You’ve come a long way since we started our series on exporting.
If you’ve stayed with us, you’ve selected a best-prospect export product or service by analyzing your “Pros” and “Cons” on your exporting worksheet; assembled your export dream team; and organized for the export trial run.
Now you are ready to close on your first export deal. Here’s how you go about it.
Before anything else, you should expect to adapt your product to some degree for sale outside domestic markets before you make your first sale. You’ll be well-situated to tackle this after you have availed yourself of the market information resources outlined in the previous article, consulted with local government market experts, and communicated with sources overseas — prospective customers, wholesalers, agents and embassies.
Now the hard work of finding and cultivating your customer has paid off — you’ve got a product inquiry and request for a price quotation. Congratulations! You’re ready to follow through, put a deal together and make it happen.
In this article, we’ll show you how to choose safe, prompt and cost-effective transport, arrive at an appropriate price per product unit, and work with a freight forwarder to prepare your final quotation. Read through what follows carefully, and refer to it often. You want to be on top of all the information you’ll need at each stage of the process.
Since export shipment involves moving goods from one country to another — a somewhat riskier and more complicated enterprise than domestic shipments — it is extra important to find a company that offers safe, reliable, quick and cost-effective transport services. The quantity, value and perishability of your product, your customer’s location, how fast the shipment is needed and how much you are willing to spend will determine which method (for example, air or ocean) of transportation you should use.
It’s imperative to shop around and compare rates to get the best possible transportation package for your customer. Don’t be shy about questioning a transportation company or freight forwarder at length and in great detail about their service and rates. A freight forwarder is an all-around transport agent for moving export cargo, typically from a factory door to your customer’s warehouse or storage facility.
Always inquire about the latest and most advanced methods for moving goods overseas. Even as you read this, improvements are under way. Keeping current with the transportation industry will help you to offer your customers the most innovative and cost-effective service and equipment options.
You now have some guidelines as to what transport methods are available to get your product to your customer and how to make a cost-effective choice. As you move on to put together a price quotation for your customer, you’ll see exactly how valuable a good global freight forwarder can be as you work together to make the sale and deliver the goods.
Pricing Your Product and Preparing a Quotation
Pricing a product for the overseas market, determining landed costs and presenting them in quotation form are critical steps in the international sales operation. At this point, you might want to revisit the SBA’s “Breaking Into The Trade Game: A Small Business Guide to Exporting – 4th Edition” and review “Chapter 5: The Export Transaction” for how to do this. We can also give you a couple of tips on how to arrive at good shipping rates that will meet with your customer’s approval. We will show you how to use these figures to put together a proforma invoice, a key document in every export transaction.
Theoretically, if you have a customer willing to buy, you can price your product at almost any level, provided it never exceeds what the customer is willing to pay, or what the market will bear. You don’t want to alienate the customer or make it easy for your competitors to undercut you! Typically, exporters take a 10-15% markup over cost, which is the price a manufacturer charges you when you buy product from them. In other words, if your supplier charges you $1.00 per unit for his product, you might price it anywhere from $1.10 to $1.15 per unit. That markup becomes your profit or commission.
Test your price out on your customer, with whom you have hopefully cultivated a strong relationship and to whom you’ve presented your product’s positive sales attributes. See what reaction you get and then negotiate from there. If you priced the product with only a slim margin for yourself — so slim you cannot afford to go any lower — and your customer still balks, consider re-negotiating with your supplier.
Oftentimes, if you explain that the only way to sell the product overseas is to price it more competitively, they will agree to go back to the drawing board and see if they can rework the numbers. Don’t pull this too often, though, because if you continue to have price problems the supplier will catch on sooner or later that you haven’t properly checked out what the foreign market will bear.
Continue reading part two of The Art of Closing the Export Deal …
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About the Author: Global business expert Laurel Delaney is the founder of GlobeTrade.com. She also is the creator of “Borderbuster,” an e-newsletter, and The Global Small Business Blog, all highly regarded for their global small business coverage.