Minimum Investment for Import Export Business
Investment is an indispensable prerequisite for any business in the current market economy. Therefore, the initiative to mobilize an measure the use of working capital, is very necessary to improve the efficiency of investment in any company.
For every business, the need of minimal investment can be different. Investment size depends on various factors such as: company structure, no of co-founders, business model, products planned to be sold, scale of the business etc.
All must start with careful planning and estimating. Entrepreneur must count all the relevant costs and expenses what are needed to start up and break-eaven. Breakeven is the point on the revenue scale, where company is not jet profitable, but is also not losing the money.
How to calculate the investment for export-import business
In every business, there are 3 types of main costs. There are fixed costs, variable costs and one-time costs. There are also more complex costs like progressive costs and undirect costs. For export-import startup, to estimate the minimal investment, these are not so important to consider these.
We will explain you the 3 most important one,
based on these, you can calculate rough investment need for your export import business.
One-time costs
are such, what entrepreneur needs to bear one time only. Example company registration cost, business certificate or license application etc. Here you need to count all such kinds of costs.
Fixed costs
Are such like office rent, warehouse rent, staff monthly salary. Those are costs what are same every month.
Entrepreneur must consider and count all the fixed costs per one month. Then need to consider, how many months company need to operate to reach to break even. For new company, fixed costs should be as low as possible.
But you cant determine, how many months you need to “burn money”, before you reach to break-even, until you don’t know the variable costs and profit margin per product unit.
Variable costs
Are costs, which depends directly on the products being sold (revenue). It means, the more pieces you sell, then totally the more variable costs (as sum) you will have.
Most common variable costs for export-import companies are: product purchase costs, packing costs per product unit, transport and delivery cost per product, custom and insurance, bank costs etc.
Profit margin
Is the amount of profit you make per each product. If you sell one unit of product and you subtract from it the variable cost then you will have the profit margin.
All the previous, what you read, can put into a very simple formula, to derive and calculate needed minimal investment for your export-import business.
Entrepreneur must calculate all the variable costs per 1 unit of product.
After that you need to estimate, how many pieces you need to sell, to be able to cover monthly fixed costs. You can only calculate the volume, if you know, how much of profit you are going to make from one sold product unit.
All these provided informations can prove to be very useful to analyse and understand the current market trend.
For further info,visit us at B2B Export Import Academy Pune.
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