Export Business Plan: How to Develop an Export Business Plan

To achieve efficient sales offerings to buyers in the targeted markets, several concerns regarding products, literature and customer relations should be addressed.

STEP 1:

Identify product concerns.

Can the potential buyer see a functioning model or sample of your product that is substantially the same as would be received from production?

Comments:

____________________________________________________

____________________________________________________

What product labeling requirements must be met? (Metric measurements, AC or DC electrical, voltage, etc.) Keep in mind that the European Community now requires 3 languages on all new packaging.

When and how can product conversion requirements be obtained?

Can product be delivered on time as ordered?

Comments:

________________________________________________

STEP 2:

Identify literature concerns.

• If required, will you have literature in language other than English?
• Do you need a product literature translator to handle the technical language?
• What special concerns should be addressed in sales literature to ensure quality and informative representation of your product?

STEP 3:

Identify customer relations concerns.

• What is delivery time and method of shipment?
• What are payment terms?
• What are the warranty terms?
• Who will service the product when needed?
• How will you communicate with your customer? . . . through a local agent or fax?
• Are you prepared to give the same order and delivery preference to your international customers that you give to your domestic customers?

In international sales, the chosen "terms of sale" are most important.

Where should you make the product available: at your plant, at the port of exit, landed at the port of importation or delivered free and clear to the customer's door? The answer to this question involves determining what the market requires, and how much risk you are willing to take.

Pricing strategy depends on "terms of sale" and also considers value-added services of bringing the product to the international market.

STEP 1:

Define International Pricing Strategy.

• How do you calculate the price for each product?
• What factors have you considered in setting prices?
• Which products' sales are very sensitive to price changes? How important is pricing in your overall marketing strategy? What are your discount policies?
• What terms of sales are best for your export product?

STEP 2:

Define promotional strategy

• What advertising materials will you use?
• What trade shows or trade missions will you participate in, if any?
• What time of year and how often will foreign travel be made to customer markets?

STEP 3:

Define customer services

Forecasting sales of your product is the starting point for your financial projections. The sales forecast is extremely important, so it is important you use realistic estimates. Remember that sales forecasts show the expected time the sale is made. Actual cash flow will be impacted by delivery date and payment terms.

Step 1: Fill in the units-sold line for markets 1, 2, and 3 for each year on the following worksheet.

Step 2: Fill in the sales price per unit for products sold in markets 1, 2 and 3.

Step 3: Calculate the total sales for each of the different markets (units sold x sales price per unit).

Step 4: Calculate the sales (all markets) for each year - add down the columns.

Step 5: Calculate the five year total sales for each market - add across the rows.

 SALES FORECASTS - FIRST FIVE YEARS

1 2 3 4 5

Market 1

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Market 2

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Market 3

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

Total Sales _____ _____ _____ _____ _____

All Markets _____ _____ _____ _____ _____

 COST OF GOODS SOLD

The cost of goods sold internationally is partially determined by pricing strategies and terms of sale. To ascertain the costs associated with the different terms of sale, it will be necessary to consult an international freight forwarder. For example, a typical term of sale offered by a domestic exporter is cost, insurance and freight (CIF) port of destination. Your price includes all the costs to move product to the port of destination.

A typical cost work sheet will include some of the following factors. These costs are in addition to the material and labor used in the manufacture of your product: export packing, forwarding, container loading, documentation, inland freight, consular legalization, truck/rail unloading, bank documentation, wharfage, dispatch, handling, bank collection fees, terminal charges, cargo insurance, ocean freight, other misc., bunker surcharge, courier mail.

To complete this worksheet, you will need to use data from the sales forecast. Certain costs related to your terms of sale may also have to be considered.

Step 1: Fill in the units-sold line for market 1, 2, and 3 for each year.

Step 2: Fill in the cost per unit for products sold in markets 1, 2, and 3.

Step 3: Calculate the total cost for each of the products - (units sold x cost per unit).

Step 4: Calculate the cost of goods sold - all products for each year - add down the columns.

Step 5: Calculate the five-year cost of goods for each market - add across the rows.

 COST OF GOODS SOLD - FIRST FIVE YEARS

1 2 3 4 5

Market 1

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Market 2

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Market 3

Units Sold _____ _____ _____ _____ _____

Sale Price/Unit _____ _____ _____ _____ _____

Total Cost _____ _____ _____ _____ _____

Cost of Goods Sold All Markets _____ _____ _____ _____ _____

INTERNATIONAL OVERHEAD EXPENSES

To determine overhead costs for your export products, you should be certain to include costs that pertain only to international marketing efforts. For example, costs for domestic advertising of service that do not pertain to the international market should not be included. Examples of most typical expense categories for an export business are listed on the next page. Some of these expenses will be first year start-up expenses, and others will occur every year.

Step 1: Review the expenses listed on the next page. These are expenses that will be incurred because of your international business. There may be other expense categories not listed - list them under "other expenses."

Step 2: Estimate your cost for each expense category.

Step 3: Estimate any domestic marketing expense included that is not applicable to international sales.

Step 4: Calculate the total for your international overhead expenses.

