Export costs, sales forecasts and the moment of truth
Updated: May 27, 2019
Nothing guarantees success in exporting. But you’re much better off if you know for sure there’s money to be made – and what it’s going to cost to make it all happen.
It’s important to get a clear picture of your cash flow and all the costs associated with exporting before you enter a new market, and then balance it against a reliable sales forecast.
You’ll then be ready to work out exactly what level of sales you need to cover your costs in a new market – and whether you can actually make enough sales to reach that point and start turning a profit.
Cash flow for exporting
A good cash flow forecast for your export venture will tell you exactly when money is coming in and going out each month.
This is critical, because you’ll need to know when it will be able to support itself financially – and how much money you’ll need to keep the lights on in the meantime.
Remember that international sales will often mean longer payment cycles and extra up-front investment, plus more cash needed to put together larger sales or orders.
The usual rule of thumb is that exporting takes twice as long, and costs twice as much money, as originally planned.
You need to be prepared to balance the books from month to month under these pressures until you see an overall return from exporting, which may take years.
Get advice from your accountant to build a sound cash flow forecast, and use a range of forecast scenarios – best, worst, and likely – so you won’t get caught out if things don’t go to plan.
Assuming you’ve already developed your product or service, launching it overseas will mean up-front costs for market research, promotions and marketing, changes to product or packaging, new production capacity, extra staff and more.
You’ll also have to consider variable costs related to sales – including freight costs and insurance, agent or distributor margins, duties and taxes, and export financing, on top of your standard production costs. These will give you the actual landed cost of your product or service in-market.
See our full guide to the cost of exporting for a fuller list of export costs to consider – then work them into your budget and pricing models.
Sales prices and forecasting
When you’re fully across your costs, you’re ready to work out your selling price in-market. Use our full guide to pricing for export to work through this and get advice on the right pricing strategy to suit your product or service and the market you’re targeting.
The next step is sales forecasting – the most exciting part of the process, and the hardest to get right.
Do as much research as you can to support export sales forecasts and fight the temptation to make big top-down claims. It’s better to be cautious, and do better than expected, than get carried away and pay the price later on.
Just like cash flow, don’t do this alone – get your accountant and an export advisor to check over your pricing and forecasts before you make any decisions.
Sales prices and forecasting
Once you know your costs, your selling price and your likely sales in-market, you can calculate a break-even point.
This is the amount of sales you need to make in an export market to cover your costs. Every additional sale on top should be making you money.
Comparing your break-even point with your sales forecasts is a key moment in export planning. This will tell you whether you can actually sell enough in a new market to make it worth your while.
If you need to sell 500 units a year, but an overseas market can only absorb 200, you might need to trim your costs or alter your pricing – or it might be time to think about other markets instead.
But if it turns out you can break even in your new market at 500 units, with plenty of sales potential left over, you’re in a much better position. Now it’s time to build a plan and make it all happen.
Ready to take your business places? Sign up for the next Export Essentials Workshop in your area and get proven tools to grow your business faster internationally.