To turn your brand into a globally recognised household name, you must engage in exporting. However, it’s important to understand the concept of exporting and confirm your preparedness before taking this step.
Exporting involves producing goods or services in one country and selling them in another. While the conventional understanding might be manufacturing shoes in New Zealand and selling them abroad, there are subtler forms of exporting. You may already be involved in exporting, even if it’s not immediately apparent.
What exporting is and isn’t
Having an overseas client makes you an exporter, even without physical product sales.
Exporting includes:
- Conducting English lessons via Zoom for someone in South America.
- Creating a house design for a client in the United States.
- Translating a document and sending the translation via email to someone in Asia.
- Providing virtual tours of New Zealand’s picturesque countryside to a global audience.
- Transporting a few bottles of wine in your luggage for hand-delivery to a client in Europe.
Engaging in business exports entails sending goods or services overseas, involving a client and financial transactions. However, simply sending personal items or samples to friends or trade shows abroad does not qualify as exporting. For instance, sending chocolate fish to comfort your homesick Kiwi friend in London or taking industrial pipe samples to a trade show does not constitute exporting.
Advantages and challenges of exporting
Expanding your business through exporting can foster growth and enhance competitiveness. Some key benefits include:
- Generating additional sales from new customers and entering foreign markets.
- Achieving economies of scale and lowering the cost per unit through increased production.
- Diversifying risks by operating in multiple countries; when facing challenges domestically, there may be better opportunities abroad.
- Gaining insights into new ideas, technology, and work methods can enhance competitiveness, both domestically and internationally.
However, exporting also presents challenges, including:
- Incurring additional expenses, such as customs, transportation, and compliance costs.
- Managing intricate regulations and fulfilling compliance requirements.
- Addressing legal risks that emerge when operating in a foreign country requires careful management.
- Effectively handling political risk becomes crucial, especially in markets prone to political instability.
- Safeguarding against potential risks during times of war or restrictions on foreign exchange is essential for protection.
Seeking expert advice and thorough planning can effectively mitigate challenges and risks, such as having robust export and risk management plans in place.
Check if you’re ready to export
Achieving successful exporting requires dedication and resources. Essential elements include:
- establishing a strong business foundation with proven and reliable business practices.
- ensuring efficient delivery of goods or services is essential for successful exporting.
- a solid understanding of your local market and knowledge of effective marketing strategies are crucial for successful exporting.
Improving operational efficiency and innovation
Assess your export readiness by integrating it into your business plan. A concise plan helps identify your current status, future goals, and the strategies to achieve them.
Consider these things before exporting or setting up overseas
Here’s a general overview of what exporting entails. Not all aspects will be relevant to every business, and additional details may need to be considered based on individual circumstances.
Money
- Prices: How do you set prices?
- Foreign exchange: How volatile is the currency exchange rate? Could fluctuations pose a threat to your profit margins?
- Finance: What trade terms are you employing? Is trade finance necessary, especially if customers have extended payment timelines? Consider how to secure additional funds for scaling up or to address cash flow challenges.
- Tax: What is the payment amount, and when and in which country will the payment be made?
Logistics and tariffs
- Supply chain: What is the optimal approach for transporting your raw materials, goods, or services from point A to point B?
- Tariffs, customs, and duties: What will be the cost, and what is the expected duration for customs clearance of your goods?
- Freight costs and logistics: Do you need to handle door-to-door delivery, or will your customer manage freight and logistics? Clarify responsibilities for tasks like obtaining special permits for items such as dangerous goods. Establish a clear understanding between both parties regarding their respective roles and responsibilities.
- Export regulations: What are the import regulations and rules in the country where you intend to sell your products?
Marketing and sales
- Market representation: Do you require a sales team, or can you rely on a distributor to sell your products on your behalf?
- Marketing and sales: Will you utilise a website, social media platforms, or a combination of both? Additionally, are you considering participating in trade shows?
- Packaging: Consider the packaging requirements for your new market, including aspects like design, labelling specifications, and barcodes.
Risk management
- Risk and product liability: What type of insurance is necessary? For instance, should you consider insurance for non-payment?
- Intellectual property (IP) protection: Who possesses the intellectual property rights? What rights are granted to the customer? Should trademarks be established? It’s advisable to consult with an intellectual property specialist.
- Legal considerations: What type of customer contracts should you establish? Considerations should include aspects of data integrity, privacy, and business structure.
Culture
- Language: To what extent do you need to learn another language?
- Culture: What essential knowledge do you need to ensure smooth operations and prevent potential mistakes?
If you set up overseas
Establishing operations overseas may require undertaking some or all of the following tasks, depending on the country and chosen business structure:
Think carefully before you set up overseas
Register the business
Registering a new company entails various tasks such as tax, GST, payroll taxes, and superannuation registration.
Inquire with the relevant country’s company office to determine if accounts need to be provided for auditing or other purposes.
Set up a bank account
Establishing a bank account overseas can be more complex than anticipated, often taking weeks. Tasks such as document certification and potentially translation may be necessary. Additionally, a personal visit to the bank may be required.
New Zealand banks may not always have robust relationships with overseas banks, limiting the extent to which your local bank can provide full support.
Think about getting your money back to New Zealand
You could potentially retrieve your funds through avenues such as a management fee, royalty, or software licensing.
You’ll be subject to withholding taxes or dividends on royalties. Sending a dividend from Australia to New Zealand may exempt your Australian company from tax, but the New Zealand company may incur tax obligations when distributing dividends to shareholders.
Appoint overseas representatives and consult advisors
A resident director, residing in the other country, may be necessary, as some countries, like Australia, mandate resident directors.
Consider engaging a local lawyer to review standard terms and conditions or consult with an accountant for tax advice in the respective country
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