Whether you’re a sole trader or run a business with several employees, one thing’s for sure. Sooner or later, you are going to want to trade with companies abroad. These days, it’s easier than ever to have trading partners in other countries.
But, the only downside to overseas trading is there’s a higher risk of things going wrong. Especially as you can’t regularly meet with your trading partners in person for logistical reasons. Still, it is possible to trade with overseas companies safely. Here’s how to do it:
Carry out market research
The first thing to do before you reach out to potential trading partners in distant lands is to conduct some thorough market research. Doing so is vital to ensuring a definite market for the products and services you sell.
For many businesses, selling abroad isn’t as simple as putting up an eBay listing and stating that you deliver worldwide! There are many factors to consider, such as import duties and taxes, and even regulatory approval for certain products and services.
As with most things in life, carry out due diligence before you commit to either supplying products and services abroad or selling them directly. It might be worth discussing your plans with your local chamber of commerce to gain specific advice and support.
Otherwise, carry out your market research in much the same way as you would in your home country:
- How likely are consumers going to use your products and services?
- Do your products and services need to get adapted to meet local demands?
- Are there any duties and taxes liable on the things you sell?
- Do your products and services need government approval?
- What is the cost to your business for selling your products and services abroad?
Those are just a few of the many questions you need to answer during the market research phase of your plans.
Should you establish a local base?
When businesses are serious about selling a constant supply of products and services to another country, there’s one question they must consider. Does it make sense to set up a local office to deal with all trading aspects in that other country?
Some companies may decide that it makes sense to do just that. They will typically appoint one or more personnel to work from that office and deal with the “home country” regularly. But what if you don’t have the capital or resources to make that happen?
Have no fear because there are other options available to you. One idea is to appoint a sole distributor of your products and services. You provide them with all the resources they need to sell and support your wares. Their job is to act as your representative in that country.
Another idea is to consider licensing your brand and offering franchise opportunities. One of the brilliant things about such entities is franchisees run their business with your backing and support. They don’t need to carry out market research as you’ve already done that.
There are pros and cons to both options. Be sure to take some time researching both of them and weighing up which option is better suited to your needs.
Transferring foreign currency
Another factor to consider in your plans for establishing an overseas presence is how you deal with foreign currency. You’ll likely need to pay for business fees such as shipping, taxes, and distribution in the local currency rather than your own.
With that in mind, you must research the most suitable ways of transferring money abroad and back again. As you can imagine, there are a plethora of options at your disposal. The ones that will be most suited to your needs should:
- Offer instant money transfers;
- Provide online transfers and transaction tracking;
- Have no or low fees for converting currencies;
- Not have any hidden charges or caps on how much you can transfer each month.
If you want to send money to Japan and back, or between other countries, it makes sense to consider the volume of your transactions. In some cases, it can work out more affordable to transfer money infrequently to cut down on fees levied to your account.
Whichever method you choose, be sure to select a well-established provider in the market that has government approval from both countries. You should also avoid using cryptocurrencies as part of your transfer strategy to limit all risks to your transactions.
One final point to remember on the subject of currency exchange is to check that either country hasn’t sanctioned the transfer of money between each other.
Risk analysis
As you can appreciate, there’s always a risk that some things could go wrong with anything you do in business. To that end, before you start trading overseas it’s worthwhile conducting some thorough risk analysis.
For example, how likely is it that your overseas trading partners or franchisees might go out of business? Do you have a contingency plan to deal with such a problem? And can you arrange insurance to cover any loss of earnings to your business?
Depending on the country you wish to trade with, you should also determine whether you’re likely to encounter any regular problems with customs and excise authorities. Sadly, it’s a well-known fact that some countries have corrupt governments.
While it’s not possible to guarantee all outcomes, you can take steps to mitigate risks to your business that might harm its brand or ability to make a profit.
Language barrier
One final point to consider is how you might overcome the language barrier when dealing with foreign trading partners. You can ignore this section if you’re dealing with another English-speaking nation.
But, you need to remember that not everyone speaks English as either their native tongue or a second language. How will you overcome such a challenge? Would you go to the effort of learning the foreign language yourself?
Or, would you prefer to hire the services of a translator to act as your “go-between” when dealing with prospective new distributors and retail outlets?