Post by Trade Coach on Feb 12, 2014 18:26:23 GMT 1
How can SMEs avoid potential pitfalls and maximise their chances of success? Those in the know offer their advice
Although the UK economy is at last delivering growth, many SMEs realised a simple truth during the global financial : domestic markets cannot always be relied on, and exporting not only provides additional revenue – it can diversify risk.
The government is therefore setting industry a target of doubling exports to £1tn a year by 2020. While there is considerable doubt as to how realistic a target this may be, SMEs can at least be confident that help is on offer from government departments as a wave of new companies are encouraged to repeat domestic success in new markets.
For those who have already launched export drives, or who have helped others enter new markets, there are some very clear guidelines as to how an SME can maximise its chances of success.
1. "Is it a good idea?"
Sometimes the best advice may seem a little obvious but the simplest questions can often be the most searching. According to Rosana Mirkovic, head of SME policy at the Association of Chartered Certified Accountants (ACCA), an SME needs to bear in mind that what works at home may not work in another market.
"SMEs must assess the suitability of their goods and services for export," she urges. "It might be they don't have enough profit margin to absorb export costs, or they might need to be adapted to suit foreign laws or regulatory standards.
"You need to factor in how much time you will need to devote to getting exports off the ground and what impact that will have on your domestic market. Even language and cultural barriers, not to mention legal obstacles, in other markets need to be considered."
Mirkovic also suggests SMEs should take a look at the Small Business: GREAT Ambition initiative from the Department of Business Innovation and Skills (BIS) which is helping small businesses break into new markets.
2. Trade advice
In addition to help from BIS or UKTI most SMEs will have a trade association they can go to for advice in their industry niche which has doubtless helped many companies in a similar position decide if exporting is for them.
Paul Alger, director of international business development at the UK Fashion & Textile Association believes that talking to your industry's association makes perfect sense for answering questions you may not have even realised you needed to ask.
"Trade associations are usually in the best position to flag up the problems the exporter will face," he says. "They may refer a company to customs and excise or the commercial department of the UK Embassy for the destination market. In most cases, though, they will know the answers. For example, here we know the restrictions for, say, snake skins going into markets like Japan and the USA."
3. Stamps, office or partner
If there appears to be a receptive market, the next big question is always going to be how to stimulate and fulfil demand. For the lone eBay buyer and seller this is probably no more of an issue than getting parcels weighed by the post office or courier. For a more ambitious plan to set up a local presence for the company, the big question is: what form should this take?
After looking at the option of a partnership or setting up new offices in unfamiliar markets, William Crawford of Concrete Canvas opted to tap in to local knowledge through deals with distribution partners who are already active on the ground.
"The hardest aspect of using a pure distribution model is finding the right partners," he says. "This is the single biggest factor in determining whether a market is successful. However, when you find the right partner and establish a good relationship, business can be very effective, efficient and enjoyable.
"For exporting without a local presence, my top tip is to find a distribution partner who is focused on your customer base, a good cultural fit with your business, and who understands your product and route to market."
4. Getting paid
Paul Bennett, managing director of Fascia Graphics, took the step of forming an export division at the membrane keyboard-maker 18 months ago. While it has been a hugely positive step, the main challenges he believes other SMEs should be aware of revolve around not just whether your product is right for another market but, crucially, getting paid.
This makes taking out credit insurance to protect against non-payment a good idea, as well as getting credit reference from other companies who have worked with a potential customer.
"Quoting and invoicing can be a particular challenge because of exchange rates and the fact that terminologies and specifications of products differ from country to country," he says.
"You need to understand and adapt to basic language barriers and different business cultures to avoid confusion. I'd recommend exporters make sure the details of any order are very clear, and check that you are both aware and have agreed on which currency you are quoting and selling in."
5. The legal bit
SME owners are naturally optimistic when it comes to new partners and opportunities but it always pays to ask the "what ifs" before a deal is done. That way you can ensure you are on a firmer footing when it comes to having goods accepted and paid for. Crucially, an SME also then knows whom it can turn to in order to seek redress.
Steve Beahan, partner at national law firm Irwin Mitchell, advises SMEs on exporting and finds that one of the most crucial points that many need to understand is whose law is going to apply to a deal.
"Exporting can be lucrative, but it can also lead to an increase in commercial disputes and these can be expensive and time consuming to resolve – especially for smaller firms who may be dipping their toe for the first time," he cautions.
"A business must at the beginning of the process ensure that its contract is watertight, ensure that it understands what jurisdiction covers the agreement, and check that its standard terms and conditions are up to date."
