Preparing an export budget for your firm
8: Preparing your export plan > Preparing an
export budget for your firm
Revising your initial budget
You will recall that have already allocated a small budget in step 4 of the export planning process for your export activities to date. The purpose of this intial budget was to enable you to do the research and planning that is required to develop a viable export marketing strategy for your firm. Even this step - step 8 - still falls within the scope of this initial budget. However, the time has come to prepare a more substantial and longer-term budget to support your export endeavours. Once you have complete step 8 and outlined your export marketing strategy, you will then begin to put this strategy to work and will need more money to do this.
Your budget must match the time frame of your export strategy
Your export budget should prepared with a time frame in mind. If you believe that it will take 2-3 years to establish your exports, then you need a budget to support your export activities over this period. It is no use expecting to take three years to develop your export market, but then to budget only for one year. At the end of this year your money will inevitably run out and you will almost certainly have to find more money. However, your firm's circumstances and priorities may have changed and it may be difficult to set aside more money for your export activities for the next year (or two) at this time. This means that the focus will shift away from exports, resulting in the ultimate demise of your export endeavours. It is crucial, therefore, to allocate a realistic budget for your exports for the time period it will take you to establish your exports.
Possible budget items
The budget should include money for the following activities:
You need to budget for at least one, but probably more staff that will be allocated to handling the firm's export activities. Even if you plan to do this yourself, you need to attach a cost to your time, especially if it will take time away from your management or work activities (which it surely will). You may argue that you will do the export development work after hours and in the evenings, but this seldom is feasible. Exports require a lot of attention and you will find yourself spending more time on your export activities and less on your other work responsibilities. If you neglect your day-to-day work, you may find that your business suffers as a result. It is wise, therefore, to consider appointing an export admininstrator; someone that can take care of most of the export activities that you will be required to do. Not only do you need to budget for this person, but you should also allocate a cost to (and budget for) your own time that will spend on d
eveloping your firm's exports.
This need not be a senior position - only someone reliable and hardworking that is interested in international affairs and has some international 'commonsense' (e.g. knows where countries are located and has perhaps travelled overseas and or has some interest in international affairs). It is really important that the person you choose is good; this person will in some instances need to be able work on their own initiative and must be self-driven. They may have to do some administrative work, some online research, communicate with intermediaries, trade associations and potential customers, organise trips abroad and perhaps even arrange participation in an overseas trade fair.
As your exports begin to grow, you may need to appoint additional staff. For example, you may want to appoint a export marketer who will help you develop your export markets and you may need someone to focus on the export logistics, and still another to concentrate on export payments, assuming that your exports grow large enough to warrant this staff.
Creating a small export department will mean that need to allocate space for the department even if it is only for one person. Allocating space underpins the idea of an 'export department' and gives legitimacy to your firm's export endeavours. You will need a computer, a fax machine, a telephone, a printer, a photocopy machine and other tools of the trade. Fast internet access is essential (perhaps an adsl line) and your telephone and fax lines must be able to dial international. You also need to set budget aside for international communications - phone calls, faxes and courier services.
It is very difficult to develop export markets without travelling abroad. Overseas buyers normally will want to meet the people they do business with and travelling abroad shows commitment on your part. It also gives you the chance to better understand the market you will be operating in and perhaps to participate in a trade exhibition. It is difficult to say how many trips you will need to undertake, but at least one is essential. I believe two trips a year is probably adequate and desirable, and even more may be necessary depending on the markets you are concentrating on and the products you are marketing.
Export marketing expenses
This will be one of your biggest outlays. You need to budget for brochures, redevelopment of your website, a promotional CD perhaps, as well as for other promotion materials (printing of new internationally-orientated business cards, for example). Don't forget, you may need to translate these materials into other languages and this can be very expensive. The budget for the any trade fairs also falls under marketing, but because we see trade fairs as being so important, we highlight this expense separately below.
Participation in a trade exhibition
A trade exhibition as we have said is an excellent way of marketing and introducing your product to the foreign marketplace. I believe that participating in an suiable exhibition will generate a lot of good publicity for your firm and is one of the best marketing avenues available to you in exporting. Trade fair participation is not cheap, however - see the section on trade fair budgets. I would also only participate in a trade fair once I have done some preliminary marketing to raise the awareness of my firm. It is likely, therefore, that trade fair participation may come in the second or third year of my export schedule.
Additional export research
Your research activities never stop and you need to allocate some money for this research. It may be as simply as buying one or two international research reports that have already been compiled about the global market for your sector, or it may mean undertaking more specific marketing research to establish specific customer requirements or trading opportunities/impediments. You may also want to build up an export trade library and buy export directories and similar publications.
Once your exports begin to grow, you will need to budget for freight forwarding, insurance and other logistical and documentary matters. Clearly, these costs form part of your export costing and are worked into the export price. You may, however, need to allocate a substantial sum to pay upfront for these expenses, especially the first time. Thereafter, they becoming a typical cost item.
Product redevelopment expenses
We have pointed out that it is highly likely that you will need to do some redevlopment of your product to meet international requirements. This may involve additional R&D, production-line adaptations, creating and printing new labels, developing new packaging, etc. Some of these changes may be very expensive and you will need to allocate a budget to undetake them initially even if you expect to recoup your expenses from your exports eventually.