Understanding your exporting costs

Estimating the costs of doing business can be hard enough here in New Zealand, and disastrous if you get it wrong. When you decide to step out into a new international market, it gets even trickier. The more accurate and prepared you are, the less financial risk for you and your business.

Before exporting, it's important to work out whether you can make enough profit to cover your costs and be rewarded for the financial risk and hard work of entering an export market. Remember you may face a lengthy wait before you see a return on your investment.

The best way to determine if entering a new market is even feasible, and if your company can sustain the investment it requires, is to be realistic in your financial planning. You may have to pay for unbudgeted items, substantially affecting your cash flow and working capital. Spend the time now, and equip yourself with better information for your planning and decision making.

Understanding exporting costs

This Export Essentials guide will help you identify all of the costs you need to factor on as you work out the feasibility of any market you are looking to export to. You’ll find information on:

  • Why you need cash flow and sales forecasting
  • What costs you need to think about
  • The importance of knowing your break-even point and using this to determine the feasibility of entering your target market
  • Useful tools and templates

Download our free guide now on this page and get some clarity on the true cost of doing business offshore and how to factor this into your planning and decision making.

Watch this four-minute video of Jai Basrur, NZTE Beachhead Advisor and James McLeod from Made4Baby talk about the many hidden costs of selling offshore, from domain name registrations to requests from distributors for giveaway items and ensure these are in your price. James also shares advice he was given that you need to ensure your business is financially robust enough, and your relationship with you bank is good so that you can withstand slow payments.

If you want to learn more about sizing the market opportunity, planning and forecasting then register now for our Export Essentials Workshop. We’ll give you practical tools and techniques to take your business global.

Jai Basrur: To an exporter and be strong with practical experience, the cost of exporting would represent the costs incurred in implementing an export strategy over a period of time. This is a more holistic approach  when one is exporting; we are incurring costs over a period of time and on different activities. Export costs would include the cost of resources, time costs, activity costs and any related opportunity costs for developing that strategy.

James McLeod: Yeah, the hidden costs that we’ve come across are like compliance when you enter into a country, registration costs. Don’t forget the domain name for your product as well; we forgot that in a few countries, and you do want to make sure you secure your domain name. The other one that we got caught out on was insurance, so in those countries where you have public liability like Canada, the US, Australia, make sure you’ve got public liability insurance.

Jai Basrur: One of the key components I’ve experienced is the time cost, because let’s say you’re going into a new market, there is always a market development cost, which is not such a reality in New Zealand because quite often you’re responding to a market need or you’re adding on a product to an existing portfolio, whereas when you go overseas a lot of time, resource and activity is spent on just getting to know the market in terms of developing that market and getting yourself established.

James McLeod: Brigid Liddell. She’s a New Zealander who lives in New York. She gave us the best advice ever. She said, “You can get the big order upfront, but what happens; can your business run if you don’t get paid for 30 days, 60 days, you know, for 180 days? So, ensure that you have a good relationship with your bank or even your investor because you’re more than likely going to need that cash-flow in between getting that first order payment.”

Jai Basrur: What does happen is that red credit tends to take longer. And the other aspect is that very often when you start exporting you do take on a risk of not getting your money paid.

James McLeod: The key, I find, for managing your costs is to ensure that you’ve built-in enough margin for when there are requests for growth. So, your distributor will likely ask you for a gift with purchase; they will ask you for a bulk pricing. They will more than likely ask you for giveaways. Just make sure you’ve built those extra costs in there for when you’re exporting or setting up your price.

Jai Basrur: In approaching export markets my advice is to follow a systematic approach and don’t follow a kneejerk approach. Make it a part of your strategy and don’t react to other people or market pressures, do what is right for you. Each business is unique, and going into export market, while it seems very attractive, has also got certain issues which need to be carefully considered.

Exporter guide

Use the online calculator to help you figure out the number of sales you need to make a profit 

  • I want to find out about tax requirements for export
    NZTE doesn’t provide tax or legal advice as we are not specialists in this area – the best option is always to get professional advice on this matter. 

    To find tax a lawyer in New Zealand, the New Zealand Law Society provide a useful tool on their website.

    Your local Chamber of Commerce may be also able to recommend tax or legal experts who have knowledge of particular export markets, and have worked with other export companies. You can find your nearest chamber online on the New Zealand Chamber Network web page.

    For some markets, NZTE holds lists of tax lawyers and accountants that our team is aware of – to check if a list of contacts is available for the market you’re looking at, contact our Advisor Team on 0800 555 888 or send us an enquiry
  • Who can I talk to in my region about business training, advice and connections?

    The Regional Business Partner (RBP) network has specialist business advisors available to provide you with advice, information and connections to support your business. They can help you:

    • identify the next steps for your business
    • connect you with the local business community, industry networks and clusters
    • match you with a mentor from Business Mentors NZ
    • provide access to Capability Development vouchers
    • provide access to research and development (R&D) funding
    • help you navigate the support you can get from Government agencies.

    The RBP network is made up of these local Economic Development Agencies and Chamber of Commerce: 

  • How do I protect my business against a buyer defaulting on a payment?
    The Export Credit Office can help you protect your business from cancelled contracts or payment defaults that are due to commercial or political events beyond your control. 
     

Export Essentials Workshops

Develop your export plan in our practical two-day workshop