Starting an import export business in India can be a lucrative endeavor, but it does require some upfront capital investment. In this blog post, we’ll break down the basic costs associated with launching this type of business so you can determine how much money you’ll need to get up and running.
Costs to Consider
When budgeting for your new import export company, there are a few key categories of expenses you’ll need to account for:
- Registration and licensing fees – To legally operate in India, you’ll need to register your business and obtain the necessary import export code and licenses. Plan on investing between ₹15,000-₹30,000 on the paperwork.
- Office space – While you can start small and run the business virtually, having a dedicated office space for meetings and inventory storage is ideal. Budget ₹25,000-₹1,50,000 annually for rental fees.
- Product inventory – One of your biggest upfront costs will be purchasing your initial product inventory to import or export. Amount will vary dramatically based on your niche.
- Operations costs – Ongoing costs like shipping, storage, marketing, accounting services, travel for trade shows, etc. Budget upwards of ₹3-5 lakhs annually.
Below, we’ll explore these categories in greater detail.
Registration & Licensing Fees
The first step in starting any business in India is making sure you have the necessary registrations and licenses in place. Here are the basic requirements:
- Business registration – Register your business structure (sole proprietorship, partnership, LLP, private limited company) with MCA. Cost is ₹2000-₹4000.
- Import export code – Obtain an IEC code from the Directorate General of Foreign Trade. Fee is ₹500-₹1000.
- GST registration – Register for Goods and Services Tax identification number. Free unless applying for voluntary registration.
- PAN card – Apply for a Permanent Account Number card from the Income Tax Department. ₹105-500 depending on type.
There may also be additional industry-specific licenses required depending on the products you’ll be importing or exporting. All together, plan on investing ₹15,000-₹30,000 on registrations and licenses.
Office Space
While many import export businesses operate as home-based ventures, having a professional office space can give you more credibility with suppliers and clients. Here are some office rental options to consider:
- Coworking space – Shared work environment with desk space and meeting rooms. Costs ₹5,000-₹15,000 per month. Offers networking opportunities.
- Commercial space – Private office space leased from business center or commercial building. ₹10,000-₹1 lakh+ per month depending on size.
- Warehouse – If storing inventory, a warehouse rental can also serve as your office. Costs ₹4,000-₹25,000 per month.
Make sure to factor in security deposit fees as well which typically equal a few months of rent. Also budget for monthly utilities, internet and any office equipment or furniture needed.
Product Inventory
For a product-focused import export company, your inventory will be one of your biggest start-up costs. The amount of money you’ll need to spend here can vary dramatically based on:
- Your niche – Some products like fabrics or handcrafts can be sourced cheaply while high-value goods can require big upfront buys.
- Suppliers – Sourcing through an intermediary vs direct from factories will impact costs.
- Order quantities – Large bulk orders generally provide better pricing per unit.
Realistically, you may need ₹1-10+ lakhs in working capital to purchase your first product inventory shipment. Choose your niche carefully and start small while reinvesting revenue until you reach your ideal inventory scale.
Operations Costs
The day-to-day costs involved in running your import export company will also require significant budgeting, likely ₹3-5+ lakhs annually. Operations expenses may include:
| Expense | Details | Estimated Cost |
|---|---|---|
| Shipping & Delivery | Freight, couriers, export/import duties | ₹50k-5L p.a. |
| Storage & Warehousing | For inventory storage | ₹25k-1L p.a. |
| Accounting | Bookkeeping, taxation filing | ₹50k-2L p.a. |
| Marketing | Digital marketing, trade show fees | ₹1-5L p.a. |
| Travel | For trade shows, sales trips | ₹1-3L p.a. |
| Legal & Professional fees | Consultants, trade compliance | ₹25k-1L p.a. |
| Insurance | Cargo, product liability | ₹10k-50k p.a. |
| Software | Inventory, data management tools | ₹5k-25k p.a. |
Total Budget
Given all of these costs, a reasonable estimate for the total capital needed to start a small to mid-sized import export company in India is ₹10-40+ lakhs. This provides for modest initial product inventory purchases, licensed operation, and 1-2 years of operating expenses while sales ramp up.
Financing Your Business
Coming up with the full startup budget likely means seeking outside funding beyond your own savings. Some options for financing include:
- Bank loan – Approach banks or NBFCs for a small business loan or OD facility based on your credentials.
- Investors – Pitch to private investors or PE firms for seed funding in exchange for equity.
- Government programs – Apply for grants, subsidies and incentives like MSE-CDP, NEIAEI.
- Family & friends – Seek personal loans from people in your network who can invest in your success.
Combining sources to raise your target capital amount while minimizing any equity stakes or high interest rates is wise. An import export business can generate nice returns for investors once established.
Is Starting an Import Export Business Profitable?
Launching an import export company requires significant upfront capital and ongoing operating costs. But with hard work and the right strategy, this business can ultimately prove quite lucrative in India based on:
- High demand – Rising consumer culture and economic growth is fueling import needs across sectors.
- Growing industries – Areas like electronics, automotive parts and organic foods have strong export potential.
- Favorable environment – Government initiatives like NIRVIK scheme easing small exporter access to affordable credit.
- Wide margins – Markups between sourcing costs abroad and domestic selling prices tend to be generous.
Expect breakeven to take 1-2 years. By year three, annual profits in the ₹30-70+ lakh range are reasonable targets. Get your import export venture properly licensed, funded and strategically launched to start cashing in on this high upside sector.
Ready to Launch Your Startup?
Starting an import export company offers one of the more accessible and potentially profitable small business models for aspiring Indian entrepreneurs. This guide outlined the major costs and funding needs associated with getting your trading venture off the ground.
The total capital required could be anywhere from ₹10-40+ lakhs depending on the scope of your operations and initial inventory purchases. While not an insignificant amount of seed funding, the high growth prospects for the industry make import export a smart bet.
If you have a mind for global trade and the work ethic to build a cross-border brand, now is a prime time to tap into the “Make in India” revolution. With the right regulatory clearance, capital and strategy, your trading startup could be facilitating valuable international commerce and generating major profits in just a few short years.
Topic: Financing Options to Fund Your Import Export Startup
Raising startup capital will likely be one of the first steps and greatest challenges facing aspiring import export entrepreneurs. Beyond bootstrapping your business using personal savings, here are some of the top financing options:
Bank Loans
Approach leading nationalized and private sector banks like SBI, ICICI Bank, HDFC Bank as well as NBFCs for small business funding based on your plan and credentials. Government backed schemes may offer reduced collateral requirements and interest rates.
Private Equity & Investors
Those with an exceptionally compelling import export opportunity can attempt to sell equity in exchange for risk capital from HNIs, angel investors and private equity firms active in the space.
Government Programs
Agencies like APEDA, MPEDA and IIFT offer useful exporter training courses. Government small business grants, subsidies and incentive programs can also help offset costs.
Friends & Family
Seeking personal loans from relatives and your inner circle willing to back your abilities can be an accessible startup funding avenue before approaching institutions.
With the right mix of personal assets, outside investor buy-in and government support, securing adequate launch capital is an achievable goal for aspiring import export startups.
