Written by David Pye
Cover Story for Realm Magazine
In today's global economy, the import/export business offers opportunities for young Canadian entrepreneurs to run their own international trading companies. Here's how to get started.
While running a home-based desktop publishing business, Jennifer Henczel recognized an opportunity to supply an additional service to her clients. "I started re-inking their dot matrix printer ribbons with a machine I imported," she says. "As it became too labour intensive, I started importing machines and distributing them to accounting offices, car dealerships and other businesses that needed to use multi-paged forms."
That venture sparked Henczel's interest in international trade, so she enrolled in a college-level program offered by the Forum for International Trade Training. "I would highly recommend the course," says Henczel, who today is an international trade consultant and corporate trainer through her company, Affective Communications. Henczel now uses her expertise to conduct workshops that assist entrepreneurs, manufacturers and employees who want to enter global markets.
Never before has the global market been so close to our fingertips, with Internet resources, improved communication tools and trade agreements that have opened up borders. Young entrepreneurs are exploring opportunities to bring foreign products into Canada as importers and to distribute Canadian goods to foreign markets as exporters. With estimates of one in three Canadian jobs linked to trade, it comes as no surprise that many young Canadians are turning to import/export businesses as a way of making their entrepreneurial debuts.
1. getting started > The first step toward launching a new import/export business is to build an infrastructure for your company. Choose a catchy name that clearly defines your business, then register your company and apply for a business number from Canada Customs and Revenue Agency. Your business number will eventually become a consolidated reference number for all of your federal and provincial tax and licence numbers when you start importing and exporting goods (see [http://realm.net/net/5/spr00e-5-register.htm] for information on registering a business). You should also set up an office, ensuring that you are equipped with telephone, fax and e-mail coordinates, professional letterhead, Internet access and a company bank account.
2.import or export? > Deciding on whether you want to import or export is a personal choice, but it is quite common to start trading in one direction while simultaneously nurturing your trade channels in the other direction. "Turning an import business into an import/export business is a natural progression," says Henczel. "You get a good feel for the types of goods that your foreign suppliers might want to import, and it can be quite profitable for both sides."
As an importer, you'll need to start looking for a product or line of products to trade. Thorough research is the key to finding a product niche in a sustainable market. Take a look at local companies operating around you, and see if there is something they use that could be replaced. More often than not, successful entrepreneurs start out importing a foreign product that is either cheaper than an existing product or unique to the Canadian market.
3.choosing a product > When selecting your product, never lose sight of the concerns of your target customers. Will you be able to deliver this product at a price point that meets their costing requirements? Is your product at least as good in quality as what they're using now? Can you deliver your product readily? "You need to find a balance between price and quality compared to similar products," says Chris Neilson, international trade analyst with the Canadian Association of Importers and Exporters (CAIE), a non-profit organization that publishes Import Canada: A Step-by-Step Guide on How to Start an Import Business. "The key is to really research the market you will be competing in, and to gauge the demand for your product."
Look for products manufactured in countries that have signed favourable trade agreements with Canada, as their consulates can help you identify products that will remain competitively priced even after exchange rates, duties and tariffs, customs brokerage, freight charges and profits have been taken into account. "These agreements allow them to ship things here that aren't subject to as many tariffs," says Andre Lemay, deputy director and departmental spokesperson on trade issues with the Department of Foreign Affairs and International Trade (DFAIT). "The door swings both ways, meaning we have privileged access to their markets as well."
4.securing a supplier > Once you have a product in mind, there are abundant resources available to help you find foreign suppliers. Always conduct thorough research to ensure you are familiar with the Canadian rules and regulations governing the importation of your product. Foreign consulates and embassies throughout Canada are great places to start, and their economic attaches will help you identify products and suppliers. "Stay in close contact with the people at the consulate," suggests Henczel. "They can help you do a thorough supplier evaluation, including credit checks and other background information."
Once you have selected a product line, negotiate a supplier relationship. "Most of the success stories I have seen on the importing side start out as manufacturer's agents before building their company up to the distributor level," says Henczel. "There are plenty of manufacturers that don't have the resources or the capacity to do export marketing, and they will welcome your initiative."
As a manufacturer's agent, you will generally receive a commission of approximately five percent, and your overhead costs will be minimal. As you progress to the level of distributor, you can warehouse large quantities and set your own profit margins. No matter what type of agreement you strike, make sure everything is spelled out clearly in writing and that you understand the legalities and business culture of your supplier's country. The consulate can help you find out what the company is all about, where it is physically located, whether it already does business in your territory and, if so, what assurances you will get to guarantee exclusivity.
5.acquiring samples > When you're comfortable with your supplier, acquire some samples. Depending on the value of the product, most suppliers will offer free samples in order to win your confidence and, ultimately, your business. Take these samples directly to your target customers and gauge their feedback carefully. Is this something they would buy? If so, at what price? If they are willing to buy your product at a price point you can meet, start taking orders, but keep it small. Remember, you will probably have to finance your own way at first, so be sure not to extend yourself further than you can handle. Don't start out trying to sell to places like Wal-Mart, where the quantity and frequency will surely be beyond your capabilities. Banks will not back you as a new importer until you are able to prove success, and there are very few assistance programs available for importers.
6.are you ready to export? > Canada is fertile ground for young entrepreneurs looking to export Canadian products, shipping 44.6 percent of its gross domestic product (GDP) abroad. Canada's export success can be attributed in part to dozens of government programs designed to facilitate the process, and finding assistance has never been easier. "The Government of Canada has an excellent Web presence," says Neilson. "Their sites are very thorough and they provide a lot of valuable information." In addition, the Trade Commissioner Service, offered through DFAIT, can help you establish a niche market abroad and has a number of market studies readily available.
Geoff Lilge, director of marketing and co-founder of Alberta-based Pure Design, is a believer in the Canadian government's export assistance programs. When Lilge looked at exporting his company's furniture products to the US, he took advantage of assistance through the Program for Export Market Development (PEMD), which offers loans of up to $7,500 for new companies to either visit a potential market or participate in an international trade fair. "It allowed us to attend a trade show in San Francisco where we were able to secure some initial orders," says Lilge, whose company has grown into a sustainable export business, shipping 80 percent of its product to the US.
But international trade is a constant learning experience, and Lilge preaches the benefits of research. "It's important to understand the rules and regulations, and to always have a backup plan," he says. "We had a whole shipment of trade show literature turned back at the border just because it didn't say 'printed in Canada'."
As with importing, perhaps the easiest way to get started in exporting is to act as a manufacturer's agent, seeking out Canadian companies who would like to sell abroad. Convince them you can lay the groundwork, and work out a commission rate you are happy with.
There is plenty of financing and other resources available, such as Team Canada Inc, a one-stop shop for Canadian exporters. "If young entrepreneurs want to access government programs and information, they can go through Team Canada Inc and gain access to the services of 23 departments and agencies," says Nicole d'Entremont, marketing communications manager for Team Canada Inc. "We have a whole series of guides that has been developed to help people export."
No matter which path you take, be sure to identify a market you are passionate about. It's amazing how much more efficient and attentive you can be to your work when you know your product and market inside out. Grow slowly, and be sure to protect yourself by using all of the resources at your disposal. We are all eager to run with great ideas, but the first steps come with walking.
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