Seven steps to creating a successful international business
Exporting your medium-sized business abroad can create significant growth opportunities, yet many are reluctant to venture out of their home market. Despite world trade increasing 38-fold over the last 60 years, only a small proportion of all businesses export abroad. In the UK, for example, just one in ten businesses export, while in the US that number plummets to one in 100.
If you do decide to sell overseas, it allows for access to a broader customer base with the potential to capture a greater market share, increase sales and reduce production costs. Exporting can also help reduce business risk by limiting reliance on a single market and provides valuable opportunities from international expertise.
Despite the opportunities it presents, many medium-sized businesses still feel anxious about exporting and perceive it as difficult and costly, so they often choose the ‘safe’ route of sticking to what they know. There are, however, ways for business owners to reduce the risk and increase their chances of international success.
Below we have outlined seven steps to do just that:
1. Ask if your business is ready
Selling your products and services overseas is a big commitment, so you need to be sure that the timing is right, you have an effective strategy and your business is in a good position to export.
Begin by asking yourself if your business model is working well and delivering healthy profits in your home market. Funding is important too as you need to have enough in the bank to cover upfront costs. If not, then it is essential to know your options for accessing a bank loan or external investments to power your expansion.
2. Determine your target market
If you have already received enquiries from overseas, or from existing clients with an international footprint, then you will probably have a target country or region already in mind. If not, then you should first spend some time creating a market profile and outlining the kind of market that would best suit your product. This could include a country’s size, culture, accessibility or economy. By doing so, you can to identify countries that fit what you’re looking for.
3. Don’t skip market research
It’s important that you still do your market research, even if you have a good idea of where you want to export. Time should be spent looking into the competition in your target market, target audiences, different pricing models, and identifying the potential stumbling blocks from a legislative, tax and economic point of view.
Online research is a good place to start, but it’s vital you also speak to well-informed sources on the ground, as well as business advisors, accountants and consultants, who may have clients and similar past experiences.
4. Choose your route to market
A key decision is whether you are going to sell directly into your new market or do it via a partner on the ground. If this is your first venture into exporting, then the latter is likely to be the best option, enabling you to benefit from established knowledge and expertise, while avoiding the cost and complication of setting up a local team.
When setting up a partnership, there are a number of options, ranging from a joint venture, where you enter into a formal partnership with a local supplier, to working with a distributor or local sales representative who can manage your operations on a contract basis. You may already have identified potential partners during your research phase, however, your local enterprise agency can be another good source of trusted contacts, as can relevant expos and trade shows.
5. Understand the legal and tax issues
Navigating countless rules and regulations across different territories can be a significant barrier to companies who are eager to export. Even within free trade regions, such as the EU, there can still be huge variations such as contrasting tax treatment of similar products, varying product composition and packaging rules, and different IP standards. There are also customs classifications to understand, which are frequently confusing and sometimes out of date.
If you don’t have in-house experts who can help to navigate these elements, you may want to consider hiring external advisors to support. Your local enterprise agency is a good source of information, and they will also be able to introduce you to international advisors who can help with the necessary processes and paperwork.
6. Start marketing
Once you have created a plan, you can start promoting your product or service. If you have a marketing strategy that has worked well in your home market then this is a good place to start, however, always consider the culture and etiquette of the country you are entering in order to ensure that it is appropriate for your target audience.
Be mindful of expense versus return on investment, and consider starting small through creating a local website, along with some targeted PR and advertising. Social media sites, such as LinkedIn and Facebook can be a cost-effective way to get started.
7. Anticipate logistical challenges
Logistics can often get overlooked amid all the other complexities of trading overseas but getting this element right is essential to ensure your products arrive at their destination on time, and in perfect condition.
Due to the complexity involved in international logistics, many companies choose to outsource this element, rather than developing their own function in-house. Logistics providers have all the infrastructure in place already and will also take care of any paperwork around procedures. Logistics providers can also be a helpful source of local contacts and knowledge when you’re getting started.
Trading overseas is a long-term commitment and it takes constant work to sustain international growth beyond your initial sales. For example, if you begin by working with local partners, you may reach a tipping point where you need to set up a fully functioning organisation on the ground. Whatever stage of the journey, the key is always research, research, and more research. These seven steps will help guide your strategy creation and prepare your business for a successful global expansion.
To find out more about how we can help your business expand internationally, please get in touch with us to the right.