The global economy has opportunities galore for companies with exciting and innovative ideas. Entrepreneurs must cast aside their fears and cross national borders to expand their businesses
There is something of a dissonance between the state of British exporting and UK plc’s inherent ability to conduct trade overseas. On the one hand, the UK isn’t a great exporter. Research from Grant Thornton shows that about 37% of British companies are engaged in exporting, which is about the global average.

However, this is far below countries such as Germany or Italy. On the other hand, British companies and entrepreneurs have repeatedly been proven capable of creating strong, export-worthy products. The UK has good intellectual property (IP) laws, a reliable infrastructure to export from and, anecdotal evidence suggests, a reputation for honesty and reliability among foreign purchasers.

Brand GB appears to be in decent shape, but we can seem a little timid when placed on the world stage. As Sir Andrew Cahn, chief executive of UK Trade & Investment (UKTI), the government’s foreign trade arm, commented recently: “The UK is one of the world’s top exporters, but I think that we can do better. Too few UK companies have an active export strategy.”

Harking back to the old days of heavy industry and traditional manufacturing is clearly a misnomer. Britain is never again going to be home to the ‘workshop of the world’. The global economy has determined that the behemoths of China and India are set to dominate the mass production markets of steel, iron and coal, as well as majoring in car manufacturing and textiles. They have the manpower and the cheap raw materials, so they can muscle into these macho industries.

However, British business is far from blocked from trading overseas. Indeed, smaller entrepreneurial companies are well placed to take advantage of the global economy. Offering a wide range of niche, specialised products and services, many of which are the result of high or at least medium technology, British businesses are in demand across the globe.

Also, despite the recent horror of our financial systems, and notwithstanding its recent hammering on the currency markets, sterling is still a respected currency among buyers and sellers. Indeed, the weakness of the pound should be a boon to UK exporters, but it hasn’t made as much of an impact on the exporting figures as some would have expected. There’s something of a reluctance or apprehension among UK companies to go overseas, and many will only do so after a foreign customer contacts them. It seems, then, that you may need some encouragement.

Why do it?

There are many good reasons to export, but perhaps the most pertinent is that it shields you from a downturn in the domestic market. Barry Scholes is the founder of Evac+Chair, a Birmingham-based manufacturing business that makes special chairs to transport mobility-impaired people down flights of stairs. He says that last year, exports were worth £1.2m (out of a £5.7m total), and that during the recession he was glad to have them.

“It’s very important, because the home market has suffered quite significantly during 2009,” he says. “Our UK sales saw a decline of 16%, so exports were important for us. Last year was tough for us, but if it wasn’t for the exports, it would’ve been so much worse.”

Having additional markets in which to sell spreads the risk of a downturn. But global trade isn’t just about selling abroad. Successful global businesspeople believe making it overseas entails buying and selling, and forming partnerships wherever they may be. This allows them to take full advantage of the market as both buyer and seller.

Dr Julie Diem Le was formerly an eye surgeon, but went into business making UV-protected sunglasses for children and teenagers. However, although the business, Zoobug, is located in the UK, its products are made in Italy.

“We produce our frames in Italy, because our factory there is able to offer the quality and state-of-the-art production facilities we require,” Diem Le explains. “Sometimes it works out cheaper than manufacturing in the Far East, which can have expensive freight costs, import taxes and duties.”

Doing business overseas does, of course, come with risks attached. However, there are dangers associated with not expanding globally as well. Steve Cunnane, international trade adviser with the Birmingham Chamber of Commerce and Industry, stresses that competition is global and entrepreneurs that fail to recognise that are lining themselves up for a fall.

“Businesses that only focus on the UK might be letting the competition off the hook,” he says. “Companies need to know that they risk their competitors coming over here and then they may lose out in the UK as well.”

Cunnane says that while a weak pound should mean that UK-made goods perform better overseas than previously, entrepreneurs might need to look further afield to take advantage. UK companies should be considering non-traditional markets, such as India, China, the Far East and South America.

