Exporting for Growth 10 Steps to Success

Transcription

1 Exporting for Growth 10 Steps to Success

2 What are the benefits of exporting? Why should you consider it? Let s consider a few really good reasons to explore this as an option in more detail. The UK has a population of 63 million, which is less than 1% of all the people on the planet. Without doubt, expanding your business domestically will provide growth, but extending beyond the shores of the UK to carefully selected markets could help propel your business to substantial growth. By increasing your sales footprint to countries outside the UK you will protect your business from any domestic economic challenges. Expanding into new territories will help increase your business s resilience. With diversified sales into a number of countries the volume of goods sold increases. This increase in productivity will in turn help your margins increase, providing a better bottom line. You may well have invested significant research and development budget into the creation of your product, and by expanding the commercial lifespan through export you will derive greater returns on those investments. When you export your products you re also exporting your brand, providing greater visibility. Exposure of this sort enables you to better leverage global social media platforms to spread your message wider and create a loyal brand following, both at home and overseas. With such compelling reasons to consider exporting, the question to ask is UK POPULATION 63 MILLION LESS THAN 1% OF ALL THE PEOPLE ON THE PLANET

3 If you re thinking about trading internationally there are a number of key areas you need to think about. This guide will provide guidance on the areas for careful consideration and planning. It may seem overwhelming as you begin your journey of discovery into the potential of export, but your UK Trade and Investment (UKTI) International Trade Advisor (ITA) is available to discuss them all, and will help you make sense of them. They can provide you with access to many resources to help you build a plan and achieve success. Contact UKTI by visiting or by calling +44 (0) (9-5 Mon-Fri).

4 Is there a market for your products or services? Market entry options Which market? Your business model Resources Risk evaluation Making payments and getting paid

5 Is there a market for your products or services? Before looking for new territories and new markets you should aim to have a very thorough understanding of what your products and your brand have to offer. You should consider the demographics of your target market, the amount of disposable income that they have, and the competitive environment. If there is little or no competition for what you have to offer this may be a warning sign that it is not something that will have much of a market. However you should be equally concerned if there are too many competitors as this could indicate that what you are offering is seen as a commodity and as such buying decisions may be driven by price. Assess your products unique selling points before deciding which market is right Market entry options In some markets you may be able to enter directly. In others it may be advantageous to work through an agent. In a number of more complex markets there may be a need to partner with an organisation, potentially as a joint venture. You should consider your company s ability to work with partners and be able to communicate with them effectively, as once you enter an arrangement communication often becomes the most critical factor. UNDERSTAND WHAT YOUR PRODUCTS AND BRAND HAVE TO OFFER Which market? DEMOGRAPHICS KEY CONSIDERATIONS DISPOSABLE INCOMES COMPETITION With the world being such an enormous marketplace, knowing where to start can be very hard. Many businesses start their journey into export by choosing markets that have a similar culture, the same language or are geographically very close. This enables them to gain confidence and experience in seemingly simple markets. It is for this very reason that the US is the UK s largest export market followed by Germany, the Netherlands, France and Ireland. It is only once you ve assessed your own products, their unique selling points, and price points at which you would need to sell, that you can make decisions about which market is the most appropriate to begin exporting to.

6 Your business model You should assess your business model and consider whether there are any legal barriers or constraints around how you operate that may be problematic in other countries. Look at the cultural way in which you do business and have a think about whether this would be compatible when exported abroad. Resources How will you resource an export plan to maximise your success? The end result of successfully exporting will be increased revenues and profit margins. But as with any new business initiative there will likely be a need for significant investment of management time, project finance and expenses to fund the development. Do you have sufficient resources and spare capacity in your business to be able to take advantage of the export opportunity? Also consider who within your company will be nominated to lead the project, as there will need to be firm objectives and accountability for the success of the programme. INCREASED REVENUES PROFIT MARGINS INVESTMENT OF MANAGEMENT TIME PROJECT FINANCE AND EXPENSES TO FUND DEVELOPMENT

7 Risk evaluation You would need to conduct research and full due diligence on any partner or markets that you intend to enter. One such part of this due diligence is to conduct a risk evaluation including how you would protect your goods as well as your intellectual property. This can be quite tricky in some countries and yet fairly straightforward in others. Nevertheless, you need to consider how you would go about conducting this evaluation and then put in place a process. The difficulties and risks of operating in these fast-changing markets are less than the risk of not participating in their growth Miles Templeton, Director General, Institute of Directors Making payments and getting paid Do you know how you would make payments to local suppliers of goods or services in new countries? Have you considered the way in which you would get paid for overseas sales? There are important factors to consider such as setting acceptable payment terms and methods, as well as considering insurance to protect yourself against potential problems. There is also likely to be a cost associated with chasing late payments. Consider carefully how your business would cope with late or even non-existent payments. RESEARCH GETTING PAID KEY CONSIDERATIONS HOW TO PROTECT YOUR GOODS RISK EVALUATION

