By Ade Potts, Managing Director, SME Business, Experian
With the UK economy out of recession, two out of five (39%) senior decision makers at UK SMEs are firmly focused on increasing sales and profitability to grow the bottom line. The CBI has reported that businesses are 11% more likely to survive if they export, and the government is actively encouraging smaller businesses to export overseas. For SMEs, expanding and operating internationally is a real option to grow business. But, for those who are about to embark on international trade, taking a diligent approach as to who you do business with is crucial.
Here are some tips on how to avoid unnecessary risk and potential damage to your reputation, to protect your business when operating internationally:
Talk to the experts:
Speak to trade advisors from organisations, such as UK Trade and Investment and local chambers of commerce who work with businesses that successfully trade overseas. More often than not they will be able to put you in touch directly with companies who have already expanded, so you can learn from their experiences. They can also provide guidance on specific laws and export opportunities, as well as provide in-country contacts through their own networks, and support you to make the most of any business trips you embark on overseas.
Do your homework on the country or region:
You can never have too much information on which to base your decision for expansion, from understanding the macro issues such as the political, social and economic make-up of a country to specific details about local bylaws and competition in the market. There’s a wealth of information you can access from your desk but, if you can, visit your chosen market to understand first-hand any cultural differences.
Know who you are doing business with:
Research has revealed that 56% of SMEs trading overseas assess businesses through relationship building. 47% say they gauge reputation by visiting a company’s website, with 36% checking a company’s customer references and credentials. A quarter of SMEs rely simply on undertaking desk research to compare a business with its competitors. SMEs are adopting a high risk strategy to working with new customers and suppliers — at all times businesses should be applying the same rigour internationally as they would do at home. For tips on the processes you should be putting in place to check a business’s credentials read, Safeguard your company from rogue businesses.
Minimise your risk:
84%of UK SMEs who operate internationally do not check the credit history of potential overseas customers or suppliers to verify whether a company is reputable. But you can reduce the risk to your business by checking the credit rating of any supplier, partner or customer abroad, just as you would at home. To help reduce your risk exposure, consider accessing an up-to-date international credit report which provides access to millions of businesses worldwide. Not only will this help you assess a company’s credit history, but it will allow you to set appropriate payment terms and credit limits for customers.