Source: SMALL BUSINESS NETWORK
Although the UK economy is at last delivering growth, many SMEs realised a simple truth during the global financial : domestic markets cannot always be relied on, and exporting not only provides additional revenue – it can diversify risk.
The government is therefore setting industry a target of doubling exports to £1tn a year by 2020. While there is considerable doubt as to how realistic a target this may be, SMEs can at least be confident that help is on offer from government departments as a wave of new companies are encouraged to repeat domestic success in new markets.
For those who have already launched export drives, or who have helped others enter new markets, there are some very clear guidelines as to how an SME can maximise its chances of success.
1. "Is it a good idea?"
Sometimes the best advice may seem a little obvious but the simplest questions can often be the most searching. According to Rosana Mirkovic, head of SME policy at the Association of Chartered Certified Accountants (ACCA), an SME needs to bear in mind that what works at home may not work in another market.
"SMEs must assess the suitability of their goods and services for export," she urges. "It might be they don't have enough profit margin to absorb export costs, or they might need to be adapted to suit foreign laws or regulatory standards.
"You need to factor in how much time you will need to devote to getting exports off the ground and what impact that will have on your domestic market. Even language and cultural barriers, not to mention legal obstacles, in other markets need to be considered."
Mirkovic also suggests SMEs should take a look at the Small Business: GREAT Ambition initiative from the Department of Business Innovation and Skills (BIS) which is helping small businesses break into new markets.
2. Trade advice
In addition to help from BIS or UKTI most SMEs will have a trade association they can go to for advice in their industry niche which has doubtless helped many companies in a similar position decide if exporting is for them.
Paul Alger, director of international business development at the UK Fashion & Textile Association believes that talking to your industry's association makes perfect sense for answering questions you may not have even realised you needed to ask.
"Trade associations are usually in the best position to flag up the problems the exporter will face," he says. "They may refer a company to customs and excise or the commercial department of the UK Embassy for the destination market. In most cases, though, they will know the answers. For example, here we know the restrictions for, say, snake skins going into markets like Japan and the USA."
3. Stamps, office or partner
If there appears to be a receptive market, the next big question is always going to be how to stimulate and fulfil demand. For the lone eBay buyer and seller this is probably no more of an issue than getting parcels weighed by the post office or courier. For a more ambitious plan to set up a local presence for the company, the big question is: what form should this take?
After looking at the option of a partnership or setting up new offices in unfamiliar markets, William Crawford of Concrete Canvas opted to tap in to local knowledge through deals with distribution partners who are already active on the ground.
"The hardest aspect of using a pure distribution model is finding the right partners," he says. "This is the single biggest factor in determining whether a market is successful. However, when you find the right partner and establish a good relationship, business can be very effective, efficient and enjoyable.
"For exporting without a local presence, my top tip is to find a distribution partner who is focused on your customer base, a good cultural fit with your business, and who understands your product and route to market."
4. Getting paid
Paul Bennett, managing director of Fascia Graphics, took the step of forming an export division at the membrane keyboard-maker 18 months ago. While it has been a hugely positive step, the main challenges he believes other SMEs should be aware of revolve around not just whether your product is right for another market but, crucially, getting paid.
This makes taking out credit insurance to protect against non-payment a good idea, as well as getting credit reference from other companies who have worked with a potential customer.
"Quoting and invoicing can be a particular challenge because of exchange rates and the fact that terminologies and specifications of products differ from country to country," he says.
"You need to understand and adapt to basic language barriers and different business cultures to avoid confusion. I'd recommend exporters make sure the details of any order are very clear, and check that you are both aware and have agreed on which currency you are quoting and selling in."
5. The legal bit
SME owners are naturally optimistic when it comes to new partners and opportunities but it always pays to ask the "what ifs" before a deal is done. That way you can ensure you are on a firmer footing when it comes to having goods accepted and paid for. Crucially, an SME also then knows whom it can turn to in order to seek redress.
Steve Beahan, partner at national law firm Irwin Mitchell, advises SMEs on exporting and finds that one of the most crucial points that many need to understand is whose law is going to apply to a deal.
"Exporting can be lucrative, but it can also lead to an increase in commercial disputes and these can be expensive and time consuming to resolve – especially for smaller firms who may be dipping their toe for the first time," he cautions.
"A business must at the beginning of the process ensure that its contract is watertight, ensure that it understands what jurisdiction covers the agreement, and check that its standard terms and conditions are up to date."
Source: SMALL BUSINESS NETWORK