Import/Export business

A tried and tested business model that has been around for as long as man has been able to travel and interested in trade. What could be simpler than sourcing something cheaply in one location, bringing it to your intended market and selling it on for a profit?

Research

The advent of the internet makes researching your chosen market, suppliers, etc much easier. You can also market & sell your products via a website (either solely or as one of many sales channels). Of course this is a double edged sword because it has also become much easier for your competitors (and potential competitors) to do the same thing.

However whilst something like this might seem simple there are many pitfalls and you should either know your chosen market very well, or research it extensively before setting up this kind of business (or any other for that matter).

Hidden costs

You need to find out about any hidden costs that you might not anticipate (obvious ones are import duties and local taxes), local laws relating to importing/exporting in both your own region and the area you intend to be exporting from/importing to. You could do worse than checking out this site International Trade as a starter.

An example of an import business

Here's an example, of a business importing old VW cars from various parts of the world to the UK (with the odd one being shipped on to the US) that ran for about 5 years. Here are some of the things that had to be considered as part of the process:

• Every vehicle had to be checked in the country of origin to make sure it wasn't stolen. This could involve a lengthy process and a lot of red tape, which could often be expedited with the aid of a small "gift" to the person processing the paperwork. Depending on the countries you are dealing with you may find yourself having to make numerous "gifts" to people along the line which can add to your costs significantly, or severely slow down the process if you are not willing to make them.
• In order to export a vehicle from a country you normally need the registration documents (another way of checking to make sure it is not stolen); with many old vehicles that had not been on the road for many years this was not always possible. In order to get round this the vehicles could be exported as ‘parts’. However, on arrival in the UK they couldn't then be brought through customs as anything other than parts. By listing the chassis numbers of any chassis present it was possible to get round this.
• Shipped in containers, there would often be a lot of left over, unused, paid for space in a container that could have been usefully filled with something.
• Vehicles would often get damaged during the loading/unloading stage by people who cannot be held accountable for the damage they cause. Insurance only normally covered total loss and had a high excess.
• Sometimes the condition of the vehicles when they arrived was nowhere near as good as had been promised. The final sale price barely covered the cost of purchase, shipping, etc.
• The two previous points can be resolved by you travelling to the location, sourcing, loading, etc the products yourself but is it viable for you to do this each time both financially and in respect of time? If not then you need someone you can trust to arrange things at the other end and you need to make sure they know exactly what you expect from them.
• Every vehicle was liable to UK import duty and VAT at a rate of 10% and 17.5% respectively (on top of the purchase price and the shipping) although by going through a special application process (for each and every vehicle) it was possible to get this reduced to 0% and 5% respectively.
• Because of the age of the vehicles (over 10 years old) they only had to pass a UK mot. Newer vehicles would have to comply with other, stricter legislation.
• In order to become UK registered, proof of duty paid and mot had to be provided, along with a completed application form.
• Containers were often held up at customs whilst they were xrayed (which the business was charged for) incurring demurrage and quay rent fees (both of which are very expensive and should be avoided at all costs).
• As more and more vehicles were exported from the countries where they were being sourced the prices that sellers were demanding increased as they responded to increased demand for their vehicles and became aware (via the internet) of the demand for what they were selling.
• Oil prices increased, as a consequence the price of shipping increased.
• A container was washed overboard/ship sank causing total loss of a shipment. The insurance only covered the purchase price minus the excess/the shipment wasn't insured (ok so this never happened but it could).
• Someone decided to smuggle some guns/drugs/something else inside a shipment without the knowledge of the directors and although they were not prosecuted, they were arrested and could not trade for sometime (again this is a hypothetical situation but there is the potential and you should be aware of it and be wary of who you are dealing with).

In the end the business was wound up, having succumbed to too many of the pitfalls and experiencing cash flow problems, not having made the directors rich as they had originally anticipated. Whilst Cash Ninja doubts that everyone planning and setting up an import business will be planning on selling cars the points made should be relevant to other goods and will hopefully help you avoid some of the potential problems. With a bit of luck (and a lot of hard work) you may succeeded, set up your own website, sell your stuff on Ebay, advertise on other related websites (bet you didn't know there were so many websites dedicated to VWs did you?) and make your fortune. Good luck.