We’ve already touched on the topic of setting up a business that imports goods into Australia, so today, let’s talk about the flip side of that equation: exporting goods from the Philippines.
Whether you’re an ex-OFW who’s looking to finally realize your dream of putting up a business or an Australian expat who sees a potential demand for a particular Filipino product back in your home country, the local export market definitely presents a lot of opportunities. And thanks to the Internet, you can even start a small exporting business right from the comforts of your own home!
So, how do you begin?
1. Think about which products you want to export.
First off, brainstorm about what sort of products we have in the Philippines that could be in demand yet are not readily available in Australia. Some of the most popular products for export from the Philippines include woodcrafts and furniture (those rattan chairs really add an exotic touch to luxury resorts), agri or marine food products like mangoes and natural sea salt, clothes and fashion accessories, coconut by-products (virgin coconut oil, coconut water, etc.), and of course, electronics and gadgets, which amount to 51% of our total exports.
Ideally, you should have a buyer in waiting before you even begin ordering or producing the items you aim to export. Having a ready market in place really helps your business move along much quicker.
2. Apply for the proper government registration.
If you just want to sell local goods to individual consumers from your home-based website, then you probably won’t need to apply for formal permits.
However, if you plan on expanding and doing business with companies later on, then having the proper documentation lends you the credibility you need to close those high-stakes deals.
You can find the detailed steps for acquiring the said paperwork here.
3. Set up your financing scheme.
The export business, by nature, entails transacting with buyers from different countries.
Sure, PayPal works for small-medium transactions and is pretty much the norm for many home-based export businesses. But again, as we’ve mentioned in the previous item, you should require a more binding method of payment if you have plans of scaling up operations in the future.
This where a letter of credit comes in. It’s basically a legal document issued by a bank that guarantees complete payment for a seller once s/he fulfills certain conditions (in this case, producing or shipping off a buyer’s order).
Because exporting to different countries means you’ll be dealing with different laws and different languages, it can be difficult to ensure a buyer’s payment. Requiring a letter of credit from an overseas buyer who places a large order for your goods guarantees that you will get paid once you fulfill the terms of the order. (The bank pays on the buyer’s behalf if the latter is unable to provide the funds once the bill is due.)
Do note that the letter of credit has to be as specific as possible for you to derive maximum protection from it. Make sure your buyer’s letter of credit indicates your company name or yours (spelled correctly, of course), the date of completion or delivery you agreed upon, the quantity to be produced and/or delivered, and any other pertinent details. The smallest mistake on a letter of credit can sometimes nullify the bank’s guarantee to pay you, so be sure to read the fine print.
4. Calibrate the reliability of your supply.
In exporting (heck, in any business, really), the most important factors behind a seller’s success are reliability and fulfillment. You simply have to provide the correct quantity of a particular product every single time you get an order.
If you are also the one manufacturing the goods for export, pay attention to your production capacities. You should know how long it will take you to produce a certain quantity (e.g., 2 or 20 tons of a product), so you can give an accurate answer when your buyer inquires about how much lead time you need.
If you are sourcing your goods from a supplier, coordinate their delivery times. If you tell your buyer that they’ll receive their orders at a certain time but end up going back on your word because your supplier failed to make the delivery on time, you’re not likely to get a return customer out of that deal.
Reliability is especially important if your goods are seasonal and are meant to be sold during a specific month. After all, there’s not much a buyer can do if the Christmas ornaments s/he ordered from you arrive on the last week of December rather than two months before.
5. Work on your pricing.
No one goes into a business without the goal of turning a profit. With exporting, you don’t just consider the cost of the goods you sell (i.e., the price of raw materials, labor, etc. needed to churn them out). You also need to factor in shipping or freight costs.
Oftentimes, two exporters can have near-identical prices for their products, so the one that’s able to work out a more favorable freight cost ends up closing the deal. You may also want to see if you can get incentives from the government for exporting your products (agri-based ones usually do in the Philippines).
Do familiarize yourself with the following pricing terms as well:
Freight on Board (FOB): price includes cost of goods once loaded aboard a vessel (e.g., a ship)
Cost insurance and Freight (CIF): cost of goods +insurance + freight
Cost and Freight: cost of goods + freight (In this case, the buyer is the one who insures the goods)
Free on Ship Side (FOS): Cost of goods up until shipside
6. Determine your target country.
A lot of Filipino exporters bring their products to countries with a sizeable migrant population. (All those homesick Filipinos can give you healthy revenues if you export the right product.)
On the other hand, this shouldn’t be your sole consideration. Seek out countries that are economically and politically stable so that you don’t experience any interruptions with bank processes and shipments.
One last thing: once your export business is up and running, always exercise due diligence in your dealings. Run background checks on prospective clients to ensure that they have the means to pay, don’t be too eager to rush into deals that seem too good to be true, and above all, get loads of advice from the experts in the business whenever you can.