The fear factor

Fear often seems to be the major issue holding entrepreneurs back from entering a new market. This is, of course, understandable, but overseas business is for the brave, so you’ll need to find a way to cast your worries aside. Remember the thrill of starting up your first business? Consider this new period of growth in a similar vein.

“If I look back about 10 years, I think I was frightened about doing business abroad,” says Paul Morris, founder of Addmaster, which produces plastic additives.

Its main product, Biomaster, makes plastics safer and more germ resistant, and the company outsources its manufacturing to businesses in the UK. However, Morris has applied this hands-off approach to other parts of the company and this has enabled him to expand rapidly.

“Entrepreneurs often want to be control freaks. By outsourcing our manufacturing, we have learned to take [a hands off] approach all through our business,” he says.

Despite having only five full-time staff, his business sells Biomaster across five continents, and around 40% of the company’s sales are made overseas.

Getting started

First, you need to assess whether you are really in a position to expand abroad, as it can be a risky and time-consuming venture. If your business is strong in the UK and your cash position is reasonably stable, then you are probably ready. Typically, businesses that succeed overseas have done well at home first. Addmaster came to the attention of overseas clients, as it was already performing well in the UK and had major buyers, such as the NHS, on its books.

“We didn’t set up thinking about going further afield. We set up with a view to creating a range of products that would stand out in the UK market,” says Morris.

For many entrepreneurs, the first steps abroad are made at home. John Enstone is the head of IP & Commercial at the law firm Faegre & Benson, and has worked overseas for the majority of the past 30 years. He says that entrepreneurs often rush abroad from a sense of desperation, and that this often leads to them getting burned.

“The mistake is that people often put off going into a foreign market until they have to,” he explains. “But, generally, it takes longer to make a profit from a foreign territory than a domestic one.”

Broadening your horizons involves extending your network, but you don’t need to go very far initially. The usual ports of call for expanding entrepreneurs, such as Business Link and your local Chambers of Commerce, are good places to ask early questions, get advice and make contacts.

UKTI can also be extremely useful. It runs subsidised ‘trade missions’ to new markets, where entrepreneurs can get out and meet the locals. It also helps you to attend trade shows and with networking in general. Diem Le has benefitted from this. “UKTI gives small grants, approximately £1,500 towards overseas trade shows, but I recommend you apply early,” she says.

“If you are new to it, they organise for you to go in a group, and you can learn a lot from fellow exhibitors. They also help with finding distributors and business partners, although there is a fee for this.”

Researching the market

It’s crucial that you spend time investigating your potential market and developing your ideas on how you are going to break into the new territory. Getting some good information on how well you’re likely to be received and identifying potential gaps in the local market is a decent start. Initial research can be done on the internet and through networking, but the best information will only come from actually visiting the country.

As with domestic trade, your ability to conduct business overseas relies upon your unique selling point in the market. Successful UK businesses can’t compete with Chinese businesses in terms of volume, but specialised and niche products can be sold there and in other emerging territories. “I wouldn’t want to be exporting products that are already available in that market – make sure you are unique,” advises Morris.

Enstone says that developing regions, such as China and India, are potentially good for high technology businesses, as we possess knowledge and expertise which hasn’t yet come to fruition there. “India has gone berserk, particularly in the high tech sector, while China is booming from every possible angle. However, if you want to go for one of the most challenging markets, then China is the one,” he says.

It may be that some of the greatest riches are to be found in the toughest terrains, but China, with its somewhat mysterious culture and politics, is an area where you should get as much advice from business veterans, public bodies and professional advisers as possible before entering. Problems such as enforcing contracts and IP violations are well known, and lawyers like Enstone recommend beefing up your documentation and treading carefully.

However, one market where doing business is relatively straightforward, but where cultures are more similar is Eastern Europe. “This is one of the easiest [markets to export to], as it is familiar with your products, interested in trade with the UK and doesn’t want to be seen as difficult to do business with,” says Enstone.

Finding partners

Unless you are planning to open a new office, you’re most likely going to be employing an agent of some description. Usually, these are other businesses that deal in the types of goods or services you provide. However, you must decide on the most suitable type of arrangement. On the one hand, you want some flexibility and to make a good profit. On the other, a good agent will want certain rights and privileges, such as exclusivity in a particular region. They also need to be given enough time to really make a go of it.

