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Lord Digby Jones, board member at Urica, an early payments network for small firms
As a small business exporting for the first time, you don’t need to be a pioneer. Small and medium-sized enterprises pay a price for being the first one through the door, and lack the clout or money to fund it.
For small firms, it is about making exporting easy for yourself. Begin by asking: why, where and how?
First, examine why you want to export. For example, a consumer company that I chair made the decision to export in the near future because in another few years it will have saturated the UK market share.
Next, decide where to export to. If exporting for the first time, it’s best to go for a place that speaks English, including India. As a small engineering firm, you’re likely to be making part of a larger product, so it is wise to go where your OEM goes.
For the consumer company, we identified the US as a potential market because of its 320 million sophisticated consumers. However, market potential alone is not enough. Does the country have strong anti-corruption laws and free movement of goods, people and currency? If the answers to these questions are yes, that is the sort of place you want to be.
Then comes the question of how to export to that country. Link in with your supply chain and your customers, and decide whether you will need a dealer or an agent. It is a good idea to seek advice from your bank, your accountant and your lawyer, who will likely have experience of overseas markets.
If exporting to a big country such as the US, decide whether to target all of it or just two or three states in one region. Do that well for a few years, and then expand or pull home.
Perseverance is key. Don’t think you can visit once, shake some hands and fly home. If you don’t go back in two or three months’ time, they will forget you.
Urica, the government-backed early payments network for small firms, asked some of them why they don’t want to export. The biggest reason is fear of not getting paid. To deal with this factor, using paid-for services such as Urica to take on the risk could be a viable option.
When deciding whether to export, your margin must be bigger. It will have to allow for things such as overseas visits or the risk of not getting paid on time.
Finally, if you’re not making money, don’t do it. Don’t be a busy fool. Cutting your losses and coming home is a brave decision.
Here are three common exporting pitfalls to avoid:
• Don’t fall in love with the perceived, often erroneous, glamour of exporting. Make sure it is working and focus on the numbers.
• People will see you coming and lie to you. Be wise and savvy.
• An overseas market will eat you alive if you don’t learn and adapt, become more competitive, train staff or invest in kit to boost productivity.