Top export tips for small businesses

Consumer Rights

Countless opportunities can arise from selling your business’s products or services overseas, but there are also many issues and challenges you need to be sensitive to when exporting. From local customs to legal regulations, small businesses need to think about how they can best operate in other countries. The Federation of Small Businesses (FSB) is working with government to encourage more small firms to look for opportunities abroad, and has put together a number of steps firms can take if they are considering exporting. 1. Know where you are exporting It is important that you are confident there is demand for the goods/services your business offers, but also competition and prices. Different countries have different rules concerning marketing, advertising and promotion; what works in the UK may not work overseas. Documentation for tax and travel can also be different. Take the time to check with an international marketing expert, or look at the services UK Trade and Investment (UKTI) offers, such as the Passport to Export scheme, which helps first-time exporters. Each country has different customs and attitudes to business. Get to know these because it will give you an advantage over your immediate competition and larger firms. If possible, speak to other companies that have done business in your chosen country. You can use exporting clubs (based around the UK), speak to other businesses and research online. HM Revenue and Customs has also produced a guide that offers advice to small firms. 2. Consider how you want to sell abroad Small firms can sell in new foreign markets in a number of ways: To a distributor: The distributor will then sell your goods to customers in that market for a percentage of the total sales value. Through a sales agent: These individuals will either sell products for you or find customers for you on a commission basis. This can help ease you into the local customs and regulations. By entering a joint venture with a local business: This will provide you with a lot of local knowledge on customers and regulations. For complete control, open an office or employ staff in the new foreign market. Know your customers: Make sure you know the relevant customs, and the commercial deadlines to which your customers work – Saturday and Sunday are not weekend days everywhere. Importantly, understand their culture; what are good manners in the UK might not be elsewhere. In some countries, personal relationships count for more than a slight price competitiveness. It’s also important to know if your new foreign customers can pay for the goods and services you will sell to them. If you have concerns about this, ask for pre-payment or an export Letter of Credit, both of which assure payment. These can be sourced from all major banks. If you are just starting out, it might be easier to have some local help, but firms should consider all options. 3. Financing your export venture You may need financing to produce the goods or to fund other aspects of a sale, such as promotion and selling costs, engineering modifications and shipping. Here are some considerations when thinking about finance: Costs: The cost of borrowing, including interest rates, insurance and fees, will vary. The total – and its effect on the price of the product and profit from the transaction – should be well understood. Terms: Costs increase with the length of terms. Different methods of financing are available for short-, medium-, and long-term borrowing. You need to be fully aware of financing limitations to secure the right solution with the most favourable terms. Currency: Being based in the UK means you will want to convert sales into pounds sterling. However, as currencies fluctuate in prices, you will need to consider if opening a bank account in the trading nation is necessary – especially if it is a major trading nation for your business – and even ‘hedging’ to lock in prices. This will depend on how often you trade abroad and where you trade. Risk management: The greater the risks associated with the transaction, the greater the cost will be. The creditworthiness of the buyer will directly affect the likelihood of payment to an exporter, but it is not the only factor to think about. The political and economic stability of the buyer’s country are also important when costing finance. 4. Questions the banks may ask: Can the exporter perform? They will want to know that you can produce and ship the product on time, and that the product will be accepted. Can the buyer pay? They want to know the buyer is reliable with a good credit history. They will evaluate any commercial or political risk. If selling goods, make sure they are insured when you transport them to the host country. If a lender is uncertain about the exporter’s ability to perform – or if additional credit capacity is needed – UKTI and UK Export Finance can help with their lending schemes, and provide local knowledge in most major trading nations. All of the major banks offer a range of advice, products and services for small businesses. Credits: from the Federation of Small Businesses (FSB) Images: Mascha Tace / Shutterstock Winter 2015 exports Top export tips for small businesses Selling abroad can be big business for small businesses, so follow these top tips Understand their culture – good manners in the UK might not be elsewhere.