If you’ve made a wish for your business in 2018, it’s probably that you experience real growth in the year ahead. Over a third of British SMEs plan to grow in 2018, according to research from the British Business Bank. And one way that many companies opt to expand is by exporting overseas. Most exporters are small businesses, and one in five SMEs exports goods or services, according to the Department for Business, Innovation, & Skills.
Antonio Horta-Osorio, the boss of Lloyds Banking Group, called upon more of Britain’s smaller enterprises to turn to foreign markets for business opportunities. He encouraged firms to look beyond the US, and the Eurozone – which is the UK’s biggest export market – and embrace Asia and South America. Plus, the Chancellor, George Osborne, revealed £45 million worth of export-friendly measures for small companies in his Autumn Statement. So, with exporting seemingly on everybody’s lips, what do you need to know? And what are some of the potential pitfalls of operating on the international stage?
What is special about your product or service?
Start by asking yourself a simple question: why would someone want what you have to offer? Understanding the value of your product or service is essential in order to be able to figure out where there’s likely to be demand for it. Think about what makes your offering different. Can you trade on its British provenance? We’ve talked on this blog before about the potential power in the Made In Britain brand. Or perhaps you have a true piece of innovation that’s new to a market. Know why your product may be desirable, or the ways in which your service might stand out in a particular location. Then, you can consider who might actually pay for it – and where.
Where in the world?
Choosing your target market is the next stage. There are a number of aspects to take into account when looking at a particular country:
- Is there a genuine demand for what your business has to offer there? Identify who your likely customers will be, and the size of the potential opportunity.
- Who are the competitors in a given geography? Find out the names of the key players in a country. Or are you offering something really new?
- Are there any language issues? Quite simply, how will you communicate in the country, as well as with your customers and staff?
- Might there be any currency concerns? Some exporters decide to hedge against any future currency fluctuations in a region. Businesses need to explore the logistics of managing their currency risk, so talk to a foreign exchange provider to get a grip on possible issues. Also, explore payment terms in your chosen spot. They can vary hugely in different parts of the world, so know what to expect.
You must research any market thoroughly, both remotely through resources such as the British Library’s Business and Intellectual Property Centre, and, of course, on the ground. You should visit the country, and a trade fair can be the way in. The Department For International Trade(DIT) has a calendar of events taking place throughout the year, and its Trade Access Programme offers SMEs grants to take part in trade missions and shows. UKTI also has a mass of expertise about conducting useful market research, and how to gain the relevant knowledge about where you’re hoping to operate. The Government’s Business is GREAT New Markets website is another valuable source of information.
Consider cultural issues
This is a hugely important area that can be underestimated by some novice exporters. Cultural differences can be very pronounced when operating in some parts of the world. In China, for example, business introductions have to be made through the right channels, and it can take years to build up relationships, and cement trust. Researching what is and isn’t deemed appropriate in a given country is an important part of your preparation to export. Even how you package and market your product or service could cause problems if you don’t understand local attitudes. UKTI’s Passport to Export service helps first time exporters better understand the markets in which they want to operate, and offers advice both from experienced exporters, and its own International Trade Advisors. Appointments can be made with these experts for free.
You’ll also need to think about practical considerations:
- Will you be working through a local agent?
- Should you sell through a distributor?
- Might you need to develop a joint venture partnership with a native business?
- Would it be better to open your own office, and hire local staff?
- Is e-commerce the best route to market?
All of these things will have an impact on how you grow and operate your business, and what sensitivities you’ll need to take into account. And talk to the Intellectual Property Office about protecting your designs, trademarks, and domain names when moving into foreign markets, too. The Government also offers further guidance on this vital aspect of working internationally.
How will you fund overseas expansion?
As well as a clear and carefully thought-out business plan, you’ll need the right amount of capital to fund your expansion into overseas markets. The Government’s UK Export Finance (UKEF) is the best place to start, as it provides SMEs with financial advice, as well as guarantees against non-payment, and insurance to protect firms.
Talk to your bank about your plans, as they may be able to offer you trade finance facilities to ease cashflow worries. Alternatively, you could seek out a short-term loan if you think you’ll need funds for extra stock or money to tide you over while you get the export side of the business up and running. You might even think about attracting investment to fund your move into exporting. Any potential investors will want to see evidence of the market research that you’ve done, so have all of the necessary figures at your finger tips, and be able to demonstrate how you’re going to generate revenue, win customers, and scale up the business. And, importantly, don’t try to run before you can walk. Some entrepreneurs are hungry to launch themselves into multiple markets, but the general wisdom is to start with one or two countries, then think about spreading further.
Finally, make sure that you tap into the wealth of support and advice that’s available for businesses that are looking to export. There’s DIT, UKEF, your local Chambers of Commerce, and even banks and law firms have export specialists to provide help. You can read a Government guide called From Local to Global that gives great tips on becoming a successful exporter. Talk to people who’ve already had experience of exporting via network events run by the likes of DIT or the British Exporters Association.
With all of this guidance, and a little drive of your own, 2018 could be the year that your business spreads its wings and takes flight, blossoming into a true exporting success story.