EXPENSE COST

Market 1 Market 2 Market 3 Total Yr 1

Legal Fees _______ _______ _______ _______

Accounting Fees _______ _______ _______ _______

Promotional Material _______ _______ _______ _______

Travel _______ _______ _______ _______

Communication _______ _______ _______ _______

Equipment _______ _______ _______ _______

Advertising Allowances _______ _______ _______ _______

Promotional Expenses _______ _______ _______ _______

(e.g., trade shows, etc.)

Other Expenses _______ _______ _______ _______

Total Expenses _______ _______ _______ _______

Less Domestic Expenses _______ _______ _______ _______

(Included Above, if any)

Total Intern’ Start-up Expenses _______ _______ _______ _______

PROJECTED INCOME STATEMENT - YEAR 1 to 5, ALL MARKETS

You are now ready to assemble the data for your projected income statement. This statement will calculate your net profit or net loss (before income taxes) for each year.

Step 1: Fill in the sales for each year. You already estimated these figures; just recopy them on the work sheet.

Step 2: Fill in the cost of goods sold for each year. You already estimated these figures, just recopy on the work sheet.

Step 3: Calculate the Gross Margin for each year (Sales minus Cost of Goods Sold).

Step 4: Calculate the Total Operating Expenses for each year.

Step 5: Calculate the Net Profit or Net Loss (Before Income Taxes) for each year (Gross Margin minus Total Operating Expenses).

PROJECTED INCOME STATEMENT - YEAR 1 to 5, ALL MARKETS

1 2 3 4 5

International Sales _____ _____ _____ _____ _____

Cost of Goods Sold _____ _____ _____ _____ _____

Gross Margin _____ _____ _____ _____ _____

International Operating Expenses:

Legal _____ _____ _____ _____ _____

Accounting _____ _____ _____ _____ _____

Advertising _____ _____ _____ _____ _____

Travel _____ _____ _____ _____ _____

Trade shows _____ _____ _____ _____ _____

Promotional Material _____ _____ _____ _____ _____

Supplies _____ _____ _____ _____ _____

Communication Equipment _____ _____ _____ _____ _____

Interest _____ _____ _____ _____ _____

Insurance _____ _____ _____ _____ _____

Other _____ _____ _____ _____ _____

Total Intern’ Operating Expenses _____ _____ _____ _____ _____

TIMETABLE

This is a worksheet that you will need to work on periodically as you progress in the worksheet. The purpose is to ensure that key tasks are identified and completed to increase the success of your international business.

STEP 1:

Identify key activities

By reviewing other portions of your business plan, compile a list of tasks that are vital to the successful operation of your business. Be sure to include travel to your chosen market as applicable.

STEP 2:

Assign responsibility for each activity

For each identified activity, assign one person primary responsibility for the completion of that activity.

STEP 3:

Determine scheduled start date

For each activity determine the date when work will begin. You should consider how the activity fits into your overall plan as well as the availability of the person responsible.

STEP 4:

Determine scheduled finish date

For each activity determine when the activity must be completed.

ACTION PLAN

STEP 1:

Verify completion of previous pages.

You should have finished all the other sections in the worksheet before continuing any further.

STEP 2:

Identify your business plan audience.

What type of person are you intending to satisfy with this business plan?

The summary should briefly address all the major issues that are important to this person. Keep in mind that this page will probably be the first read by this person. It is extremely important the summary be brief yet contain the information most important to the reader. This section should make the reader want to read the rest of your plan.

STEP 3:

Write a one-page summary.

You will now need to write no more than a page summarizing all the previous work sheets you have completed.

Determine which sections are going to be most interesting to your reader. Write one to three sentences that summarize each of the important sections.

These sentences should appear in the order of the sections of your business plan. The sentences must fit together to form a summary and not appear to be a group of loosely related thoughts.

You may want to have several different summaries, depending on who will read the business plan.

INTERNATIONAL BUSINESS PLAN SUMMARY:

________________________________________________

________________________________________________

________________________________________________

________________________________________________

_________________________________________________

COST FACTORS

In calculating an export price, be sure to take into account all the cost factors for which you, the exporter, are liable.

1. Calculate direct materials and labor costs involved in producing the goods for export.

2. Calculate your factory overhead costs, prorating the amount of overhead chargeable to your proposed export order.

3. Deduct any charges not attributable to the export operation (i.e., domestic marketing costs, domestic legal expenses), especially if export sales represent only a small part of total sales.

4. Add in the other out-of-pocket expenses directly tied to the export sales, such as:

• travel expenses
• catalogs, slide shows, video presentations
• promotional material
• export advertising
• commissions
• transportation expenses
• packing materials
• legal expenses*
• office supplies*
• patent and trademark fees*
• communications*
• taxes*
• rent*
• insurance*
• interest*
• provision for bad debts
• market research
• credit checks
• translation costs
• product modification
• consultant fees
• freight forwarder fees

*These items will typically represent the cost of the total operation, so be sure to prorate these to reflect only the cost of producing the goods for export.

5. Allow yourself a realistic price margin for unforeseen costs, unavoidable risks, and simple mistakes that are common in any new undertaking.

6. Also allow yourself a realistic profit or mark-up.

Other Factors to Consider