With growth in short supply in the UK and increased competition, many businesses will see export markets as offering a compelling opportunity to boost their revenues.
How will you grow your business during 2016? If you’re only considering domestic opportunities, the scope for expansion may be limited: the Treasury predicts the UK’s economy will grow by just 2.4% this year – and the battle for a share of that will be tough; more than one in five businesses (21.5%) see competition as their biggest barrier to growth, according to the Close Brothers Business Barometer.
Overseas markets could therefore be crucial to many businesses. A study published by UK Trade & Investments, the Government body responsible for promoting exports, found that 85% of exporters claimed exports had given them a “level of growth not otherwise possible”. Many of these firms realised other benefits too: 78% said exporting gave them exposure to new ideas, while 73% said it had increased the commercial lifespan of existing products and services.
The CBI warned last year that the UK is currently on track to fall £300 billion short of the Government’s target to double exports to £1 trillion by 2020. It called for ministers to take six steps in order to restructure export support to businesses, including further financial support for exporters, a more joined-up network of advice services and the launch of a National Exports Commission.
While businesses certainly would benefit from any additional support made available, it would be a mistake to wait until it is offered before investigating export opportunities. The potential of overseas markets is too valuable to ignore. And while many businesses understandably fear the unknown, organisations such as the Federation of Small Business have offered detailed advice on how to get started with exporting.
Here are three basic steps that will get businesses closer to selling overseas:
1. Do your homework
Think carefully about which countries might be suitable for the product or service you’re offering and then do your homework on where might be best. You’ll need to establish that there will be demand for what you sell but also that competition from existing players in the market isn’t overwhelming. You should also check that you can actually do business in the country – for example, whether there are rules or regulation that prohibit overseas market entrants, or limitations on the product you are offering.
UK Trade & Investment’s Passport to Export service can be a huge help here. It offers training, planning and support to exporters lacking experience. However, you should also try to speak to firms already doing business in your market of choice. They will be able to tell you about the local culture and attitudes, and the practicalities of doing business there.
2. Think about distribution
Moving into an overseas market doesn’t have to mean being on the ground there; opening international offices and employing staff abroad is an option. One alternative is to sell via a distributor who will take a cut of your sales in each market in which it operates on your behalf. Sales agents operate in a similar way. Or you could consider a joint venture with another business – an international partner with experience and expertise in your market of choice, or a local business. It may even be possible simply to sell online, distributing goods direct from the UK.
3. Make sure you have the right finance in place
Setting up your export operation is likely to carry costs that may take some time to recoup. You will be making no sales at all during the planning and launch stage as you enter a new market and you may need to make additional investment in production, as well as in areas such as marketing and distribution. Your business will need to have a solid funding structure on which to rely as you work towards building an export operation.
For many companies, that will mean raising finance. But don’t assume your bank is necessarily the best place to access such funding. While banks are more willing today to support growing businesses than in the immediate aftermath of the financial crisis, they may not offer the best solution. The alternative finance sector now competes directly with more traditional sources of funding.
In particular, options such as invoice finance may prove more flexible and cost-effective, and represent a far more bespoke solution for businesses seeking to raise money for a particular purpose, such as exporting.
Alternative finance
UK businesses are now embracing alternative finance for many positive reasons rather than turning to it as a last resort when the banks won’t lend. In our latest blog, we take a look at some of the compelling reasons to do so.