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9 0. Research potential markets Identifying the markets that offer you the best opportunities will enable you to target your resources and achieve the best returns. So what s the best way to go about this? Firstly you want to identify which market to target. Which markets import or consume the largest quantities of the product that you sell, and which have experienced rapid growth most recently? Understanding this will give you a baseline of potential countries that you can start to explore in more detail. Next, have a look at the data analysing which countries are predicted to grow the most in terms of spend per head of population. Is it likely that they might spend some of that on your services? Once you get to the overall size of the market you can begin to narrow down your focus onto which subsections of the population, or regions within a country, you think are the best to begin with. For example do you think that it is a young or old demographic that might buy your product? Have a think about whether there s a particular section of society with particular cultural or religious practices that may benefit. Do you think there is a group that will be the first ones to take advantage of your marketing? There are other factors like population density, or groups with particularly high income levels. Or indeed there may be expats that are looking for traditional home-grown brands. By doing just a little bit of desk-based research you ll quickly be able to find the best new markets in which to invest. Your UKTI ITA will be able to help you really narrow down on the best places to start in any given market. Also, why not take advantage of UKTI s overseas offices where they offer a number of market research services, which will help provide in-depth information about the market and best routes to take in about 100 countries or so. Whether you opt for the easier or more challenging markets, one thing is certain - they are growing very fast Not all markets are equal, and some are easier to break into than others. Your ITA will be able to help you discover what the barriers to export might be and how difficult it may be to export into certain geographies. This will help you identify the best first export market making your journey as easy and smooth as possible. Lastly make sure that you understand the competitive environment. Who will you be selling against? Do you know the Unique Selling Points (USPs) of your products well enough versus competitive offers?

10 1. Export strategy and plan If you re thinking about starting down the road to exporting then your first port of call should be to the UKTI. They have a network of International Trade Advisers (ITAs) and regional experts across the UK who specialise in the area of your products and services. Your ITA will be able to help assess the initial export readiness of your business and then help you put a plan together so you can make the most of the opportunity. Best of all, the consultation with the UKTI ITA is free, so you have nothing to lose; just a whole load of insight, information and new opportunity to gain. You ll want to put together an export plan covering the steps that you will need to take, targets that you will be aiming for, and which resources you will be able to gain access to and invest in to meet those targets. There are four things to consider as you start to build out your plan: 1. Your people Can you take someone from your own organisation whom you think has the talent and aptitude and promote them into a position to drive this programme? Perhaps it s an opportunity to visibly promote from within. Or, if there is no one in-house, or they re all busy with the existing business, consider whether you need to bring in some new talent. 2. Your capacity If your new venture is wildly successful do you have enough capacity to increase your production levels? If you do then this is a great opportunity to benefit from economies of scale and improve your margins per unit sold. If not, how could you get more capacity? Is there a short-term option, with the ability to partner with someone to give flexibility as you increase your exporting business? 3. Your products Have a look at your products and see whether or not there are some things you need to adapt to make them more appealing for your new consumers. Culturally, consumers may be used to a particular style of graphic or writing on packaging. There may be legal requirements to label the contents, ingredients, recycling, and other such things. Potentially you will want to translate the packaging into the local language. Your ITA or British Embassies overseas should be able to advise on packaging and labelling and other changes you might need to make. Your products might claim certain benefits, and while they will undoubtedly do everything you say they do, you need to make sure that any certifications you have are acceptable to a foreign regulator. Getting your pricing right is really key to making sure you get a balance between a big enough market impact and the margins that you need to receive. Spending time with your ITA going through all possible options of product distribution, pricing and margin will help make sure that your export plan is really geared up to work for you.

11 1. Export strategy and plan continued 4. Your knowledge You will need to undertake quite a lot of research to work out which markets to enter, which ones will provide the easiest entry, and which ones will provide the best returns. This may sound daunting, but with access to your UKTI ITA it is really not that hard. Once you ve undertaken research to determine which markets may be the most appropriate there is nothing better than conducting your own market visits to test out and showcase your own products at trade fairs as well as build new contacts. Linking back to point number one, make sure you have enough resources, including people, time and money to invest in this critical phase. Take advantage of a free consultation with UKTI and begin your export plan UKTI can help you by providing training and guidance as you start to build your plan. UKTI s Open to Export website supports businesses like yours and includes access to sector specific resources. There are plenty of resources on the website to help you through each of the 10 stages of your journey by offering information on export opportunities, key contacts, events and webinars, and a platform to pose questions to a community of experts. The site is free to use.

