12 secrets of successful exporting
If you're looking to expand, will foreign markets provide the opportunity?
It is a shocking fact that just 37% of UK companies trade overseas. We are far behind our European counterparts and most of the world. However, if you really want to expand then you can’t just rely on ol’ Blighty, you must venture abroad
1. Know your market
Research is essential. It can be conducted in a variety of ways and it should never really stop. The internet, foreign embassies, business support groups such as UKTI and trade shows and exhibitions must all be on your checklist to start with. You also need to make some good contacts in the region and visit it if you are to soak up the business culture. Mark Turrell, founder of software fi rm Imaginatik, says his US arm is like an American company.
“To be successful in the US you have to act as if you come from there,” he says. “I have spent years in the US and have immersed myself in US business culture – I know the Red Sox are the best baseball team.”
Identify the key players in your market and fi nd companies which have equivalent structures and might be good partners. But, ultimately, the most important question is: can you make money?
“Can you break into it and sustain it?” asks Turrell. “If there’s only six months’ worth of business out there then you want to hold off.”
Exporting is initially expensive, risky and time-consuming, so aim for deep pockets.
2. Choose partners carefully
Agents can be employed to sell overseas and this can be a very effective way to expand. An experienced agent will have the contacts and cultural knowhow and will be able to advise you on the market.
Choosing the right one is tricky, but Grant Thornton’s Alysoun Stewart succinctly sums up what you want: “Somebody who has demonstrable and tangible experience of dealing in that market and whose position can be vouched for and referenced,” she says.
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The quest for the right partners is a major part of your research and you want to spend time with them before committing. You are looking for someone who you would employ as a senior member of staff and whose opinions you value. Nicky Santomauro, of clothing manufacturer Lavenham Leisure, has an excellent relationship with her Japanese agent, which is key to her success there.
She says: “We have quite heavy discussions with our agent before we go around the fabric stores and put our range together – agents need to have a big say.”
3. Anticipate cultural differences
Good exporters are cultural chameleons and don’t get fl ustered when cultural differences arise. Allison Riser, president of Cement Performance International, says work ethics are anything but uniform across the world. “In Latin America durin very important discussions people might just stand up and turn off their computers because it is lunchtime,” she says.
Aping your clients’ behaviour is advised. Turrell suggests noting the local fashions before arriving at a business meeting. “If you look odd when you are trying to secure a six-fi gure deal then you will receive a black mark,” he says.
China is a region that many entrepreneurs are attracted to. However, this is not an easy market to crack or understand. Steven Munnoch, managing director of Avon Metals, says: “In China they think that any contract is open to renegotiation.” This has led Munnoch to adopt a pragmatic approach to business in the country, as there is much less legal recourse to enter into if he chose to contest.
The consumer market is also different in China compared to Europe or North America. Karl Alomar, of China Export Finance, helps fi rms source goods and materials from China and knows the country well. “Brands that are mid-market here will be seen as luxury over in China while the top of the market is likely to be too expensive” he says.
4. Select the right currency
As an exporter you will soon be using other currencies. If you are dealing with the US then don’t expect to use anything but dollars. The dollar is the most common international currency and is often used in Australia, Japan, China and Latin America.
In the European Union it’s the euro, although sterling is respected across the world. However, currencies fluctuate, and this can cause problems, which can largely be mitigated by sticking to the currencies mentioned above. But if your margins are tight, a shift could burn you.
If you are predominantly trading in one currency then consult with your bank about insurance or hedging as a way to offset the risk.
5. Get paid
This is one of the most daunting areas for most entrepreneurs. However, there are a number of strategies to improve collection:
- Charge first
Websites that sell to consumers nearly always do this and many businesses are prepared to pay upfront also.
- Payment insurance
Insurers will do this for about 90% of the money owed, although you will have to carry out a credit checkon the client fi rst.
- Use your agents
Agents can do collections, but it is key that you stipulate how much you expect to be paid and in what currency. It might mean a bigger slice going to them but it involves much less hassle.
- Invoice promptly and chase
This is sound business advice but many don’t follow it. Some late payers might be worth the effort if the margins are high enough. And some of them might need a surprise visit. “I know businesses that have actually ravelled overseas just to collect from a client,” says Stewart, who has a client who regularly does a round of Eastern Europe.
