When we go into business, it is to make profit. For exporters (particularly start up exporters), having an understanding what you should do to be profitable on a regular would help sustain your business.
Let’s delve right into it.
- Understand how to use hedging to mitigate currency risk
Currencies fluctuate. Every day events take place in the world, and these events have positive or negative effect on currencies. Every exporter has to deal with the risks associated with dealing in foreign currencies such that whatever happens you get your projected profit from your export. Imagine the value of GBP(Great Britain Pound) was N450, then two weeks later the value of GBP appreciates to N480. That’s N30 loss per unit on what you’re exporting.
But what if you and your customer agreed on the exchange rate N450, and then you both worked out a way such that even if currency falls or rise, both party is assured of not being on the loosing side due to fluctuating currency price? That would be great, right?
This is called hedging. Hedging helps both party bullet proof from whatever the price of any currency might be valued at in the future. - Do thorough market research of your target market.
Your market research should help you understand your market. It should help you gauge demand level, and how best to stay profitable with the market.
Some tips to help your research is following industries relating to the commodity you’re exporting. For example, for a cocoa exporter, the chocolate industry is a good industry to follow. An increase in demand for chocolate is good indication of a booming cocoa exportation to that market. - Secure low interest funding for your exportation.
Because you don’t want to get loans that can put pressure on your margins, looking for some low interest loans or maybe government grants should be the way to go for you.
Trying to get funds to facilitate your trade can be daunting. So exploring several options is crucial for you to remain profitable. - Be creative with marketing and promotion
After you’ve done thorough market research, it is time to start reaching out to your market.
There are several way to promote your products to the international market, however, which ever way you choose to reach your customers must be able to give you edge in terms of long term profitability.
Another important tip on this is once you’re able to find any customer who can trust you enough to want to do business, don’t disappoint! Your existing customers can bring more customers for you, this serves as a cost effective way to expand your business in your target market.
Other ways to promote your business include run targeted adverts online or you can leverage on export agencies to access their network of buyers.
