ll want to research each of these areas in depth:

The product or service you’ll be selling.

The ultimate consumer you’re targeting (large-scale market, heavy industry, light industry, medical or hospital use, government, business, or professional)

The countries from which you’ll import or export.

The trade channels you’ll use (direct sales, representatives, distribution, or commission representation)

Initial Expenses

One of the 22 steps to staying in business for yourself is that you need money to make money – in other words, you need startup funds. This cost ranges from under $5,000 to up to $25,000 for income/revenue-based businesses. You can start from home, which means you won’t have to worry about renting office space. You won’t need a lot of inventory, and you might not even need employees.

Your basic necessities will include a computer, printer, fax machine, and modem. If you already have these items, then you’re good to go. We’ve spoken to some entrepreneurs who started from the ground up.

 What’s Inside

Introduction

  • Target Market
  • Startup Costs
  • Income and Billing
  • Operations
  • Marketing
  • Resources

Introduction to Income and Expenses in Business

There are many nifty things about income and expenses in the world of commerce, and one of them is that its initial costs are relatively low. You benefit from a home-based ability that reduces office expenses. Until you start as a distributor, you can save on inventory purchases, meaning there’s no estimate of funds for beautiful displays (you don’t have any display space!). Your major financial outlay will go towards office equipment and market research – and if you’re like many newcomers, you already have the most expensive part of office equipment: a computer.

But let’s take it from the top. From heavy capital investments to flying by the seat of your pants, here’s what’s needed:

Modem and computer system along with a printer.

Fax machine.

Internet/email service.

Software.

Market research and/or business leads.

Phone.

Voice mail or answering machine.

Stationery and office supplies.

Mail.

Travel expenses for conducting market research on international turf.

You can include various items in this list as needed. For example, a copier is handy. Having office furniture is also good: a comfortable chair with lumbar support that swivels and tilts, a lockable file cabinet that really locks, and quality oak bookshelves.

But let’s focus on starting from scratch. You can set up your computer on your kitchen table or in a corner of your bedroom. You can stash files in closets. This isn’t glamorous, but it’ll do until you advance your business further.

Income and Billing

As an international trader, what can you expect to make? The figure is entirely up to you; it depends not only on how serious you are but also on how far you’re willing to expand. Annual gross income for the industry ranges from $30,000 to well beyond $200,000, with an average of around $75,000. Some traders work from home, supplementing their income with 9-to-5 earnings from their trade skills. Others have started thriving full-time businesses that demand constant attention and feeding. They manage multimillion-dollar contracts for Viacom, a famous exporter with a staff of five.

“Income opportunities in trade are myriad,” says Viacom. “We’re about 10 years behind in earning as American industry makers.”

So your capacity for advancement is completely up to you – as long as you’re willing to put in the time.

Determining Your Own Prices

 What’s inside

  •  Introduction
  • Getting Started
  • Target Market
  • Initial Expenses
  • Income and Billing
  • Operations
  • Marketing
  • References

As an international trader, you’re a middleman in buying and selling, or income and billing. So, you have to determine not only the price of your products but also the price of your services. Both figures are separate but interactive. Because you’re in the business channel, you have to include the price of your services in the price of the product, and this can affect competition in the market.

Since your service fees can affect the success of the product, you can decide to change the structure of your prices. You don’t want to charge your clients too little, so you can’t cover your expenses and make a profit, but you also don’t want to charge your company and the products you represent too much so that you don’t want to charge and minimize competition.

The Commish

Import/export management companies generally work on almost a 10% commission basis. These fees are usually based on the price of the product received by the manufacturer.

Let’s say you’re working with English chairs, each of which costs you $110. Here’s what you do: First, they take the price the factory owner is receiving for the product: $110. Now, multiply $110 by 10 percent, which gives you a commission of $11.

 So at this point, your product’s price is $121 per chair ($110 + $11). To come up with the final price, you’ll need to add other expenses to these numbers: any special marketing or packaging, shipping, insurance, and any commission that your representative or distributor will charge you, which we’ll come to in a bit.

Once you reach the final price, you’ll compare it against your competitors’ prices (you’ve done your market research, right?). If your price is competitive, you can move forward.

Cutting the Cord for Maintaining Profitability

If the manufacturer cannot afford to reduce its price or if you anticipate that the product will be a tough sell, you may want to consider becoming a rate retainer (not a dental type, but a financial one). You will provide the manufacturer with all the expenses of market research. By taking on a retainer, you ensure a fixed income instead of relying on commissions from a ‘problem’ product.

Profitable Income Business
Profitable Income Business

To determine what your retainer should be, you will need to consider three variables related to the performance of your services.

