With all the opportunities to trade with businesses worldwide, running an import/export business can be extremely exciting and rewarding. Moreover, as a hub for international trade, the UK is an ideal place to start such a business.
But how do you set up an import/export business to have the best chance of success? Let’s find out.
1. Research and planning
Before you create a business, start with market research and planning — striking out without intensive research or planning is a recipe for mediocracy or, at worst, disaster.
During your market research, your objective should be to gather insight into your target market, competition and consumer behaviour. With it, you can:
- Identify market gaps and opportunities that you can fill
- Understand your customers’ needs, allowing you to develop a product or service they will purchase
- Assess the competition to develop strategies that improve on their weaknesses and differentiate you from them
- Estimate demand so you can make informed decisions about production and sales.
Meanwhile, a business plan will provide a roadmap for your new business. You can do a lot with that, from clarifying your business goals and mitigating risks to managing resources and forecasting financial performance.
2. Choose your business structure
There are multiple ways to set up a business, but if we assume that you’re opening your business alone, your two main options are as a sole trader or limited liability company.
We wrote an article on the difference between the two business structures, but to summarise: a limited company pays corporation tax on its profits, and the owner’s finances are protected if the company goes bust; a sole trader pays income tax on their profits, but their personal finances are at risk if the business fails.
There is no right or wrong answer when it comes to choosing a business structure — only what makes sense for your business, so talk to an adviser if you need a second opinion.
Sole traders do not need to register their business with HMRC, but they do need to register for self-assessment and keep certain records. You need to register your company with Companies House and for corporation tax.
3. Get your business ready to import/export
Importing and exporting your goods has its own intricacies you need to be aware of.
To export, you need to:
- Check the rules for exporting your goods. Duties, documents and restrictions may differ in your destination country. Checks duties and customs procedures with HMRC.
- Apply for licenses. There are special rules for certain goods that require licences, including animal and plant products, chemicals and medical devices.
- Get ready to export. You need an EORI number that starts with GB to export goods from England, Wales and Scotland. Ensure your buyer has the necessary import declarations and licenses their country requires.
- Export declarations. You can hire someone to deal with customs and transport for you or you can do it yourself. Make sure your invoice and certificates travel with the goods.
To import, you need to:
- Get an EORI number. You need one to import goods into the UK, except in Northern Ireland.
- Determine the classification of your goods. This will help you identify the customs duty and other taxes you pay. You’ll also be able to identify rules for certain products.
- Arrange for transport and shipping. This can be done through a freight forwarder, shipping company or courier service.
- Submit an import declaration. You need to send to HMRC to pay customs duties on your goods.
4. Secure funding
To get your business off the ground, you need cash, so don’t turn away from external funding sources.
Nowadays, many sources exist, including crowdfunding, venture capital, bank loans and Government grants. Research each option thoroughly and ensure you can pay off your loan or live with giving up some control of your business to investors for access to funds.
If you have to pitch your business to investors or banks, this is where a well-formulated business plan will prove essential.
5. Review your performance
Once your business is established and can stand on its own two legs, it’s essential to look back on your past performance and figure out what went well and what you could improve.
You also always need to take a step back and look at what risks you might face in the future or what other opportunities could arrive at your door. Don’t forget about customer feedback — they’ll be able to provide an objective opinion on your performance.
Last but not least, assess your profitability, cash flow and overall financial health to help you make informed decisions about investments, expenses and growth opportunities — financial analysis is our speciality, so feel free to get in touch for professional advice and assistance.
How we can help
Need help setting up your import/export business? We’re here to help; we’ve assisted many clients like you get started with the right foot forward and enter the international marketplace.
We’re also part of FY International — by connecting with like minded accounting, legal and consulting firms worldwide, we’re able to offer our clients access to local knowledge and worldwide expertise
Get in touch with us for practical help setting up an import/export business.