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Doing my first export transaction

Once my business was legally setup; I needed to get a more accurate estimate for the cost of my first export transaction. Here are the various parts I needed to do:

I called back the manufacturer's export representative I spoke with before. I reminded him of our conversation and this time I asked him to send me an official paper stating the agreed upon price and any other terms that I would need to know about. Later on in future transactions, I knew to ask for its official business name; Proforma Invoice. They are a very well established fortune 500 company and hence we did not worry about them taking the money without delivery of exact defined product model and quanitiy and because of that we were going to pay in advance. Once the representative heared that payment was in advance, he informed me that we would get a better pricing.

I needed to locate and choose a shipping company that handles commercial international shipments from pickup to delivery. I checked the business pages of our local phone directory but there were no listings for companies that handle these types of shipments. After that I headed to our local library's business references section. I could not find a directory for international shippers either. At that time the internet was in its infancy and not many knew about it nor it was that populated with all kinds of information and companies. At the local library, I was directed to a reference of around 25 thick volumes of companies listings; it was called the Thomas Register. I would later become a frequent user of this yearly updated publication. It was very vital for my business.

I checked out from the public library as many books as I can on the subject of importing and exporting. One of the things I read in one of the books was a description for what is a freight forwarder and how they can tremendously help your business. A freight forwarder is a company that handles for you almost all of the logistics and paper work required to get your goods from its source of origin up to the destination.

Since I did not know much yet about what all the paper work, legalities, and logistics required to ship goods for export; I decided to narrow my search to those companies that not only arrange for shipping the goods but also process al documents; local and international. I located one that was experienced with shipping products to the Middle East. I contacted them and provided them with all required information (origin, type of goods, shipment value, packaging information and dimensions that were provided by the manufacturer, estimated shipping date, as well as final destination). They provided me with their estimated shipping cost. The preference for the shipment was by air since it was not big enough to be shipped by sea.

The freight forwarder provided me with the costs for both; air and sea shipping. Air shipment is faster of course with a delivery of around a week and a half while sea shipment would be take around a month to get to the destination. When shipping by sea, they calculated it based on weight while by air they calculated it by size.

I gathered all of this information and shared it with my uncle's company in Saudi Arabia (my first and only customer at that time). He knew the total cost (cost of goods + shipping) and since we knew each other, he said he will be wiring to my business account the money to pay for all of that and will include with it a little bit more to cover for my business setup costs.

I received the money in my business account within 5 days in which I contacted the manufacturer and informed them of the check being sent their way for the goods. I also contacted the freight forwarder to let them know that I am going ahead with the shipping estimate they provided me with. The freight forwarder said that they will pick up the shipment as agreed, will inspect it to ensure the accuracy of its expected weight and size, and then will send me prefilled papers that I would need to sign and return to them along with my payment.

I received, signed, and returned the freight forwarder’s paper including the payment and in few days I received from them copies of the papers they submitted with the shipment to various government agencies and other transportation entities. The copies showed when the shipment was sent to its destination and also the processing agent on the Saudi side. I shared this information with my uncle so he is aware of when to expect it and who they would need to check with locally about the shipment.

Few days later, I received a call from my uncle informing telling me that the shipment was cleared on time and that the goods have arrived as per specifications and quantity.

Since this has been done as a favor to my uncle's business, I told him that there were few thousand dollars left in the account after factoring all expenses ($5000 to be exact) and that I will be wiring them back to him. To my surprise he said; No. Do not send back any money. This is your profit percentage as an export agent! he continued on by saying How much time do you have to finish up your thesis and graduate? I said A couple of months. Why? I asked. He said Well. You now know how to do it, you have the business setup, and you have me as your first customer. Give it a try for at least a year and if it does not work, you can always get a job in computers since you will have a master's degree very soon. I will be one of your customers and you are welcome to expand your customer base and business.

The answer back that I gave was a definite Why Not!.

Why not; I thought to myself. An effort that consumed few days from my time have paid me back very well. I enjoyed being able to do it right from home with few faxes and phone calls. After all, I had the luxury of the hardest thing a business would need; customers (although it was just one customer that i had so far but not bad for an unplanned startup).