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Five things you should know before exporting

Before you export, preparation is everything. Here are five simple things to help you on your way to overseas success.

Plan your business strategy

Make sure you refine your aims and objectives for the business before you start work on your business plan.

1. Where will you export to?

You have to make sure you’ve done the right research as part of your preparation. The quality of your research is as important as the quantity.

Start by identifying all the markets you think would be suitable for your business, and then prioritising them. Perhaps concentrate on your top three – the world is a big place and it’s easy to spread yourself too thin. You can even use your experiences in one market or region to inform and guide future expansion.

Try to identify a strong local demand and note any challenges you’ll face, and then build a five or ten-year plan.

If you work out the ‘where’ part of your export business you’ll reach an exciting point in your project. It will focus your thinking and might throw up more questions if your research provides answers you didn’t expect or want.

Take your time over the decision. Make sure you get all the advice you can before you commit. There are still many things you’ll need to deal with: the best sales channels to use, any changes you might have to make to adverts for local audiences, and local laws, trading standards, duties and taxes.

2. How are you going to sell?

 

It’s important to be flexible. Always consider local customs and preferences. Look at all your options. For example, why create relationships with outlets when a sales agent might offer a cheaper option.

Always look at the positives and negatives.

  • A joint venture could get you into local markets right away, and solve a lot of problems, but it could also reduce the impact and perceived newness of your arrival
  • Opening your own branch will have the most impact, but it’s also the most expensive
  • Selling online is cheaper, but it has its own issues. The competition can be fierce. Not just with direct competitors, but you can find yourself competing with videos and games for the attention of your potential customers. You have to ensure that what you offer stands out.

And remember:

  • You created your business plan to guide you – what suits the growth plan best?
  • Relationships are important in business – if you don’t trust someone, don’t gamble on them
  • Don’t promise what you can’t deliver – doing something badly can have a very negative impact on your business and your brand name

3. How will you get paid?

The way you get paid for exports will be different. This will be most noticeable in the time it can take for payment to come through.

Here are some golden rules regarding payments:

  • Avoid going into the red – there will be pressures on your cash flow, so discuss the possibilities with your bank and other affected parties beforehand
  • Make sure everything that’s been agreed is written down, no matter how trivial seems
  • Don’t be afraid to ask for a percentage deposit – it’s perfectly acceptable to make your export customers show they’re creditworthy
  • Currency fluctuations can make great deals turn sour overnight. Don’t over-expose yourself to this risk.
  • Think about moving the non-payment risk to the buyer’s bank or – even better to a UK bank — rather than the buyer
  • Before you give anyone credit terms check their credit history and explore ways to guard against non-payment

4. How will your products get there?

There may be unique logistical challenges in each country you export to. Do your homework to be aware of things like local laws, the local climate and distance your goods will have to travel.

It’s up to you to operate within the law. Be prepared for a steep learning curve and always assume that you‘ve missed something.

Be sure you:

  • Understand Incoterms – the internationally recognised rules and definitions used in export/import
  • Have different pricing structures for different Incoterms
  • Make sure your contract defines (using Incoterms) who is responsible for freight and insurance costs, and any import duties

There are many generic export documents, like:

  • Export invoices — detailed descriptions of your goods and their commodity code
  • Standard transport documents — the carrier’s receipt for the goods with details of the contract of carriage and routing
  • Dangerous goods notes — if your products are hazardous
  • Export licenses — may be needed sometimes, but worth knowing about

If you need help understanding local export laws, talk to UK Trade & Investment (UKTI). Make sure you apply common sense when planning the logistics of your exports. Imagine and visualise the journey of your product and try to anticipate any problems that might arise. Whoever you deal with, especially if you’re using a freight company, make sure they have a good reputation and always make sure you get insurance.

5. How well should you know your customers?

To build successful relationships with overseas customers you have to put yourself in their shoes. Learn what they need and how they think. They could be influenced by centuries old traditions, or local trends, or both. The better you know them, the better your chances of success.

You can’t guarantee success by understanding local cultures. But to ignore them will almost always lead to failure. Try to immerse yourself in the local culture. Learn the language, read local papers or buy competitor products — it can help you get things right first time.

Your product may have different associations in different countries. Embarrassing errors, especially public ones that cause offence, could damage your prospects. Try to get a native speaker to read all your communications, from emails, to adverts to the packaging.

Summary

Successfully exporting your business is about more than finding new customers abroad. You need to put in a huge amount of hard work in the preparation stage. And continue working hard once you launch in the export market. You’ll probably have to develop a change of mindset, to be flexible in your finances and your thinking. The more flexible you are, the greater your chance of succeeding.

Why do some businesses get it wrong?

There are many things that can go wrong when you decide to launch an export business. One way to try and avoid these pitfalls is to learn from the mistakes of other people.

Things that can go wrong include neglecting your domestic market when you’re channeling all your energy into launching into the export market. It’s not smart business practice to lose one market as you open up another. Never make assumptions about local laws and customs, as you can easily cause offence without intending to.

If you’ve seen a gap in the market, and plan your export strategy carefully, there’s a whole world of opportunity awaiting you.

If you’ve decided that export is the way to go, the best place to start is with an export cash flow forecast. This gives you an idea of whether the project can be viable before you commit anything to the project. You can see how it will fit with your existing business plan, and seek second opinions to make sure you’re backing a winner.


This guide is intended as general advice only, and not intended to cover specific circumstances and needs. The information in this article is also not linked to any of the products offered by Clydesdale Bank PLC.

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