12/09/2014

By Lucy Fox, General Manager, UK Cloud Solutions at Exact

With the stated aim of increasing exports to £1 trillion by 2020, the UK government recently announced significant tax breaks for companies who sell abroad. At the time, Chancellor George Osborne remarked, “We’re not going to have a secure economic future if Britain doesn’t earn its way in the world”.

It’s seems many small and medium enterprises (SMEs) are taking this message to heart. Recent independent research commissioned by Exact found that over half of all UK SMEs now sell their products or services abroad. Companies in the manufacturing sector are leading the charge with 68 per selling abroad. Perhaps most interestingly, exporting is now the biggest growth area for almost one–fifth of all the SMEs questioned as part of the research.

There are several benefits to exporting your goods and services. Foreign countries represent new – often untapped ¬– markets, offering significant new sales opportunities. This is especially true in emerging markets where business is maturing and the spending power of the middle classes is increasing. The research found that 25 per cent of all UK SMEs are now exporting to the BRIC (Brazil, Russia, India, China) countries.

Diversifying into new markets also helps companies diversify risk. During times of economic downturn, operating in foreign markets can help to mitigate the effect of a recession at home. Research by the CBI found that companies that export are more likely to survive than those that don’t. If your products or services are subject to seasonal fluctuations, exporting to countries in the southern hemisphere can also help reduce the negative impact of these economic instabilities.

What’s more, exporting can often make a business more efficient and productive. Competing in markets where the opportunities and challenges are slightly different will inevitably make your business operate more efficiently. Increased sales through exporting will help your company achieve greater economies of scale while spreading risk and reducing average unit price. It also will put idle capacity or spare inventory to work, in turn achieving greater efficiency of resources.

For businesses that are yet to start exporting, what are the most important things to think about before dipping your toe in the waters?

Understand the marketplace Is there a market for your products? If there’s no demand for your product, you need to consider whether exporting is right for you. The upfront cost of entering new markets could cripple the business if no-one wants your product. Beyond demand, you should also examine other economic and social considerations that may determine the success of your export push. Do the same level of research and preparation as you did when you first launched in your home market.

Know your competitors If established players are already present in the new markets you are looking at, you need to carefully consider your unique selling point (USP) in relation to these competitors. If you don’t have a USP, it may be worth switching your attention to another market.

Are you set up to export? It’s critical that if you start exporting, you are able to scale sustainably while servicing your existing customers. A huge order from aboard could take your business to the next level. But if you don’t have the resources and the manpower in place to fulfil all your orders, your reputation in the new market could be irreparably damaged while your customers at home could suffer. Make sure you have everything in place – whether that means raw materials, labour, components, even web hosting – before you start thinking about exporting.

With over half of the UK’s SMEs involved in selling abroad, it’s clear many are already switched on to the many benefits, which include greater potential revenue, financial stability and productivity. For those small businesses not already exporting, taking the time to examine these different considerations will help you let know whether you’re ready to make the leap.

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