Accounting – Page 5 – Financial Memos

It is true that expanding your business is tempting. It can help you expand and diversify your operations and your income and hedge against the risk that operations in a single market brings. It is also true that expanding your business and start trading overseas is not an easy task and is full of obstacles and traps that can cost you money. There are a few things that you should consider but I think that the five most important are the following: Logistics: If you are selling physical products (especially products that are fragile), logistics should be thoroughly analyzed. Some of the things you should consider: Have you contacted logistics companies for quotes? What is the estimated delivery time and is this going to be accepted by your customers? Are there any insurance costs? Do you have a backup plan? Demand : You might be already trading successfully in one market but penetrating an overseas market will be something different. Have you considered if: There is demand for your products. Your products are reasonably priced Are there seasonalities that can affect the demand Have you developed and analyzed forecasts for the expected demand for your products? Competition: You might have already planned everything and considered every single aspect but competition is one of the things that might not be clear unless you start trading abroad. There are a few things that you could do to gauge the competition. The first thing is to contact import agencies and ask for their help. The second thing (which is the least expensive too) is to search online and try to identify the big players and the concentration in the market. Overtrading : For some people, this word might sound like a dream coming true but in reality it is a common reason that new businesses fail. Overtrading refers to the situation where are a company expands so aggressively that the working capital starts getting lower and lower until the company runs out of cash. You need to have a well-thought plan that will enable you to match the payments to your creditors (or your bank) with the payments you receive from your customers. Tax : It is highly important to consider any tax implications and ask for professional advice if necessary. You might to register for sales tax (VAT) if your sales exceed certain thresholds which will make your products more expensive. You shouldn't underestimate the complexity of the tax systems! Pricing: Finally, pricing is something that can be affected by all the above. You should consider what are the added costs that you will need to include in the price and how will these costs affect the demand and the expected sales. Apart from that, your prices should be compared with the rest of the market.