25 June 2019
Less than 10% of SMEs currently export directly to overseas markets. The Government, via the Department of International Trade and various other partners, your local Chamber of Commerce, and we at UHY, can offer a wealth of advice to those ready to take their first steps in exporting. And financial assistance is also available.
Is now the time?
Surely now is an inauspicious time to consider exporting your products or services, given the uncertainty about our future relationship with the EU. On the contrary, there is much in its favour. That very political turmoil is depressing the value of Sterling, making our goods cheaper in overseas markets, and the internet has made communicating with foreign customers so much easier. Indeed, according to the Office for National Statistics, the proportion of SMEs who exported last year reached almost 10%, the highest ever. The Government has an ambition to raise the percentage of GDP earned by exports from 30% to 35%; this can only be achieved by encouraging UK SMEs to enter overseas markets.
Help with planning
Many SMEs get drawn into exporting unintentionally. Typically a company will set up its website for internet selling and then one day, unexpectedly, an enquiry will be received from another country. At that point the company has to decline the order or rapidly acquire the expertise and assistance required to fulfil the order and, most importantly, get paid for it. Better by far to plan your export sales in advance and to tap into the many sources of advice and finance on offer.
For those who prefer to plan ahead the first step is to identify for which of your products or services there might be a demand abroad. Some market research is obviously required, which might be outsourced to experts. Then you need to draw up an export action plan. Free advice is available from the Government’s Department of International Trade or from the Institute of Export & International Trade. Alternatively you could consult your local Chamber of Commerce – that in Sheffield is particularly experienced.
Your export plan needs to cover the following:
- Marketing budget: costs will include overseas visits, translation of marketing material, exhibition and trade show costs.
- Market selection: consider a range of potential overseas markets, then select a few for further investigation.
- Product or service features and benefits: you may need to adapt your product to differentiate from the local competition or to ensure compliance with local technical standards.
- Capacity: do you have the production and administration capacity to meet your customers’ expectations?
- Effective marketing: your branding, packaging, design, logos etc. need to comply with the tastes and preferences of your chosen market.
- Costs and pricing: costs of supplying the market will include currency conversion, freight and carriage, import duties, and funding debtors if payment terms are extended. Plus the costs of training staff in export documentation and dealing with enquiries, legal fees and distributors’ commissions. Will your product be competitively priced after taking account of these expenses?
- Market entry approach. There are many ways of selling into an overseas market including selling directly to end users, selling through wholesalers or retailers, using agents or distributors, establishing a local office, or setting up a joint venture.
Financing your export drive
As with any type of business growth, an export drive will absorb working capital. Marketing, tendering, product development, research, participating in overseas trade missions or exhibiting at trade fairs all involve costs, often before any sales are made. When orders start to flow in you may need to increase stocks of materials or employ extra staff. Additional business usually means more cash tied up in debtors. Working capital loans are available and your company’s bankers should be the first port of call. They will also advise you on export credit guarantees, letters of credit and possibly credit insurance.
If your bank or insurer can’t help, you may qualify for government-backed finance or insurance from UK Export Finance (UKEF). It helps support exports from the UK by:
- guaranteeing loans and financial products to UK exporters and their suppliers
- offering finance to overseas buyers of UK goods and services
- providing insurance for higher-risk countries
- applying internationally agreed standards in due diligence to deter bribery and corruption in transactions officially supported by export credits
Assistance for attendance at trade shows
Most exporters will stress the importance of participating in trade missions, and of exhibiting at trade shows. The DIT’s Tradeshow Access Programme provides grants of between £500 and £2,500 for a company’s representation at up to a maximum of six shows. The amount granted has to be matched by the recipient and only applies to specific shows selected by the DIT. One added advantage is that participators in the scheme receive practical advice and assistance from TAP’s trade partners.
Now is the right time
If you are considering exporting now is a good time to start, whilst others hold back and await more clarity in the UK’s trading relationships. The current lack of certainty could last for years or even decades, during which time good business opportunities are being missed. A wealth of practical advice is available along with access to finance and grants. If you would like further advice why not contact me: email@example.com? I can introduce you to the appropriate experts at Sheffield Chamber of Commerce, and, through our UHY international offices, to business advisers in over 95 countries across all continents.