12 2. Sales and routes Have you considered if you would need to set up a direct sales force, or whether an agent or distributor would be a better route? There are four options open to you: 1. Selling directly This may involve having local people on the ground as a direct sales force, but equally it could also mean simply setting up a website and selling over the Internet, or regularly visiting and selling at trade shows. Direct selling doesn t have to mean you incur the cost and management overheads of hiring local people, complete with the local contract laws and payroll or taxation requirements. It can mean all of the above if that s what you assess your business needs to be. Essentially, it means you sell your goods directly to an end user, without the need for a middleman. Direct, distributor, sales agent or joint venture, the best option depends on your goods and the market 2. Sell to a distributor This is perhaps the simplest option, as once you have sold your goods to the distributor, they take title and it becomes their responsibility to sell them on to their customers. As the distributor takes on maximum risk for this option, the margins you will make is likely to be the lowest of all the options. Nevertheless this can be a great way to make a start on your export journey. 3. Use a sales agent They will sell the products on your behalf or put you into contact with potential customers. While they will stock and sell the products they never take title nor do they accept responsibility for your profit or loss. They will make a commission on every sale. 4. Create a joint venture In some markets this may be your only option, but is often very complicated and expensive. Essentially you will set up a brand-new business with another local company taking a share of the management and profits of the new joint venture. In countries like China this is a typical practice. With all of these options you need to ensure that there is clarity of responsibility for things like delivery and payment. You probably have some intellectual property that you will want to protect, so it s important to realise that you would need to secure protection in each country that you sell into.

13 3. Create opportunities Trade shows and market visits To create opportunities and promote your product effectively there are many promotional channels available to you. Which ones to use will depend on your target market and audience. One of the best ways to create opportunities is through trade fairs, both in the UK and abroad. At these events you ll be able to meet buyers and generate new business. There may even be grants that are available to subsidise the cost of exhibiting, or perhaps you could share the cost of a stand with another business and help each other out. Get in touch with your UKTI ITA and they ll be able to advise you about which of the many trade fairs would be most appropriate. Market visits are an important part of the marketing campaign. They will enable you to find out directly from buyers in your target territory whether or not there is a really good opportunity there for you. Before organising any visit contact your UKTI ITA who ll be able to put you in contact with the trade teams at British embassies and consulates. They ll also be able to offer a range of services to help you plan your visit. There are three tips for anyone looking to make a market visit: 1. Really make sure that you ve done your homework about your product and their USPs compared to the competition, the market and the potential customer. 2. Take some very well packaged product samples. Perhaps take two or three different sets of packaging for the same product and test out which is more appealing to buyers. This feedback could mean the difference between modest exporting success and fantastic growth. 3. Prepare a really compelling sales pitch, which tells the story of your company and your product so that you can best promote yourself to potential customers. Make sure you have really thought about how and why a potential customer would use your service. What is the value that you bring to your product? Is there an association with some brand values that will make what you re offering more appealing? Trade shows are one of the best places to promote your products and services The UKTI, as well as several approved trade bodies, organise trade missions to specific markets, which might allow you to meet with buyers and attend events. Information about these trade missions can be found by signing up for the UKTI information alerts. There may even be funding available to support your attendance at these missions so ensure that you ask your UKTI ITA for further information.

14 3. Create opportunities continued Marketing overseas Adverts can be placed in business directories or product catalogues to help you gain exposure and start selling. Your UKTI ITA may be able to provide advice about certain countries, but you will also be able to find a lot of information by searching on the Internet. Take extra care when placing adverts to ensure that they are reaching the target audience who will buy your products. Adverts can sometimes be very expensive, and you cannot always be sure that you are reaching your intended audience. As part of an overall brand awareness campaign and if budgets allow, placing adverts can make sense. Just be aware that you need to monitor your expenditure and resulting sales from each and every advert to ensure you re getting the best return on your investment. It costs very little to set up a website and for the content to be translated into foreign languages. Maintaining an up to date and informative website is a very worthwhile investment as it provides an easy point of contact for potential customers. When any potential customers want to find out a little bit more about you perhaps before they make a buying decision, having a really engaging and informative website is critical. It can mean the difference between making a sale or losing one. Your website should be full of good, clear and useful information, as well as providing a good overview about your company along with plenty of customer examples and case studies to give potential buyers confidence that your products do what you claim they will and that they re making a good purchasing decision. Any great content that you create for your website needs a way to be released across the Internet and social media is the perfect vehicle to do this. The type of customers you re targeting will determine the social media avenue that works best. The benefit of these platforms is that they are free and that they can help proliferate your message quickly across multiple platforms to be seen by many people. As with most things that are free, the most important thing to consider is how you use them and the frequency with which you provide updates. Your aim is to create interest first and then over time, a loyal following. Whilst the tools are free, investment will need to be made into providing a continual stream of good, informative, clear and engaging content. You will also need someone to manage the distribution of content, as well as to engage online with those who pose questions or post comments.

