By Tara Kneafsey, SME Director of leading global insurer, RSA
With the British economy now out of intensive care and on the road to recovery, Britain is engaged in a global race to return to growth.
Key to an export-led recovery will be encouraging small to medium sized enterprises (SMEs) to either export more, or start exporting in the first place. According to recent figures from HM Revenue & Customs the value of exports from SMEs represented only 37% of total exports. The potential for growth is clear.
I recently spoke to a group of small business owners about the challenges of exporting. The first thing that leapt out from the discussion was that many British businesses have become complacent and take for granted their competitive advantages, such as the commercial value of the English language.
At the moment, we import over £2billion more than we export. Small firms have the potential to turn this situation around, but many business leaders are unsure of how to prepare for overseas markets.
The Government is encouraging SMEs to look beyond the UK for business growth, and has launched a number of initiatives and incentives aimed at boosting the UK’s export value. In order to protect your business when trading overseas, firms should consider these top tips:
Protect your interests
Insurance: plan for the possibility of goods going missing in transit and decide what costs you would need to be paid. Typically, insurance will cover the invoice value plus 10 per cent, but this can be increased to allow for additional costs.
There is also danger in thinking that one plan will keep a business safe forever. I know of many companies where overseas offices have not reviewed or updated their insurance policy because they did not deem it necessary, or simply forgot. This can leave fast growing businesses open to serious risks.
Transport: don’t rely on hauliers for cover. They only protect their own liability and this can be a real problem if you are transporting low weight but high value goods. Liability is often limited to £1,300 a tonne, which means that if a £250,000 shipment of computer chips that weighs very little goes missing you could be seriously out of pocket.
Harness local knowledge
Just as market knowledge is vital to any commercial opportunity, every country and sometimes state has its own quirks when it comes to risk. A suitably qualified, specialist broker can advise on local factors. For example, businesses exporting to Nigeria need to be aware that anyone buying goods in the country is forbidden to insure those goods outside its borders.
It is also worth considering the impact of business interruption due to problems with suppliers. If you outsource manufacturing to China or an Eastern European country to reduce costs, or source materials from overseas suppliers, your business may be highly dependent on those third parties.
Map out the impact of incidents such as a fire at the manufacturing plant, and insure your business against these kinds of eventualities using a UK policy known as an ‘overseas supplier extension’.
Protecting your balance sheet requires a good understanding of the territory you are exporting to. For example, a specialist broker can advise you on the different risks between Eastern Russia and Western Europe.
In addition to commercial factors, policies should be tailored to cope with environmental issues such as earthquakes in places like Italy and Japan, and increasing flood risk in many parts of the globe.
If there is one thing this recession has taught us, it is that economic growth can be a long and hard battle. Armed with a sound export plan that includes insurance to mitigate risks and fully map and prepare for the impact of risks at home and abroad, UK SMEs will be in the running for the marathon as well as the sprint.