GB Magazine
on Oct 2007
by Jon Card
It is a shocking fact that just 37% of UK companies trade overseas. We are far behind our European counterparts and most of the world. However, if you really want to expand then you can’t just rely on ol’ Blighty, you must venture abroad
1 KNOW YOUR MARKET
Research is essential. It can be conducted in a variety of ways and it should never really stop. The internet, foreign embassies, business support groups such as UKTI and trade shows and exhibitions must all be on your checklist to start with. You also need to make some good contacts in the region and visit it if you are to soak up the business culture. Mark Turrell, founder of software fi rm Imaginatik, says his US arm is like an American company.
“To be successful in the US you have to act as if you come from there,” he says. “I have spent years in the US and have immersed myself in US business culture – I know the Red Sox are the best baseball team.”
Identify the key players in your market and fi nd companies which have equivalent structures and might be good partners. But, ultimately, the most important question is: can you make money?
“Can you break into it and sustain it?” asks Turrell. “If there’s only six months’ worth of business out there then you want to hold off.“
Exporting is initially expensive, risky and time-consuming, so aim for deep pockets.
Agents can be employed to sell overseas and this can be a very effective way to expand. An experienced agent will have the contacts and cultural knowhow and will be able to advise you on the market.
Choosing the right one is tricky, but Grant Thornton’s Alysoun Stewart succinctly sums up what you want: “Somebody who has demonstrable and tangible experience of dealing in that market and whose position can be vouched for and referenced,” she says.
The quest for the right partners is a major part of your research and you want to spend time with them before committing. You are looking for someone who you would employ as a senior member of staff and whose opinions you value. Nicky Santomauro, of clothing manufacturer Lavenham Leisure, has an excellent relationship with her Japanese agent, which is key to her success there.
She says: “We have quite heavy discussions with our agent before we go around the fabric stores and put our range together – agents need to have a big say.”
3 ANTICIPATE CULTURAL DIFFERENCES
Good exporters are cultural chameleons and don’t get fl ustered when cultural differences arise. Allison Riser, president of Cement Performance International, says work ethics are anything but uniform across the world. “In Latin America durin very important discussions people might just stand up and turn off their computers because it is lunchtime,” she says.
Aping your clients’ behaviour is advised. Turrell suggests noting the local fashions before arriving at a business meeting. “If you look odd when you are trying to secure a six-fi gure deal then you will receive a black mark,” he says.
China is a region that many entrepreneurs are attracted to. However, this is not an easy market to crack or understand. Steven Munnoch, managing director of Avon Metals, says: “In China they think that any contract is open to renegotiation.” This has led Munnoch to adopt a pragmatic approach to business in the country, as there is much less legal recourse to enter into if he chose to contest.
The consumer market is also different in China compared to Europe or North America. Karl Alomar, of China Export Finance, helps fi rms source goods and materials from China and knows the country well. “Brands that are mid-market here will be seen as luxury over in China while the top of the market is likely to be too expensive" he says.
As an exporter you will soon be using other currencies. If you are dealing with the US then don’t expect to use anything but dollars. The dollar is the most common international currency and is often used in Australia, Japan, China and Latin America.
In the European Union it’s the euro, although sterling is respected across the world. However, currencies fl uctuate, and this can cause problems, which can largely be mitigated by sticking to the currencies mentioned above. But if your margins are tight, a shift could burn you.
If you are predominantly trading in one currency then consult with your bank about insurance or hedging as a way to offset the risk.
This is one of the most daunting areas for most entrepreneurs. However, there are a number of strategies to improve collection:
¦ Charge first Websites that sell to consumers nearly always do this and many businesses are prepared to pay upfront also.
¦ Payment insurance Insurers will do this for about 90% of the money owed, although you will have to carry out a credit checkon the client fi rst.
¦ Use your agents Agents can do collections, but it is key that you stipulate how much you expect to be paid and in what currency. It might mean a bigger slice going to them but it involves much less hassle.
¦ Invoice promptly and chase This is sound business advice but many don’t follow it. Some late payers might be worth the effort if the margins are high enough. And some of them might need a surprise visit. “I know businesses that have actually ravelled overseas just to collect from a client,” says Stewart, who has a client who regularly does a round of Eastern Europe.
¦ Make sure you are in the right There are some quirky rules regarding invoicing in some countries and you don’t want to get stitched up. Turrell warns: “In Mexico you have to get notarised documentation of who you are just to send an invoice.”