15 3. Create opportunities continued Three tips for you to get the most out of your online and social media marketing activity are: 1. Provide up-to-date contact details for your company and the person responsible for export sales. Make it easy for potential customers to get in contact by providing phone number, address, and a contact form. A page of frequently asked questions can also be useful so that potential customers can quickly find the information that they are looking for. REGULAR QUALITY CONTENT CASE STUDIES ONLINE MARKETING ONLINE & SOCIAL MEDIA TRAINING 2. Online and social media training are provided by the British Chambers of Commerce across the UK. Enrol in a workshop to explore ways of using social networking to communicate with your international customer base. Refresh your website and drive enquiries through a social media plan 3. Regular quality content is what will help you stand out from your competition through the noise of social media. Create a content schedule with a name to post two articles a week on something to do with your company, your product, new features or benefits, use cases, customer case studies, progress on your journey into exporting, successes and wins. In fact, just about anything that is going to raise your profile and could be interesting, informative, or useful to potential buyers. Each article need be no longer than 500 words, and may take around an hour or so to write. Posting regularly will help drive up your Google search rankings as well as provide a basis for potential buyers to engage with you. CONTACT DETAILS

16 4. Understand the admin The spoils from getting overseas export right can be exciting and significant but there are one or two admin obligations that you really must get right to avoid any unexpected tax bills or visits from Her Majesty s Revenue and Customs. Get in touch with HMRC as well as the UK Embassy of the destination country to clarify what requirements they have around customs registration, forms, payments, and so on. You ll want to get this right and make sure that your reporting practices are watertight. The documentation needed to comply with local and domestic import/export and tax requirements will vary considerably across different markets. The admin can seem confusing but with advice from UKTI you ll master it quickly As a first step contact your UKTI ITA as they will be able to provide you with recommendations about which freight-forwarding companies may be able to deliver your products. Many of these freightforwarding companies will undertake the completion of a large proportion of the paperwork on your behalf so this can be invaluable. It may also be possible to find companies by searching the Internet, but whoever you find, make sure that they have experience in delivering the type of products which you will be exporting, and into the specific countries. When it comes to paperwork there are two geographies that you need to consider: 1. European Union There s free movement of goods within the European Union which means that your products can move freely across borders without any customs checks. Some paperwork is still likely to be required so you should contact the relevant authority in your destination country to check. All goods sold within the EU aren t liable for UK VAT but you must make sure that the buyer s VAT registration number is shown on the invoice. If this isn t shown then you must charge VAT at the UK rate. 2. Rest of the world There are a number of documents, which are likely to be required and your UKTI ITA should be able to advise which is the most appropriate. These include commercial and pro forma invoices, the relevant insurance documentation, certificates of origin, and even potentially, export health certificates. The good news is that all goods sold outside of the EU can be zero rated for VAT. Useful resources to check out include your UKTI ITA, British Embassies overseas or in the UK, the British Chamber of Commerce, the EU market access database and HMRC s Starting to Export guide.

