More than ever, international trade and exporting is at the top of the business agenda, not least the UK’s. Yet, despite the optimism of official rhetoric, international trading is not an easy game for small businesses. Proper support, guidance and the right tools are needed before deciding where and how to grow markets overseas.
Know your market
The best place to start your research will be your peers. With the International Festival for Business 2016 on the horizon, you can take this golden opportunity to pick the brains of exporters that have already made a successful entry into new markets. The Festival runs from 13 June to 1 July in Liverpool and will be an essential springboard to success in exports with events dedicated to preparing business for export and matching them with the right buyers.
Choosing the right market will enormously increase chances of success. Central factors to consider include language, time difference, business culture, payment terms, delivery infrastructure and necessary product modifications.
This is where the need for support and advice comes in early on, and there are a number of great resources to go to, including Open to Export, the Institute of Export, UKTI, and the British Chamber of Commerce.
Here we look at two pillars of the exporting challenge – getting paid and making a profit.
Make sure you get paid
As is vital with any international business, you must work out how you’re going to get paid before you start making any sales. However, when Open to Export ran an online seminar back in 2013 to advise on getting started in China surprisingly only 7% of participants listed a lack of confidence in being paid as a barrier to exports.
Getting paid must be one of your fundamental concerns as it will be the bedrock of any export business.
So having a good scope of the payment methods out there and being able to work with each other to find the best solution is key. One of the most secure and suitable methods for both parties will be what traders might call ‘documentary collection’ or letter of credit. These systems, which can be easily researched on the Open to Export website, involve using banks to collect the money on your behalf. This should bring you the seller much closer to the buyer and ensure that you get paid in a timely manner. Banks should be able to help you to understand this process or training can be obtained through Chambers of Commerce and The Institute of Export.
Making a profit
As a basic premise, every good business will take into account fixed costs and variable costs when calculating the price of your goods or services. However, trading internationally can introduce unexpected variable costs that some business owners neglect to consider.
It is strongly recommended that every exporter purchase international product liability insurance when they begin trading abroad, to avoid any costly future settlements. Add to this first cost the price of global freight and local taxes and the difficulties of pricing grow.
An often forgotten aspect of export costs is also the need for modification. Everything from your original product to your delivery packaging may have to be adapted to suit the local market – both to make sense and to avoid offense.
Once you have taken into account some of these variable costs that come with exporting, you will be ready to look for those all essential profit margins. Let’s be clear, taking the leap into exporting is about making money; so don’t lose sight of it!
Exporting is an important process that appears to be riddled with pitfalls. It does require thought but there is a lot of support and guidance to navigate the best path for your product. Open to Export offers a vital planning tool to help small businesses understand what they need to do to start exporting and get it right.
When you have decided to make the leap into exporting and you want to meet potential buyers then your global marketplace is the International Festival for Business 2016 in Liverpool. It runs from 13 June to 1 July and will act as a shop window for British business to the world.
By Lesley Batchelor OBE is the Chief Executive Officer of Open to Export and Director General of the Institute of Export