“We were very careful about looking for agents,” says Morris. “We only deal with people who are technically able and genuinely interested in our products. Our partners are existing businesses that are capable of selling high value products, and are already active in our field.”

His business will give its agents exclusive selling rights to a region, but he is careful not to rely on them too much while they’re still making headway. “You have to give the agents time to make a sale, and for us it is about 12 to 18 months,” says Morris. “Also, we only let agents run with one of our products at a time.”

Scholes also employs a mixture of caution and trust, and works hard to really understand the agent before making any commitment.

“We have 32 distributors worldwide, but it’s a question of being selective,” he says. “The distributors sometimes just want to collect products for the sake of it. But you can whittle things down and find the ones that can show the right approach and develop the products in their country.”

Scholes gets very involved in the affairs of his distributors and forms strong relationships with them. This involves finding out detailed information, as well as plenty of face-to-face contact. “We send them a questionnaire that will tell us about their company, its turnover, territories and facilities. This will determine whether it’s worthwhile me visiting them,” he says. “Unless you meet people face-to-face, you don’t know anything about them. We usually ask for references as well. I always go and meet the distributors personally – it’s so important.”

Getting paid

Always ask for payment upfront when dealing with new clients and be strict with payment terms, recommends Diem Le. “If you’re offering credit, then go for a letter of credit. It doesn’t matter how big a firm you're dealing with, if it wants your product, it will be flexible. It’s not worth taking the risk unless you have developed a very good working relationship,” she says Diem Le, summing up the approach taken by many successful exporters.

Morris agrees and adds that it doesn’t pay to be too desperate. “I think a lot of entrepreneurs worry that they aren’t going to be able to make any sales, and so they accept any offer. We always say to new customers that the first order is ‘payment upfront’, and we haven’t lost any orders from that stance,” he explains.

Of course, currency issues are worth thinking about too. At the moment, exporters are in a strong position because the pound is weak and so exchange rates are favourable. However, you need to think of foreign exchange as a cost, and this can mean shopping around. Hedging and buying options are often used by exporting businesses and many have accounts in different currencies to ensure they don’t get caught out. However, most UK companies still conduct their trade in sterling. Many foreign businesses are also happy to do this as the pound remains a major international currency.

Crossing boundaries

There are many different legal issues to be aware of when conducting trade abroad, and having good advisers with experience in the territory in question is a must. You’ll want someone to have a good look at your terms and conditions, which will probably need beefing up, and to advise you on aspects and nuances in law that don’t apply in the UK. Remember that the UK has been a trading nation and advocate of free trade for centuries, whereas many of your clients are from very different cultures. “Trust the professionals to do it, don’t try to do it all yourself,” stresses Morris.

He employs a local law firm to advise him on many things, but also outsources the customs and border paperwork to the freight forwarding company he uses. Morris believes that this is the best solution. “We work with professional, expert companies, and they charge us to complete our paperwork, but it isn’t so expensive that it would be worth paying an export manager to do it in house,” he says.

Competition in the freight forwarding and logistics markets is strong in the UK, and we have a good infrastructure, so take advantage of these benefits. Also, don’t be afraid to speak to the authorities if you have concerns about your products.

“Get the exporting paperwork in order, and get advice from customs and excise, otherwise it will cause big delays,” says Diem Le. “The first time you export to a customer, get it right. This includes terms and conditions, the product, packaging, instructions, invoicing – everything. This is a reflection of your company, and you will only get
one chance to make the right first impression.”

Cultural differences

Thankfully, English is the most widely spoken second language in the world. In the world of business, thanks to British and American trade empires, it’s the first. However, this isn’t the Victorian era, so don’t automatically assume that potential trade partners want to use the Queen’s tongue. “I believe that you need to have the right people to do it. Our sales director David Wells can speak five languages,” says Morris.

