Exporting overseas, even at the best of times, can be a tricky, daunting process, though following the tips below can help minimise risk and boost a business’s chances of a successful and sustainable branch out into export.
1. Call on local expertise
Building an in-depth understanding of a foreign market can be difficult, particularly within industries where publicly available market information is scarce and predominantly offline. Entering any new market armed with the right contacts and expertise is crucial to one’s chances of success and efforts should be made to utilise the various sources of business support available to potential exporters.
Governments are under pressure both to encourage foreign investment into their economies as well as facilitate export growth and businesses should be looking to capitalise on this. Local Chambers of Commerce and Government-backed direct investment bodies are great resources for businesses looking to build their market-expertise and contact books. Aside from these avenues, working with local commercial partners and agents on mutually-beneficial revenue-sharing agreements can provide a business with a valuable local resource that only profits when they do.
It may sound simple, but LinkedIn can be an extremely valuable resource when trying to find and get introduced to various local experts who are already in your network.
2. Don’t spread yourself too thin
The desire to conquer the world is both tempting and common for all ambitious SME owners which is why it’s important to reign those instincts in and be realistic when looking to expand abroad. Targeting the few selected markets (perhaps even just one) which boast the most attractive conditions (size, demographics, competition, infrastructure etc…) will allow a businesses to focus its efforts on the most profitable export destinations.
Furthermore, a narrow focus will afford a business the opportunity to test, tweak and perfect their export operations in a more controlled environment before expanding them further. Spreading one’s efforts too thin and too early can leave a business with multiple sub-optimum international operations instead of a cherry-picked few that are stand-out winners.
3. Perfect your pricing
Consumers in different geographies have varying levels of spending power and attitudes to what they’re prepared to pay for particular products and services. What suppliers in these locals are going to charge can also vary markedly from what an Exporter is used to in the UK, and it’s therefor critical that pricing models are tailored to reflect this. SMEs don’t just run the risk of pricing themselves out of a market, they also run the risk of under-pricing and failing to capitalise on the higher margins that are available to them. Understanding the local, specific price-elasticity of an offering before launching it in a given market is key.
4. Localise your sales & marketing
Unique selling points and marketing slogans that strike a chord with consumers in one country could fall completely flat with those in another and in extreme cases, they could cause outright offence. It’s therefor crucial that a business spends time tailoring its marketing approach per local, rather than simply replicating what worked well elsewhere. Having a localised presence and feel about what they’re doing will in most cases have a material impact on the quality of cut-through that an exporter achieves in a foreign market.
5. Be smart with you finances
Unquestionably, a significant factor hindering UK SMEs looking to export their services is the lack of growth funding currently available to them. Like it or not, export business is deemed higher risk by the banks and attaining the required working capital is either not possible or acutely onerous. Fortunately there are alternative funding providers out there – such as MarketInvoice – prepared to treat export business on an equal footing to what is being carried out in the UK. Managing currency fluctuations is also a key component of keeping an export business profitable.
An article in the FT this week highlighted how large corporations targeting lucrative emerging markets risk being stung by their volatile currencies. For an SME, consulting an FX advisor or an accountant on the best course of action in mitigating their foreign currency risk is highly recommended. Many SMEs that export abroad are hedging their FX risk by agreeing a fixed rate at the point of sale or via a futures contract, practices which can be the defining factor in whether international expansion is a success or not.
Anil Stocker is the co-founder of MarketInvoice.com, an online funding platform that allows SMEs to flexibly and quickly sell their long-dated invoices in order to release working capital. Since launch in 2011, more than £70m has been traded through MarketInvoice, with 30% of the value of invoices sold being for export purposes.