If you’re a small business you’ve probably come across the term ‘omnichannel’ whilst building your business strategy. Even if you haven’t, you’re likely already implementing it.
If you’re considering selling overseas, here’s a quick overview of what you need to think about in order to start exporting.
Creating an exporting business plan
Although rewarding, exporting is a complex endeavour and it’s important that you’re prepared for your journey into overseas markets. Creating an export plan not only helps you identify all the variables that need to be considered, but will also help you avoid the potentially costly pitfalls that arise when dealing with overseas laws and markets.
You’ll need to conduct plenty of research in order to create a comprehensive export plan, but in general you’ll need to include:
- A summary of key business reasons and benefits for exporting
- What you can offer to overseas markets and how you can differentiate yourself from the competition
- Changes that may need to be made to your products or services to account for differences in culture or geography
- Which markets you’ll target and why
- How you’ll market your product or service
- A full plan of your route to market
- The required resources and costs, including staff and intellectual property rights
- Your objectives, targets and reporting procedures
You’ll need to be thorough in your approach to putting this plan together, as even the biggest businesses have had embarrassing failures when attempting to break into new markets because they have failed to do their research or plan their offerings correctly.
Choosing target markets
How successful you are in exporting will depend upon picking the right market. Choose one that’s already overcrowded and you’ll struggle to gain enough share to make the effort worthwhile. Choose one that is too underdeveloped and you won’t have enough demand to make international trade profitable.
Finding a market that has plenty of space for a foreign business and ample demand for the goods or services you provide isn’t necessarily going to be easy, but it’s a vital part of ensuring the success of your export activities.
When choosing a new market, you need to take several things into consideration. Research cultural differences carefully; something that sells well in the UK may not have a market in China, for example. Or maybe it’s very popular – just not with the same demographic.
You’ll also need to understand how the language difference and cultural concerns will affect your business.
Additionally, think about how easily you can convey the benefits of your product in a foreign language. Many companies have gotten into trouble, or been left red-faced, after releasing a product overseas only to realise the name meant something very different in another language.
Visiting a new market in person is important, as no amount of internet research will truly give you a sense of what the culture and people of your target export destination is really like. A great way to gather research on your target market is to join a trade mission arranged by an organisation such as the Department of International Trade. This helps smaller businesses to travel abroad, meet potential customers, attend trade shows, and generally get a feel for exporting.
As well as arranging trade missions, the DIT operates the Exporting is Great website, which contains information on every stage of the exporting process. The website offers free advice and information regarding choosing your market, finding overseas partners, financing your expansion overseas, and provides detailed statistics and research to help you assess the costs and benefits of trading overseas. Through the website you can create your own ‘export profile’ that helps you promote your business to, and forge connections with, eager international buyers.
Choosing your route to market
It’s important to think carefully about the route to market that you’ll take. Technological advances, in particularly the speed and flexibility of the internet, has made it very easy to enter a new market, although this doesn’t mean that the simplest way forward is the best one for your business.
There are lots of different ways you can begin selling overseas, including online ecommerce platforms, joint ventures, franchising, using international distributors or even setting yourself up overseas. Each has its pros and cons, and it’s important that you take the time to understand their costs and benefits to find the option that’s the most suited to your business, product offering, and target market.
Structuring overseas operations
Exporting can create a lot of paperwork, as well as new financial liabilities in the form of taxes. Handled correctly, these need not dissuade or prevent a business from reaping the rewards made possible by selling into overseas markets.
Whilst established exporters may have internal personnel or departments to handle these issues for them, smaller and newer exporters may wish to simply outsource these tasks to a reputable and qualified organisation in order to streamline their operations.
For this reason, many businesses opt to use a freight forwarder when selling overseas. Not only do they save you money and time by finding the best and most cost-effective providers to move your goods at each stage of the journey overseas, they also handle customs documentation, insurance, risk assessment and so on that can create significant headaches for companies without specialist knowledge in these areas.
Another key operational issue you’ll need to consider is how intellectual property rights will affect you overseas. There are two ways that IP can prove costly for exporters: having your product or brand copied by a domestic rival because their intellectual property rights are not protected in overseas markets; or entering a market in which your product infringes the copyright of a domestic manufacturer’s.
Entering an overseas market could be accompanied by large start-up costs that require you to raise additional capital.
Much of this capital requirement will depend upon which route to market you have opted; choosing to sell through an already established online marketplace in a new territory may come with few associated costs, while working with a local partner or establishing your own presence abroad can understandably come with significant outlays.
You’ll need to work out the best way to raise the necessary finance to fund expansion. It’s best to talk to your bank manager and/or a financial adviser, who’ll be able to explain your options and how each of them will affect your business.
Protecting your business from exchange rate volatility
As well as raising initial capital, you also have to give thought to the impact being exposed to foreign currency could have on your cash flow. Exchange rates can vary by several percentage points over the course of the month, which can inflate the cost of invoices and decrease the value of repatriated funds.
The impact of this upon profits can be severe, as you many find yourself having to work around long lead times and late payments. Some businesses can be waiting months or even years for payments to come through, during which time exchange rates can change dramatically.
This causes havoc with your cash flow and threatens your bottom line, but by partnering with the right currency provider you’ll have access to numerous hedging tools that allow you to lock in profits and fix costs at acceptable levels.
Tools like Forward Contracts allow you to fix a favourable exchange rate in place to use up to a year into the future. This way you can keep the cost of paying invoices low and repatriate funds at favourable rate.
Meanwhile, Stop Loss Orders and Limit Orders allow you to fix an exchange rate floor or ceiling (or both, if used in combination) to set up automatic transfers should the market weaken or strengthen respectively.
Talk to Currencies Direct today about ensuring that your company reaps the full financial rewards of exporting.
Making a success of exporting
Being a successful exporter is in many ways the same as being successful domestically. You need to think carefully about your product offering, identify and understand your target market, be aware of the laws and regulations of the territory in which you are selling, and arrange supply and distribution chains.
A company that works hard and prepares itself for selling overseas is a company that has a strong chance of succeeding. Put the effort in now and you can enjoy the full benefits of international trade.