7 important things to consider when getting into export
If your business is doing well and you’re looking for the next step for growth, you might be thinking about export. Digitalisation, enhanced transport links and the growth of international production networks means there’s never been a better time to start doing business overseas.
If you’re making your first foray in international trade, we’ve teamed up with global trade experts, Atradius to bring you the 7 most important things to consider when getting into export.
1) Does it make sense for your business?
You must have sufficient resources to expand your business abroad. Determine how much you need to invest, if your workers have the right skills or if you’ll need to employ new people and if you have capacity to meet new orders. Create an export plan that includes realistic objectives for volume and revenue growth as well as profitability, bearing in mind any additional marketing and logistics costs.
2) Do your homework
Market research is not just a tick box exercise, it’s incredibly important so you need to make sure it includes as much detail as possible. Without looking beneath the surface, you might risk being caught out.
You need to be absolutely sure that there is a demand for your product/service. You’ll want to scope out the competition, but you also need to get an understanding for the economic environment.
The economic and political stability of your chosen export destination, its legal and regulatory framework and its business culture are all important factors that will help inform your planning and forward strategy.
Familiarise yourself with the payment practices of the region as a whole, the wider sector as well as that of individual buyers. It’s also important to research the options available to you should something go wrong, you’ll want to be assured that there are legal safeguards in place so you can get paid.
3) Consider your market
Many new exporters target countries that are similar to their home market as this creates minimal barriers when it comes to language, standard of living and buying behaviour. Scope out the potential size of your target audience, as well as their appetite and purchasing power, so you know in advance if you’ll need to adapt your offering and price for that market. Many businesses find it helpful to partner with a local agent who can help open doors.
4) Embrace new cultures
It may be easy to think of the international marketplace as a ‘global village’ but not every market has the same behaviours, manners or business cultures. Before you do business, research how you should approach new prospects, how it’s customary to speak to each other at meetings and what sort of behaviours or topics might cause offence.
5) Get it right first time
Check whether your products or services are impacted by any laws prohibiting imports – or if they need a special licence. Don’t make any assumptions and set yourself strict protocols which ensure you’re following the correct procedures to avoid delays. When it comes to administration, check everything – then check it again - too often delays occur from simple oversights or mistakes on invoices.
You’ll be dealing with markets with different payment practices so set out your terms and conditions clearly. It’s essential to make sure they are understood, especially regarding currency and make sure your buyer understands whether the cost is stated in sterling or their local currency.
6) Knowledge is power
Understanding the opportunities and risks of international trade is the difference between success and failure – but keeping this understanding current is key. Markets can change in an instant and therefore being able to access real-time intelligence about your customer as well as regarding the economic and political trends in your export destination is critical.
Stay up to date with industry performance reports, country forecasts and analysis of payment trends. If you can’t do it yourself, use the resources available to you through your broker or trade credit insurer who can help you find the data you need to make the right decisions.
7) Protect your bottom line
When it comes to getting paid, make every provision. Cash in advance is golden but you’ll often need to extend credit. If you do, consider a letter of credit, ideally confirmed at a local bank. A well-drafted retention of title clause should be included in the contract and can help you to reclaim your products if your customer becomes insolvent without paying you for goods received. Stipulate which national law applies to the contract and consider an arbitration clause.
Whatever your terms of payment, the unforeseen can happen. The ultimate safety net is trade credit insurance, protecting your bottom line in the event that your customer fails to pay. As a trade partner, Atradius offers expert insight into your market and unrivalled business intelligence on the potential customers you are planning to trade with. Peace of mind that your receivables are protected by insurance helps to create a solid platform for export.
- Make a detailed export plan and do as much research as you can about your chosen destination
- Check your product or service can be legally sold in the place you’re going to export to
- Put in place a letter of credit to ensure you are protected if something goes wrong