Similarly, Diem Le employs people who are fluent in Italian, as well as there being English speakers in her Italian factory. Ultimately, you want to be sure that you are communicating effectively, and that you can understand. “I have staff who speak Italian, but my partners in the factory also speak English,” says Diem Le.

Beyond language, there will be numerous cultural factors to take into account, as well as a diverse array of approaches to doing business.

“Cultural differences exist and language barriers can lead to misunderstandings. It’s important to have things in writing with deadlines and expectations, so both parties know where they stand,” suggests Diem. “The Italians take the whole of August off for their summer holiday and all the factories come to a standstill. So wherever you manufacture, you have to respect their local holiday traditions and plan your schedule around that.”

Advisers at UKTI are helpful in the first instance, but as a next step, finding a local who can inform you about his or her business culture would be a good idea. Furthermore, it doesn’t pay to have too many preconceived ideas, as globalisation is shifting attitudes and behaviour.

“We find that some of the stereotypes do apply, but usually it’s the positive ones. The Germans are very professional, for instance. However, the negative ones, such as Chinese businesses ‘doing everything on the cheap’ aren’t true,” says Morris.

Ready to go?

A foray into a new market is something that you could think about forever, but at some point, you just have to bite the bullet and do it. Understand the regulations that affect you, get advice on business cultures and how to adapt to them.

Distance is a barrier to overcome, but don’t be scared off. UK business has some great ideas and the world needs us, just as UK plc needs investment and trade. Many forays into overseas trade are customer driven and, while you can never ignore the customer, a more proactive approach is warranted if you want to make it a real success. Don’t try to do everything yourself and find some good partners, but, ultimately, belief in your business is the most important thing.

As Morris concludes: “The key is to get good people and to be flexible in your approach. It is much harder to do business overseas than in the UK, but if you have the right products, don’t limit yourself.”

Using the web to access foreign markets
How the web proved to be a ready made gateway to international trade for Tim Snaith’s business

After struggling to ride up a hill on his bike on his way back from work one day, Tim Snaith decided to set up motorised bicyle business 50 Cycles. Scott, his brother and co-founder, was in Tokyo at the time, and told him about the electric bikes there, and a business idea was born.

“I got him to send a few over. They sold straight away, and that was the start of it really,” says Snaith. “Electric cycling is a lot more popular in Japan than it is here, although the bikes are mostly made in Germany. We take brands that don’t have a presence here and give them the treatment.”

This involves a strong web market presence and a good mailing list. Although the bikes sell here, about 20% of turnover is made from exporting. The company’s website is seven years old and so performs well on search.

However, 50 Cycles uses translation software for key parts of a sale to ensure overseas customers aren’t put off from buying. The business buys at a good price from abroad and then sells to the world. “We have a knack for spotting what is going to be popular,” says Snaith, adding that the most important part of exporting is having a good product.

Where to go next
Invaluable sources of advice to help you take your business global
  1. UK Trade and Investment (UKTI): The government’s foreign trade arm can offer invaluable advice, plus the chance to participate in overseas trade missions. It can also help put you in touch with trade officers at British embassies and consulates. www.uktradeinvest.gov.uk
  2. Business Link: The government's Business Link service offers practical advice and support to growing businesses across the UK. www.businesslink.gov.uk
  3. Her Majesty’s Revenue & Customs (HMRC): For information on customs, trade restrictions and taxes, visit the taxman online. The HMRC Guide to Importing and Exporting – Breaking Down the Barriers can be found through its website. www.hmrc.gov.uk
  4. British International Freight Association (BIFA): BIFA is the trade body for all freight forwarders in the UK, and it promotes a code of conduct for its members. The organisation will supply a list of its members to you on request. www.bifa.org
  5. The British Chambers of Commerce (BCC): Your local chambers can prove to be a strong source of contacts, information and meetings. BCC also collaborates with several of the organisations listed here. www.britishchambers.org.uk
  6. The World Bank: Interesting information about the ease with which business is conducted across different territories. www.doingbusiness.org/economyrankings
  7. The CIA World Factbook: A concise and authoritative guide, which provides statistics and key information on every country on the planet. www.cia.gov/library/ publications/theworld-factbook