Concerns about how Brexit might impact export expansion plans are completely understandable, but it should not hold you back. You just need to get serious about how you research and plan your export strategy.
That strategy should form an integral part of an up-to-date business plan, which must include your business objectives for the next 2 to 3 years. I always find setting a target is good place to start, as without it you have no objective measure of whether you have succeeded or not. Once you have a clear goal you can then work through the steps of what needs to be done. A revisit of the business plan should include an updated assessment of risks, as well as the opportunities, ensuring the business is as resilient to external shocks or changes as it can be. So while the final shape and terms of the Brexit deal are still unknown, your business will be significantly better prepared for whatever transpires if you take the following action.
A strategic analysis of your business can take a numbers of forms. It is helpful to involve someone external to the day to day running of the company, not because they have a magic box of answers, but they can help you step back and see a bigger picture.
A simple tool is a SWOT analysis (Click here for a helpful, free guide from Hubspot). If you are working on an export plan, you may want to centre the SWOT analysis on the product or service you want to export. If you do this, make sure you consider the potential negative impact on the rest of the business. For example, allocating your best sales person to focus on this new export market could affect domestic sales.
Another great strategic tool to use is the Business Model Canvas. This requires you to summarise the key aspects of your business on one page, breaking it down into 9 components. This includes defining the value proposition and clearly articulating the value that your customers derive from using your product or service. Understanding that is critical. If you are looking to export, the value that customers derive from your product in that new market may be completely different to the domestic experience.
The combination of these two tools helps to provide a framework to assess the competitive strength of your businesses in your target market, as well as your resources and capabilities.
It sounds obvious, but be very wary of the seemingly well-connected stranger you meet at an exhibition or trade fair who is looking for an exclusive deal to be your local distributor. It is surprising how often something like that happens, and rarely works out well. Another classic mistake that is ripe for failure is taking on a lone, local sales person who you manage remotely. Four months of high activity, three months of excuses, and two months getting rid of them – and then you’re back at ground zero having wasted tens of thousands of pounds and hundreds of hours of management time.
Make sure you are aware of local employment laws. In some markets it can be hard to get rid of people, even if they are clearly under performing.
Who in your team will be leading the export plans and who will be supporting them? What impact will this have on their existing roles? What experience or knowledge already exists within the business of this new market, for example have you asked if anyone has language skills? Does your management team have experience of growing exports in to other markets? You need to realistically assess their ability to deliver on your objectives.
It is a good idea to identify at least one advisor with knowledge and experience of the market who you can trust to support you in your growth plans. It is better if this is someone you identify through your own research and connections, rather than someone who finds you.
Selecting the right market to focus on is clearly important. Make sure you take account of the real basics, such as the cost of getting there, any language skills required, and the cultural differences (more on this below). Extensive market research is essential when assessing a place you hope to export to. You can do this yourself, and there are some fantastic resource available (including via the British Library) and a UK Government service to help develop your export Action Plan.
If you want to ensure you have covered all the bases and done a robust job, then it is advisable to get someone with experience to complete this task for you.
The research work you conduct will need to include a detailed look at your target customers, the channels to market, and should also highlight considerations that will influence your local sales & marketing strategy. Thought needs to be given to ensuring you gather useful market intelligence and your ability to respond to this data. Relationships that you probably have with customers at home can provide valuable feedback, so be aware of the potential for your business to lack that kind of interaction in an export market, particularly if your route to market is different than at home.
When you research your competitors, it can be helpful to consider not just how they operate now, but how they might respond to your efforts to take some of their market share. You do not want to be defined by your competitors but you need to know you compare against them, where you are stronger, as well as where you are weaker.
Exporting is not easy. But if you have proven your business model can operate successfully in the UK, which is a highly sophisticated and competitive market place, then there absolutely will be market opportunities for you elsewhere in the world. However, do not under estimate how long it may take to become established in these markets, and how much it may cost. You need to consider what resources you can allocate to developing export sales, and then understand what success will look like in 12 months from now, or 2 year from now.
You have existing customers, and they may well be operating in other countries too. You should ask their advice on how they built their businesses in these markets. If they use your products and services locally, they may well be willing to introduce you to the operating companies in the other markets. And even if that does not work out for you, the fact that they are a customer in your local market may mean you can reference them as a customer and the brand or company name may be recognised and respected to give you instant credibility in the export market.
We have all seen the HSBC adverts that highlight the cultural differences between the UK and China, underscoring how important it is to understand local cultural issues. I like to think of people I know from different parts of the UK, whether Welsh or Scottish, Liverpudlian or southerners… I have perceptions of these area of the country and the people who live in them, and know that everyone else does too. And that is just the UK. The rest of the world is like that too, with regional differences within nations, and national traditions and ingrained ways of behaving that are different from our own.
Understanding, respecting and adapting to those cultural nuances can be the difference between success and failure.
The UK is a relatively small country, physically (the straight-line distance from Land’s End to John o’ Groats is 603 miles), but even here many companies do not actively target the whole country, or even the whole of England. France is about twice the size in terms of square miles, although the population is about the same as the UK.
When you look at a large target market, you may want to consider an initial focus on one region. Look for clusters of expertise aligned to your own business area, and understand why that cluster exists where it is. That may make it the ideal starting place for your business, or the best place to avoid!
Do not overstretch your resources and capabilities by taking on too much at one time. It may be impossible for one partner, agent or employee to handle multiple territories.
Currency can cripple a business and this will not change with Brexit, but the Brexit debates have contributed to some significant currency variations, and that and other shocks may well continue. So you need to understand the potential impact; consider how your goods and services are priced; know where your costs are incurred (locally or in the export market); and how to efficiently repatriate funds.
At home you will know the profit margins of your products and services. When starting on an export journey you need to consider all the elements that could affect that margin, and plan how you structure and manage your operations to ensure you remain profitable. There can be additional costs associated with exporting, whether that is transport, dealing with returns, additional customer service costs for multiple languages, tariffs, customs paperwork, compliance with local regulations and tax regimes, or currency fluctuations. All of these can all eat through the profit margin. Map out a range of scenarios, from worst case to best case.
There are obviously advantages to exporting as well. Sometimes margins are higher, costs lower, and the business can benefit from efficiencies of scale. Having sales in multiple markets also means you are less exposed to local downturns in spending.
Contact Gavin McWhirter on 0773 6060230 or firstname.lastname@example.org to discuss your growth plans, whether looking to research a potential export market or expanding into the UK.
Gavin McWhirter has over a decade of experience working with SME’s to develop sales, marketing and market research strategies, and supporting the execution of those plans.