Exporting can open up new opportunities. Many small businesses look to international trade when they can't increase sales in their home markets, while some businesses sell exclusively to customers overseas.
The internet has enabled many more British businesses to reach customers all over the world. As well as boosting revenue and fuelling growth, exporting can reduce the risk of over-reliance on the UK market, expanding your customer base and profits.
Are you ready to export?
Becoming an exporter is exciting and potentially lucrative, but you need to be ready for the numerous challenges you'll face. Successful exporting relies on understanding where good sales opportunities lie and how best to take advantage of them.
You must have a good knowledge of the overseas markets in which you plan to become active. That means knowing what customers want and what competition you face. You must also be aware of any relevant cultural, legal, financial or taxation issues.
You must consider how you'll move goods overseas and process payment from overseas customers. If you plan to establish an overseas base, how will you find and then manage premises and employees?
There might be special product or health and safety rules you need to comply with. In some places, crime and/or political, social or economic instability pose a threat. Language or cultural differences could create a barrier between you, your staff and customers.
Research overseas markets
With a whole world to choose from, you might find it difficult to pin down the best exporting opportunity. Smaller businesses often operate reactively, by responding to opportunities that come their way. But you can actively seek out opportunities. Your trade association, the local Chamber of Commerce and the Department for International Trade can all help you spot promising export markets for your offer. They can also help with export market information and trade missions.
It's vital to do proper research before taking the plunge. This needs to cover more than just understanding local customer requirements and the competitive environment. Different languages, cultures, laws and distribution systems are just some of the obstacles you will need to overcome to sell overseas successfully. Visiting new territories on fact-finding missions is advisable.
Market research will help you tailor what you offer to suit your export market. Bear in mind, however, that local competitors will have an inbuilt cost advantage; unless you can offer something special, you'll find your margins under severe pressure.
Make sure you understand the financial implications of exporting. Any additional investment you make to launch your product will reduce your margins, as will paying agents or overseas staff. Tax and currency fluctuations can also have a significant impact on your profitability, while transporting and storing goods can add to your costs. If you grant trade credit, getting paid can take longer and be more complicated.
Some goods can only be exported under licence - otherwise Customs could seize them. International trade can also involve negotiating your way through a mountain of paperwork, plus, there could be VAT and duty to pay.
Distributing goods overseas
An effective distribution strategy will enable you to use your sales channels effectively and maximise profits.
Consider how you will distribute your products or services. Unless your offer suits direct sales (for example, selling online) then work with a local agent or distributor - you will benefit from their local knowledge while you build your market capability. It can also be more cost-effective to sell through an agent or distributor rather than direct to end users as they already have an established customer base.
You need to decide how much control you want and what you want the channel to deliver. You might need a channel that showcases your product, for instance, or provides installation and customer support. By working with a sales agent you can control your pricing and establish a direct relationship with the customer. Avoid working with too many intermediaries. It will make it easier to remain in control of your brand and allows you to build stronger relationships with your distributors.
Getting your goods into the export market is yet another challenge. Some distributors will handle this for you, but you may have to deal with customs clearance and local taxes yourself. You'll also need to negotiate payment terms and protect yourself against the risk that customers fail to pay or that exchange rates move against you.
You need to manage your distribution channels properly. This means investing in in-house systems and staff, as well as building good working relationships with agents and distributors. Efficient logistics and effective communication are vital if you want to maximise your sales.
Creating an export marketing strategy
Successful exporting starts with a strategy that spells out how you can use your strengths to give you an edge and how you can overcome your lack of international experience. You'll need to decide how much time and money to invest in getting your overseas sales off the ground and set yourself measurable targets. Exporting typically kicks off with a trial in one market, so you can refine your approach before committing resources to breaking into other markets.
Exporting takes commitment. It means expanding your operation and developing relationships in overseas markets. If your resources are already stretched, you should focus on your UK sales for now. Exporting isn't a quick fix for a shortfall in domestic turnover or a squeeze on profit margins.