17 5. Get paid Hopefully after you ve done all of your work identifying the market you wish to sell into, made your products appropriate for that market and spent time developing your marketing and getting the right distribution and sales engine in place, the orders will start flowing. There are a few practical elements you need to understand about terms of sale: 1. Incoterms these are internationally agreed rules setting out so delivery terms for the goods being traded across borders. They allow both the buyer and seller to agree details on the terms of sale and prevent any future misunderstandings or disputes. Broadly they will set out who is responsible for the cost of transporting goods including any insurance, taxes or duties, where the goods should be picked up from and transported to, and who is responsible for the goods at each step during transportation. 2. Export documentation make sure you establish the types of document you ll need to provide to enter the market. 3. Written quotation make sure you provide a written quote which deals with the particulars of your product including the size and packaging formats, as well as any potential additional cost for providing export labelling and packaging which you may be charging on to the customer. Setting out the price and delivery terms (incoterms), the estimated date of shipment on arrival and payment terms and conditions is vital if you are to avoid any disputes further down the line. Within the EU payment terms are fairly similar to those in the UK where you may have an expectation that they will settle their bill within 30, 60 or even 90 days. Be sure you know what currency they will be paying in and have the requisite facility in place to accept payment in that currency. It may be that some customers will pay upfront, particularly if it is a first order, and you may be wise to set this precedent for brand-new customers. When orders are fairly small customers from outside the EU may be happy to pay upfront and there are other mechanisms for getting paid which can help to reduce risk to both parties, such as Export Finance. Training courses in all of the practical elements of exporting are run by the British Chambers of Commerce and your UKTI ITA will be able to provide details on documentation requirements and advise on specific expectations for payment terms. There is a risk of late, or sometimes non-payment of bills, which can be greater when conducting business internationally. Getting paid from overseas is as much about an assessment of risk as it is about setting acceptable payment terms and methods. Insurance to protect you is also worth considering. Before entering into any agreements with new customers who are requesting any form of trade credit you should do full due diligence on them and run a credit check. If they re credit worthy then move on to considering the currency issues. For example in some countries there are restrictions on access to foreign currency and so some customers may find it problematic to get hold of enough of your currency to be able to pay.

18 5. Get paid continued To protect you it s worth considering two things. Firstly, take out insurance. Secondly, obtain an irrevocable letter of credit, which will secure payments according to the terms of the credit and at an agreed rate. Any business, which sells on credit, can use factoring to free up cash flow, and this may be something to consider particularly when trading in overseas markets. Factoring companies specialise in collecting money and will pay you a percentage of the invoice value upfront, plus any balance, minus commission, once they have received payment. Export Factors specialises in this for the collection of money from overseas. Be sure to do a full due diligence and credit check on any customers requesting credit terms

19 6. Legal considerations Many companies say that one of the biggest hurdles they faced at the start of their exporting journey was around legal considerations. Having a thorough understanding of the legal and regulatory environment in all countries you re considering exporting to is really important. Thankfully there are a number of organisations that can help to advise you on how to avoid the pitfalls and turn these perceived hurdles into easy steps. Ensuring that you have the right contractual paperwork in place will require involvement of lawyers to ensure that certain things are covered including territory for the agreement, commission rates and payment terms brackets including currency, duration and termination, subagents and possible distributors, sales targets, frequency of reporting and levels of authority. An experienced international lawyer will be able to approve and advise on which specific clauses should be included. Product compliance is your responsibility so you must validate that the product performs as it should do, and that any certificates of compliance held in the UK are also valid in your export market. Ensuring adequate cover for product liability is also sensible. Not all countries are necessarily covered with any existing policy so make sure you double check. As an example, the US is often excluded and so there may be an additional premium to pay, if that is your chosen export market. USE AN EXPERIENCED INTERNATIONAL LAWYER CONTRACTS LEGAL CONSIDERATIONS COVER FOR PRODUCT LIABILITY UNDERSTAND THE LEGAL AND REGULATORY ENVIRONMENT Getting the right legal advice early on can prevent legal issues from becoming a barrier to successful exporting The IPR Helpdesk can provide support on how to protect your company s intellectual property. Even if you have registered trademarks in the UK these may not extend to overseas, so if your product is copied and sold in any new market without having the right protection you ll find it pretty difficult to grow your own sales in that area. It is highly advisable to make use of an experienced international lawyer or law firm to approve any international contract that you have in place. SOLVIT is an agency that provides crossborder legal help within the EU.

20 7. Financial With any new business venture there are always risks and the UKTI can help advise how to minimise these. As an exporter the majority of the risks sit with you so making sure you have adequate protection against nonpayment or for any loss or damage of goods in transit is extremely important. There are a number of insurances that can help. Most insurers will offer products covering damage and loss of payment so check with your current insurer first. If they refuse or you can t find adequate cover from elsewhere then you can contact UK Export Finance who may be able to assist. Transportation companies or freight forwarders usually assume limited liability for any loss or damage when shipping goods. Specific transportation insurance is essential so that you have full protection. Make sure you have adequate protection against nonpayment or for any loss or damage of goods in transit Even though you will have carried out credit checks this won t guarantee that payments are made so it is also recommended that you protect against nonpayment in order to minimise impact to your cash flow and business. You can take out insurance against the customer becoming insolvent or being unable to pay for reasons such as natural disaster.