Make Money In Import and Export
This is intended for those who wish to have their own import export business. Obviously, companies who manufacture a product know that they can earn larger profits by expanding their markets internationally. However, oftentimes, when a prospective import export entrepreneur thinks about entering the business world of importing and exporting, they sometimes do not have a clear picture of how they will make their money or get paid! I hope to help explain some possible income streams in this blog.
Most import export brokers or agents choose to work as a commissioned agent or broker. This is the easiest way to get started and because you are not purchasing, warehousing, or reselling products, this is also the method that requires the least amount of capital. When you work as a broker or agent, you will put a buyer and seller together, negotiate and navigate the transaction, and collect a commission. Think of the real estate industry. A realtor lists a property, markets the property, and when a buyer comes along, they are the go between in the negotiation, and once the deal is done, they collect a commission.
Andrew meets an electronics vendor. He is looking to purchase Droid-based touch tablets. Andrew locates a Chinese manufacturer that will sell the tablets for $120.00, including all fees, with a minimum order of 300 units. Andrew orders a sample for $75.00 and goes back to the buyer to show him the product. The buyer wishes to purchase the product – Andrew quotes him a price of $145.00 per unit for 300 units. The buyer orders the 300 tablets. With a profit of $25.00 per unit, at 300 units, Andrew earns a total commission of $7500.00.
300 x 25 = 7500, minus the $75 he spent on the sample, Andrew nets $7425.00.
Lorraine approaches an owner of a chain of tea and coffee stores with a sample of coffee from a supplier in the Dominican Republic. The buyer is interested in selling a private label coffee under the name of her stores. Lorraine locates a coffee supplier in the Dominican Republic. The supplier will package the product with the private label for a small fee. The price per unit (a 12 ounce bag) is $1.50, including fees. Lorraine presents a price of $2.50 to the buyer, who purchases 1000 units. Lorraine’s profit is $1.00 per unit, at 1000 units, her total commission is $1000.00.
As you can see, the amount of the commission will vary depending upon the product, profit margin of the item, and volume. The primary way to ensure payment is that when you agree to represent the manufacturer or supplier, you should have a signed representative agreement with your client. Make sure you protect yourself and your payment with a contract that defines the relationship – what you will get paid, when you get paid, how they will pay you, what markets you may sell to and if there are any restrictions (like minimum order quantities). Most brokers or agents agree upon a flat commission schedule. The main reasons you need an agreement are stated above – you also may want to have your parties sign a non-compete, non-disclosure agreement. This will ensure that the buyer and seller do not go around you and cut you out of the transaction. It would also be in your best interest not to disclose too much information about either party during the negotiation phase of the transaction to prevent this from happening.
Agents or brokers can also earn money by negotiating professional services such as freight forwarding, web development, and storage facility contracts. Import export professionals can earn money by acting as consultants. Assist companies by setting up import export systems, provide training to key personnel, and assist in the development of marketing and export plans. Some innovative import export agents find a need and fill it! An example of this is offering to represent a clients product or service at a trade show. Perhaps you have a source in the Trinidad and Tobago for fuel, liquefied natural gas. You can offer to attend a clean technology or fuel trade shows and represent the producer. In this arrangement, they provide you the promotional materials, pay the trade show fees, pay your expenses as well as pay you a per diem (daily rate) to “work” at the show. You can also negotiate a commission on any deals you may close at the show. Many transactions happen at trade shows, so make sure you have that included in your representation agreement.
There are many ways to earn income in import and export – the key is to be creative and make sure you outline all the details of your agreement so there are no questions.
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