Exporting for the first time: What should your business consider?

1. Calculate the true cost of exporting

Short answer: Exporting adds costs, transport and export administration in particular, that need to be built into your pricing before you agree a deal.

Who you plan to sell to also has a significant impact. Selling in bulk to a distributor has a very different cost and pricing structure from selling individual units directly to customers abroad. Before agreeing prices, make sure you understand the additional costs involved and whether your proposed pricing can still deliver the margin your business requires.

2. Decide who you want to sell to

Short answer: Choosing between distributors and direct customer sales is one of the first decisions to make, since each carries different risk, credit and cost implications.

Selling through a distributor network may mean offering credit terms, which introduces the risk of bad debts abroad and exposure to different countries' laws.

Direct sales to individual customers are more likely to involve payment before delivery, but can mean higher transport costs and higher customer acquisition costs, including marketing. Understanding these differences helps you decide which approach suits your business.

3. Understand customs and tariffs

Short answer: Markets outside the EU common market carry customs-related costs that should be priced in before you decide a market is viable.

Exporting goods to Britain has become more complex in recent years, and tariffs imposed by the United States can also affect Irish businesses selling into that market. These potential costs need to be understood before deciding whether a particular export market is commercially viable.

4. Consider currency risk

Short answer: Exporting to eurozone countries removes currency risk; exporting to markets with a different currency, such as the UK, does not.

Irish exporters selling into sterling markets are exposed to exchange-rate movements. Many Irish businesses manage this by invoicing in euro and taking payment in euro.

5. Research the market before investing

Short answer: Assess competition and price sensitivity in your target market before spending on marketing or sales infrastructure there.

Consider the level of competition and whether it could affect your ability to generate sales. Also establish how price-sensitive the market is. Where customers are highly price-sensitive, you need to know whether you can stay competitive while still hitting the margins your business requires.

6. Check the regulations in your target market

Short answer: Your product may face different regulatory requirements abroad, so check this before you commit to a market.

For a manufacturer of farming equipment, for example, regulatory risk may be lower when exporting to other EU countries, while selling equipment into a market such as the United States could require permits or licences. Understanding these requirements early helps you assess both the practical implications and the potential costs involved.

7. Understand your tax obligations

Short answer: Exporting can create domestic tax obligations in addition to customs costs, and these vary depending on how you sell.

Selling directly to distributors may not create the same tax obligations as selling directly to individual customers. Depending on the circumstances, you may be required to submit VAT returns through the Revenue VAT OSS system. Tax implications should form part of your planning before you begin selling into a new market.

8. Put appropriate contracts in place

Short answer: Get legal advice before drafting sales agreements with customers abroad, covering terms, responsibilities, dispute resolution and IP.

Agreements should clearly set out the terms of the arrangement and the responsibilities of each party, and provide for how disputes will be resolved. Intellectual property is another consideration. Protections your business has in Ireland may not automatically apply in every country you export to. These issues should be understood before entering into agreements with overseas customers or distributors.

9. Review your business insurance

Short answer: Exporting can change your insurance requirements, so review your cover as part of your planning rather than after overseas sales begin.

Business insurance premiums are generally influenced by financial factors including turnover, wage costs and net profits. If your business begins exporting, additional insurance protection may be required.