There is no denying the excitement a new electronic device can bring. From miniature drones to personal home assistants, electronics often exceed our expectations and imaginations. If you’d like to enter this exciting industry and start your own electronics export business, there are major considerations to weigh in on and steps you can take to help you succeed when putting your business plan into action.
Just as with any other business, there are both risks and rewards associated with launching an electronics export business. While the stakes are indeed higher for those conducting business in other countries, there are ways to circumvent potential problems so that you can instead reap the benefits. For example, international trade finance companies such as Tradewind can support your electronics business with services like supply chain financing and export factoring. But before you can better understand these solutions, the first step is to understand the risks associated with exporting electronics.
Things to Consider Before Starting your Electronics Export Business
Deciding to sell internationally is not a simple undertaking. Although the upfront costs of starting an import/export business may be small, there are different rules and regulations to consider for each country, plus new ways of doing business that you must get used to. To launch your business, your toolkit must first cover the essentials, including a phone, reliable internet, business cards, a fax machine, and a professional website.
Before you design your website, you must first fine-tune your target audience and choose the type of electronics you would like to offer. It’s always a wise move to go with something you already have experience with. If you have previous experience in the technology field, it may be a good idea to sell computers. Or if you worked in the medical field, consider pivoting into the medical devices industry.
Utilizing your previous experience, primarily if it is something you are passionate about, can work to your advantage, mainly because you will understand the inner workings and jargon of your chosen niche, not to mention you may already have a contact or two. Once you have your chosen niche, you will want to narrow down the countries with which you will work, then research how to do business with that country. Once you have completed all the legalities, you are ready to conduct business. Here’s where the real risks start coming into play.
The Risky Nature of Electronics Exports
Most problems come into play after your first order is submitted. One such example of a potential problem is when the shipper wants payment before product is shipped—but you won’t be paid until the merchandise is received, resulting in a conflict in your cash flow cycle. Or maybe the cargo is damaged during transit, and now your buyer refuses it.
In other instances, problems can occur at the border. Rules pertaining to customs are not uniform throughout the world. It’s crucial to the success of your electronics business that you comply with all the relevant regulations. If you missed something, and now your shipment won’t get through to the buyer, it’s good to have procedures in place that address the consequences of a lost shipment. Tradewind can help mitigate the risks of trading internationally with their export factoring services.
Advantages of Export Factoring
Tradewind offers flexible, tailor-made solutions for your export business needs, whether you are a startup with limited assets looking to launch or an established business trying to eliminate short term cash flow problems.
Here’s how export factoring works: Tradewind, the factor in this case, will purchase your company’s invoices and in exchange advance you up to 95% of the total invoice value. They will then collect the full amount from your customer once the invoice matures. When your customer pays in full, the remaining balance is sent to you. This advance on payment can help ease your worries of how you will pay for the shipment of medical devices before your customer receives them.
If one chooses, for instance, to work with Tradewind, one of the best factoring companies, there are several other benefits, including:
- Payment is sent within one to two days of invoice submission, or even faster in some cases, instead of in weeks or months
- Financing is based primarily on the quality of your customers’ credit, not based on your financials
- Tradewind services are not loans so, for many companies, the financing doesn’t show up as debt on their balance sheets
- Their funding is scalable and can grow with your company
- Your worries of customer payment will be alleviated because companies like Tradewind that offer non-recourse factoring monitor the creditworthiness of your customers, plus they assume the risk of a shortfall of payment due in the event of insolvency
- Your workflow will become more streamlined as they perform bookkeeping, dunning and collections on your behalf
- The application and onboarding processes are easier and faster than applying for a traditional bank loan
- You are able to offer longer payment terms and therefore compete for larger buyers
- Their local experts comply with each country’s regulations your business operates in, providing beneficial services such as currency regulation control
While Tradewind may not be able to eliminate every last risk associated with the export business, they can offer their expertise, guidance, and international capabilities to accelerate cash flow, improve your collections and control your exposure to bad debts. Plus, with their financial assistance, you are better able to take on more sales opportunities by offering longer payment terms without cash flow interruptions.