 Labor and Materials: This, apart from the estimated wage per hour usually based on your salary, includes wages and benefits that contribute to any employee’s performance in employment. To determine labor costs, estimate the time spent on a task and multiply it by your hourly wage or the rate of any employees that you can use. You can count materials as a percentage of labor, but unless you have records in the form of a guide, you should use it between 2 to 6 percent.

Overhead: This variable includes all indirect expenses necessary to run your business. To determine your overhead rate, include all your expenses for a year, except labor and materials. To determine your overhead rate, divide this figure by your total labor and materials cost. Or use a rate between 35 percent and 42 percent of your labor and materials.

Benefits: After deducting all labor, material, and overhead costs, benefits can be calculated by applying a percentage of benefits to the common expenses of labor, materials, and overhead.

Operations: What you do during your peak hours and beyond will depend on how you’ve organized your services. Some traders work only as sales representatives, seeking buyers and taking commissions, but avoiding the shipping, documentation, and financial aspects of the deal. Others handle the entire line of services, from buying directly from the manufacturer to marketing, taking on all responsibilities from shipping to marketing. Traders often specialize in income or earnings and are rooted in the industry of the commercial goods they know best.

What’s Inside:

Introduction

  • Target Market
  • Initial Expenses
  • Income and Billing
  • Operations
  • Marketing
  • References

Whether you aim for international or domestic earnings, your most basic job is to acquire commercial goods, sell them, arrange for their transport, and make payments for them.

The Path of Export:

Alright, an importer – you’ve found a buyer for your goods. You’re a player. You’re ready to roll. So, what do you do next? Work on the path of import:

Prepare pro forma invoices – give the importer a quotation for your goods; negotiate if necessary.

Procure a letter of credit via your banking institution.

Fulfill the terms of the credit: Arrange for the commercial goods if necessary, handle shipping and insurance arrangements, pack the goods, and arrange for their transport.

Collect shipping documents.

Submit shipping documents to your bank.

Deal with commercial goods through customs.

Collect your goods.

A Day in the Life:

What does a trader’s day really look like? Check printouts of the numbers that were printed overnight, see if every representative/agent has completed their projects, and initiate changes if necessary.

Spend one to two hours on the internet to see what queries or interesting leads have come in, then personally respond or send to interested past or present clients.

Have brief meetings with partners to check if assistance is needed, then either help them or troubleshoot any issues.

Look at the day’s newspapers to see if there are any movements in my industry where I need to work quickly.

Take a Break:

Take a moment to relax.

Check your emails and handle any tasks or forward them.

After lunch, allocate some time to reflect on what happened and what needs to happen.

Exchange ideas on issues and potential opportunities with colleagues and/or business partners.

Review emails and the web for news and new opportunities.

At the end of the day, take about an hour to chat again with colleagues about how the day went and any challenges faced.

Once or twice a week, participate in business events or meet with partners for discussions.

On the Road:

A trader is never behind his desk at home. What does he do when he hits the road? Here’s a peek behind the curtains, thanks to John H., a tire trader from Belgium: 

Remember that John’s Day, in European fashion, is prepared from a 24-hour clock, or what we military folks call “Zulu time.”

 A Day in Belgium:

07.00 – 09.00 Office work, emails, fax offers, mail, etc.

09.00 – 12.00 Drive to airfields, meet Finnish customers; back to the warehouse, and select customer products.

12.00 – 13.00 Lunch with the customer, casual conversation.

13.00 – 18.00 Meeting with a Nigerian customer; lengthy negotiations, disputes over prices, payment terms, etc.; overseeing the loading of United Nations containers; phone calls, faxes, emails; arrival of a French customer, discussions.

18.00 Change and a quick trip back home for a shower.

19.00 – ?? Pick up a French customer at the hotel, have a cocktail and dinner, and more negotiations. 

A Day on the German Road:

05.00 Leave home for a 400-kilometer drive.

08.00 Arrive at the first supplier; discussions and procurement of goods.

10.00 Leave for the next supplier.

11.00 Next supplier; discussions with no definite outcome.

12.00 Meeting with a customer; make a sale.

13.30 Meet with another supplier; for further discussions.

15.00 Leave for another 300-kilometer drive.

18.00 Arrive at the hotel; check emails on the laptop and make phone calls.

19.30 Relax and swim in the hotel pool.

20.30 Dinner with the supplier, then to bed!

Marketing:

As an international trader, your mission is to sell – in two different but overlapping fields: a) selling yourself and your company to clients as an income/earnings manager for their products, and b) selling your products to agents and distributors. Success in one field will play a significant role in your success in the other. Once you establish a track record of compatible sales with a client’s products, you have a track record that can be shown to other clients. And, certainly, every success will boost your confidence, which, in turn, will give you the confidence to negotiate your spoken and written word with new possibilities.

