The road to riches is paved with businesses that have taken the plunge and exported. Equally there’s the road less travelled where businesses have fallen into a black hole.
Having the best product or service in the world doesn’t guarantee a smooth export journey. Being underprepared and exporting before arming yourself with the facts and the right support can be a recipe for disaster.
So if you have made the decision to export that’s fantastic. But don’t stop there.
Look at these key areas for starters. The challenges you will face are different from those in the UK.
For example, in some countries, the USA being a good example, it’s difficult if not impossible to obtain financial information to make an informed risk decision and generally the terms of payment are longer than in the UK. This information can be obtained but you might find it challenging if you attempt to do it yourself.
The key areas you should be addressing:
- Why do you want to export? List all the reasons, with the most important ones at the top. (e.g. the need for your product or service, you have a unique product or simply to gain a competitive advantage compared with local providers)
- How am I going to finance these goods?
- If I look at the time it takes to deliver the goods plus typical extended terms of payments, how will this affect our working capital? ( e.g. it’s not uncommon for 150 days open account terms for Italy).
- Are you aware of UK legislation and anti-corruption legislation that may apply to the countries you are exporting to?
- How are you going to market your product and find new customers in any market (identifying target customers)? Does your target audience comprise individuals you will sell direct to or will you sell via stockists/distributors?
Understanding the market map in each country – how products are introduced and distributed with all the players at each touch point is crucial.
- This will also impact on your pricing strategy – there has to be ‘rice’ in every person’s bowl. You must know the ‘cut’ each person in the distribution chain will take to determine if there is enough margin for you to cover this and make a profit, taking into consideration your other costs.
- What barriers to sale are you likely to find when marketing? Your marketing blue print may need significant modification.How will you embrace new channels you are not used to? You may encounter resistance from local competitors more agile and quick footed than you mounting counter marketing campaigns. You may need to modify your product packaging to suit the local culture and customs and be allocated shelf space etc. Your current marketing copy when translated could be ambiguous, even offensive. You must build a detailed picture before you jump in!
- Following on from this you need to know the cultural differences in trading with various countries and how these will impact on how you trade with them and how you market your products.
- How are you going to transport your goods and what export documentation is needed (e.g. custom and licence)?
- What legal challenges do you face in trading overseas?
- What currency will you invoice in and what is the potential foreign currency risk?
- Are profit margins aligned to the additional costs in exporting, extended terms of payment and risk being taken?
- How do you ensure that the goods being exported will arrive in perfect condition, meet the customer’s specification and meet all local licence criteria?
- How will you protect your company against a fraudulent transaction?
- What are the commercial and political risks in trading overseas?
- What happens if the debt is disputed or the overseas customer simply decides not to pay?
- How confident are you that you have a reliable supply of goods and raw materials to fulfil the orders for overseas customers? Will a spike in demand overseas compromise your UK operation?
- Does your current invoice financier provide an acceptable percentage of the invoice value to aid working capital to support export sales?
- How do you decide on the credit to offer an overseas customer with contractual trading terms? How does this compare with the normal terms and actual payment terms for this market? If yours are not as favourable you could face resistance with distributors.
There’s a lot to take in isn’t there?
We recognise that for some companies, the perceived challenges of exporting can outweigh the benefit.
However, your company could be missing out on additional sales simply because the process seems daunting when in fact talking to and using experts with the right experience can significantly reduce the risks associated with exporting and open your business to a whole new profitable world.
In fact, it may be less risky to trade overseas than trade in the UK due to the growing challenges around Brexit.
It’s likely you will have questions that require answers tailored to your exact situation. Please get in touch if this is the case.
Why not speak to one of our Export Experts for advice at no charge.
You can email us at email@example.com or call us on +44 (0)1279 437 662 or fill out the contact form.