- Make sure you are in the right
There are some quirky rules regarding invoicing in some countries and you don’t want to get stitched up. Turrell warns: “In Mexico you have to get notarised documentation of who you are just to send an invoice.”
6. Build and protect your reputation
You might be well-known here but you are nobody overseas. Select your best-known clients and use that association to your advantage. Potential clients in the US won’t know Joe Bloggs Butchers but have heard of HSBC.
Good and bad news both travel fast so be careful on those early jobs. Some business cultures, particularly in the Middle East, rely enormously on personal recommendation and reputation can make or break businesses.
Riser says her business has been tipped by suppliers who realise that the company has expertise in its fi eld. “The equipment suppliers are happy when we are working on a project and have recommended us to clients,” she says. It is a good position to be in because no-one sells you better than your own customers.
7. Overcome language barriers
You might not speak a word of a foreign language but your company will have to. English is the most spoken second language in the world so gettingbilingual staff shouldn’t be too diffi cult. Successful exporters typically have people who can speak their clients’ language.
“Our operations manager is a professional linguist and language skills is one of the areas we are very keen on,” says Riser. A lot of your clients are likely to have a point of contact who can speak English but don’t over-rely on them. Learning some of your client’s language will also go down well as it is a sign of respect.
8. Communicate effectively
Although face-to-face is still valued, 21st century communication is vital to building and maintaining links. “Web demonstrations are becoming more common and are often demanded by firms,” suggests Turrell. A visually appealing professional demonstration might precede a visit and should be carefully planned. Remember the above warning on cultural differences and knowing your market. Don’t presume your English presentation will play in the US – get it translated into American.
Also, your website might work here but are you ready for foreign viewers who might not speak English? Your company is about to grow and your values will soon be changing as a result of foreign dealings, so be prepared.
9. Network globally
“If we had known we would be running our own fi rm we would have done a lot more networking,” says Riser. Many of you will share that sentiment. Contacts abroad overcome barriers. Try offering your own advice to companies coming to the UK as a means of building a relationship and you could gain a very beneficial ally for the future.
10. Avoid legal blindspots
Finding a good lawyer with international contacts and offi ces is a good start. There are some bizarre laws across the world and others that stem from greater state efforts to improve security. As Turrell found when he went to Australia: “We had to get notarised documentation for all our directors, including our nonexecutives, in order to get a business number.”
For all the complaints about red tape and legislation in this country there are many more areas overseas that could trip you. There is no better advice than to get good advice on your target market and then follow the prescription.
11. Don’t stretch too far
It might be a small world, but don’t get carried away. You will be extending your operational hours and could soon be running a 24-hour offi ce. You probably can’t afford to double your staff overnight so plan your expansion with care. Nicholas Miller, founder of Kyp Systems, has been trading in more than 10 markets since founding in 2005, but he warns about over-reaching. “Look at what you are going to need in terms of resources and make sure you allocate them properly to make it work.”
Over-reaching can be disastrous, but Turrell describes how he used this fact to his advantage: “We allowed one of our competitors to win contracts in New Zealand and Amsterdam, as we knew the time zones difference would be a real strain for them.” The message is clear: cost-check your expansion.
12. Be proud to be British
UK entrepreneurs who sell abroad find that buyers tend to believe that our goods and businesses are high quality.
“British brands do well abroad – there’s a perception that they are well made. They aren’t necessarily the cheapest, but there’s a lot of manufacturers in the UK who are quite small and who provide unique and niche items,” say Santomauro.
Riser agrees: “Being British still holds a lot of sway, you are automatically seen as being very professional.”
Entering the Queen’s Award for Enterprise is a royal stamp that can open doors. So coming from Britain is no handicap, even though the statistics show us to be lagging behind.
Learning from your mistakes is one way to improve, but learning from other people’s mistakes is rather less painful. Here are two howlers:
A company that sold to a US business then began trading with an Eastern European company without realising it was a subsidiary. The parent company was less than impressed to find that the subsidiary was charged considerably less. The lesson here: know who you are dealing with.
An engineering company wrote a glossary of technical terms for its Spanish clients. However, there are many forms of Spanish and one of the technical terms was also a Colombian word for female genitalia. Fortunately this was spotted before it was sent out.