Income Streams:

A small percentage of home producers, amazingly, earn an income from their stuff. So your marketing objective is to convince the remaining folks that they might increase their income by exporting to specific target countries. You can do this directly through mail and cold calls. If you’re starting with earnings, don’t neglect this section – you’ll essentially work the same way.

What’s Inside:

Introduction

  • Target Market
  • Initial Expenses
  • Income and Billing
  • Operations
  • Marketing
  • References

Before you initiate contact with any industry players, you’ll need to do some basic market research:

 Who is hot selling in the domestic market? Focus your attention on products you know well or use, or those that have strong market leaders.

Are these products hot sellers in your target markets?

If not, are there conditions or markets that would make these products hot if they were available?

Cold Calling – Reaching Out to All Clients

Cold calling, also known as nameless calling, is when you approach a potential client without prior contact through direct mail approaches. The good news is that if you are making local calls, it is generally less expensive than direct mail. The bad news is that it requires a lot of persistence to be effective. Another good news, however, is that when done correctly, a cold call can be more effective than direct mail.

Before making your first call, make sure you know what you want to say and how you want to say it. Some experts recommend writing a script to follow during your call. This is a good starting exercise in planning your pitch, but be aware that scripts have their limitations. The person you’re calling doesn’t know that they’re following a script, and when they deviate from it, so do you.

Search for Opportunities

How do you go about finding potential clients near your state? You have several options:

Explore import search engines for international travel.

Wait for foreign manufacturers to contact you.

Participate in trade shows.

Contact trade development offices at foreign embassies.

Get in touch with the U.S. Department of Commerce’s International Trade Association.

Track leads in online and trade publications.

Sell Yourself

You’ve identified foreign manufacturers or suppliers with products that have potential for sale in the United States. Now you need to convince them to enter the U.S. market and convince them that you are the person to do it. How do you do it? Essentially, you’ll be attaching a cover letter to your mail campaign, just as if you were applying for a job. Only in this case, do you want to give your message with more thought as to how you’ll present yourself. While many traders rely on international mail, until you are sending to extremely developed infrastructure areas or countries, such as Canada or Western Europe, you’ll be more confident that your message arrives if you send it by fax.

In your letter, sketch out various opportunities available for your product in the United States and highlight how you’ll handle all logistics for the manufacturer at minimal cost. This cover letter is much like a job application:

You should contact the recipient. For example, use “Monsieur” instead of “Mr.” if the recipient is French. Even if your letter is in English, this small touch shows that you’re familiar with the French language and that you’ve taken care to address the recipient in their own language.

Make sure that you’ve eliminated any language that might be confusing to non-local people.

International Calls

Follow up with another fax in a few days. Think of it as a strong but gentle move that strengthens your position and demonstrates real interest in your position. Remember that your job is to convince the potential client that your company is the best for the job, so you’ll need to provide them with the reasons. If you can’t claim experience in importing and marketing to the United States (or wherever), then look elsewhere. Perhaps you’re not experienced yet. Fine! That’s where you’ll sell.

Marketing Plan

Whether you’re planning to export or import, prepare to present your potential client with a marketing plan. If the factory owner is near your area, you’ll naturally present it in person. If they’re foreign-based, you might still need to make a personal visit to seal the deal. If you have some sense of the product’s U.S. marketability, then the trip may be worth the time and expense.

To prepare your marketing plan, you’ll need the information that you should have requested earlier: pricing, product brochures or literature, and samples. If your access to those materials is limited, you’ll need to let them know that you’ll need more information to finalize the marketing plan and prepare a presentation for it.

Once you have the materials in your office, sit down and estimate all your potential expenses so you can arrive at your sales price. Then, if you’ve already established distributors or representatives, check whether they can sell at that price in their markets. If you don’t have a distributor yet, you’ll need to find one and determine whether they can work at the price.

 Now, let’s draft your marketing plan, incorporating the following elements:

Target Market: Define the countries where you or your representatives will be selling. Explain why these markets are viable. Include positive findings from market research and present them in a clear, comprehensive, and digestible format. This is where your desktop publishing program will shine – you can create charts, graphs, and tables along with facts, figures, and text.

Sales: Clarify at what price you will sell the product, your annual sales projection, your fee structure, and what benefits you expect from the manufacturer.

Marketing: Briefly touch on any specific marketing or promotions for the product. For example, international or domestic trade shows or any local advertising that your representatives will undertake. 

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By Areesh

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