The time to export is now!
So say the British government and a significant number of U.K. SMEs are heeding the call. The move would seem to be a wise one, and not just because of the uncertainty surrounding Brexit negotiations. Recent figures from the FSB showed that export businesses turnover nearly three times more on average than their non-exporting rivals. It’s also been shown that a company will experience an average of 30% growth within two years of beginning to export.
However, many still see the legislation and potential risk involved in exporting as a barrier to entry. While it’s true that exporting does involve more upfront work than selling to domestic markets, the majority of potential dangers and difficulties can be overcome with the right research and planning. With potential rewards including higher profits, a more secure and diverse customer base and even more innovation, if your business has export potential then it’s a possibility worth exploring.
With this in mind, here’s our guide to the steps you can take to get your business export-ready.
If you’re already selling successfully in the U.K. then it’s almost certain that you’ll find a market for your product overseas as well. But before you dive straight in, it’s worth carrying out some thorough market research on potential destinations and factors that might affect your sales.
Your target demographic will likely be similar to your current customer base, but you should still go through the same detailed customer profile that you would when launching a new product for your U.K. customers. Specific questions to consider might be whether there are any differences in the economic climate that might affect their purchase decision – or indeed the real climate! Likewise does the geography of the target destination affect the potential appeal and application of your product?
You should also look carefully at the competition. Is the problem that your product’s USP answers in the U.K. market already being solved elsewhere? How do your overseas competitors market themselves and how is it different to your current strategy?
A great place to start for your market research is the gov.uk website, where they offer a number of guides to export by country.
The importance of a sound understanding of the business etiquette and cultural differences of your export market cannot be overstated. Simple things such as whether the name of your product has a different meaning in your target market’s language or whether the colour has a particular significance can easily be overlooked. Understanding customs such as when and how to start negotiations are also important, and you will only gain credibility by taking the time to learn a few basic pleasantries such as ‘please’, ‘thankyou’ and ‘a pleasure doing business with you’.
Establish Routes to Market
Once you’ve confirmed that a country has export potential for your business the next step is to establish your routes to market. This will be different for every company, but some of the most common and trusted methods are:
Trade Missions: Governments and other export-focused organisations organise trade missions to countries with high export potential and will often help with funding for travel. The missions often involve a mix of social events and expos – both great opportunities to meet and greet potential overseas partners who come with a stamp of approval.
Expos: If you’re not ready to make the commitment of travelling to a trade mission, export expos in your own country can provide a great introduction to some of the opportunities that might be available to you. Visit the British Chamber of Commerce website for lists of upcoming events.
Ecommerce: Whether you are selling via your own website or on an ecommerce platform such as Etsy, online trade is becoming an increasingly common way for companies to break into new markets. It’s a great way to establish demand and can even throw up some surprises when you find a customer base in places you might never have dreamed of selling to. Reassure potential overseas customers by explaining on your website how you handle overseas transactions. It can also be a good idea to clearly state your opening times, or even adjust your office hours to handle enquiries from overseas.
Inbound Calls: It happens! Sometimes a potential distributor or will contact you from overseas, even if you’re not thinking of exporting. The key here (after all appropriate due diligence) is to be flexible – this could be a route to a whole new market you’ve never considered.
Whatever route you decide on it’s worth bearing in mind that (with the potential exception of ecommerce) deals are very rarely done straight away and you may find yourself travelling back and forth between countries more than once before you sign a deal. Build these costs into your business plan and remember: Exporting is an investment that takes a little time to bear fruit.
Every country has different regulations regarding tax, customs and health and safety standards. Knowing these in advance (and making sure you comply with them) can save a lot of frustration further down the line. No getting around it – exporting involves a lot more form filling than regular selling in the U.K. But it does get easier once you’ve done it a few times and you’ll find a lot of guides to help you through the process, especially the country guides produced by gov.uk.
Be aware that regulations in different countries can be product specific too – what’s allowed into one country might not be permitted into another.
Just as important is to make sure you have your intellectual property tied up so you don’t face competition from copycat products once you enter your new market. The process of protecting your product can take up to a year, so it’s worth starting this a soon as you have made the decision to export to avoid frustrating delay.
Before you agree your terms of sale make sure you build in the cost of shipping to your pricing. This can prove expensive, especially if you are exporting heavy or bulky items, or materials that come with a large customs duty. And obviously the further away your new market, the more it will cost to ship there.
It’s not uncommon for the cost of shipping to be the prohibitive factor when exporting, so it’s worth looking at this before getting too deeply involved in the other paperwork. One way to make it cost effective is to set high minimum order quantities, or to incentivise larger orders.
If shipping still remains prohibitive, think flexibly about what elements of your product you might be able to outsource to your new market. For example, it might be that you export your design and expertise, but use materials sourced from the country you are selling to.
Two things matter in business: selling your product and getting paid. While you will find a huge amount of help to sell to other countries, when it comes to getting paid the answer can be less clear. Indeed, the problem of getting paid is the sticking point for many businesses thinking of exporting, as average payment terms are between 6 and 9 months.
It goes without saying that this can cause serious cash flow problems if you don’t have the reserves to tide you over during that waiting period.
UKEF offer help and advice for businesses unsure how to go about getting paid by their new customers overseas. This might involve assistance securing documents such as letters of credit, or guaranteeing a payment to ensure you get paid.
And at Jardine Norton we also offer export finance to companies selling abroad. Because we are not restricted by the bank or other external financiers we can fund the value of your export invoices (give you the money upfront) within a much shorter time – usually between one day and one week. We will also fund trade to countries that other institutions are not currently able to, allowing you to further expand your horizons.
Case Study: Omnio
See how we helped this innovative product design company manage their transition into new overseas markets.
Find out more
For more information about how Jardine Norton might be able to help you get paid faster for the goods and services you export, get in touch today to speak with a member of our team.