Develop an export strategy
Exporting offers the prospect of new markets, more sales, better profits and a greater spread of customers. A clear strategy makes it much more likely you will succeed.
Your export strategy should be based on an assessment of your own position and research into promising opportunities. You will need to think about how to reach new customers and finance your exports, as well as making sure you understand legal and tax issues.
1. Assess your position
Be clear about your reasons for exporting
- You want to boost turnover and spread your costs.
- You are looking for new markets.
- You have built up a strong domestic base and want to maintain your rate of growth.
- You have an internationally competitive innovation.
- Your customers expect you to operate on an international basis.
- You want to extend the lifecycle of your products.
- You are receiving foreign enquiries or attracting international visitors to your website.
Ask yourself how ready you are as an organisation to start exporting
- Winning export orders takes time. Make sure you have the resources and commitment to support your efforts.
- Identify any new skills that your employees will require to handle international business.
- Review the extent to which you are able to operate in the local currency or language.
- Be realistic about your ability to motivate a sales team from a distance.
Identify the particular risks you need to address
- Differences in language, currency and business practice can complicate any sale.
- Securing payment from customers can be lengthy and complicated.
- Delivery cycles will be longer than you may be used to. You may risk over-extending yourself, particularly with large high-value orders.
- More people will be involved in any sale. As well as your customers, you may have to deal with regulators, banks, insurers and carriers.
- Long lines of communications mean that overseas partners are likely to act more independently than you would normally expect at home.
- Every foreign market is likely to pose its own particular risks. These could range from import restrictions to political change, economic instability, poor transport infrastructure and intellectual property theft.
Decide how aggressively you want to pursue opportunities
- You might decide just to pick up orders from foreign buyers in the UK or from traffic on the web.
- Licensing your intellectual property or franchising your business format internationally might allow you to profit overseas without extensive direct involvement.
- Finding experienced intermediaries to work on your behalf in different markets could reduce your initial costs and the complexity of the challenge.
- You might decide to pursue growth directly and handle all aspects of the export process yourself.
2. Draw up an action plan
Decide where you should focus your efforts
- Work out your competitive position and decide which products are likely to perform best in international markets.
- Choose markets that offer you scope for growth and that you understand. Selling to a country with a very different business culture may not be the best first step into exporting.
- Thoroughly research potential markets to inform your decision.
Establish your objectives and budgets
- Spell out what you are hoping to achieve in terms of sales, turnover and profitability.
- Draw up an export budget, clearly indicating how initial expenses should be allocated and when you expect to see a return.
- Ensure that you set an export price that covers the additional costs and risks of exporting.
Plan how you will manage your exports
- Appoint someone to lead your export activities and decide how much time senior managers should allocate to export activities.
- Ensure that employees have the equipment and systems they need to handle international orders.
- Decide how you will organise marketing, sales and delivery to reach the market.
- Work out your terms of trade and how you will finance your exports, including delivery terms and payment method.
- Use your export plan as an active management tool and regularly update it.
Consider getting help.
- The Department for International Trade (DIT) offers services for exporters including the Passport to Export programme providing training, planning and support.
- The British Chambers of Commerce and your local chamber of commerce offer export services, support and events.
- Your trade association may be able to provide export advice and export market information.
- The Institute of Export offers training and professional qualifications.
3. Research potential markets
Find out what you can about export markets from home
- Look at international trade statistics on the web or in your local library to work out where demand is strongest for your products.
- Look at the list of free sales leads held by DIT and supplied by British embassies in different countries.
- Join an export club to learn from the experience of other companies.
- Ask your chamber of commerce about events it is organising where you can meet international companies in your sector.
- Read the reports on different markets and industries published free of charge by DIT.
- Commission market research for as little as £500-£600 or use the fee-based information service from DIT. A grant of up to 50% may be available towards the costs.
- Consider checking with international aid agencies for companies that are looking for partners.
Explore foreign markets in person
- Attend a trade fair to meet potential competitors, suppliers and customers.
- Go on a trade mission. You will be given a full briefing on the market and make a large number of contacts. You may be able to get a grant towards the cost of your trip.
4. The legal and tax position
Find out about the key legal issues in your potential export market
- If you are selling goods like firearms, software, chemicals or fine art, you may require an export licence.
- Your product will need to comply with local regulations: for example, safety standards and labelling requirements.
- Decide what steps you should take to protect your intellectual property. UK patents and trademarks only protect you at home.
Prepare a comprehensive sales contract
- Be clear in the sales contract about where your responsibilities end and the buyer’s start.
- Use internationally agreed ‘Incoterms’ to avoid any confusion about who is delivering the goods, arranging freight insurance and paying for transport.
- Make sure that any agreement has clear measures for performance and only lasts a fixed term. You want to retain your flexibility in case of changes in the market.
Make sure you understand the tax rules
- Exports to countries outside the EU and to VAT-registered customers in other EU countries are usually zero-rated for VAT. You need to keep proof that your goods have left the UK (and their VAT number for EU customers).
- Your customer will normally be responsible for paying any taxes or duties in their country, though it will depend on what you have agreed in your contract.
5. Reaching the market
Take account of local rules and cultural preferences
- Be prepared to modify your product and your marketing.
- Check your market proposition. Overseas customers might think about your product in ways that you do not expect.
- Think about how best to reach your target audience. You might find that your product is sold in different ways and through different channels.
- Consider any changes that you need to make to your branding and labelling. For example, you may have to rename your product.
Select a channel for selling into the market
- You may be able to sell directly: for example, via your website, using direct mail or at trade shows.
- Appointing an agent to sell goods on your behalf can be a cost-effective option. Take advice on your responsibility for their activities, and draw up a suitable agreement. For example, you could be held liable for any bribes they pay.
- You may find it easiest to use a distributor who buys goods from you to sell on to their customers.
- Other options include entering into a joint venture with a local partner, opening a local office or setting up a local subsidiary.
Be clear about how you will deliver your goods
- Your choice of whether to use sea, road, rail or air as your mode of transport depends on your type of goods and how quickly they have to be delivered.
- You will need the right documentation to clear UK and overseas customs and to avoid any unnecessary tax payments.
- Many exporters use a freight forwarder to handle their transport. Find one who knows the territory and who can handle your documentation.
- Check packaging and transport regulations in your destination country.
Aim to offer a service that equals or surpasses local expectations
- Reply promptly to any enquiries and sign any letters personally.
- Make sure your product has service support.
- Don’t disappoint importers by failing to ship as promised.
- Keep your contacts informed of any changes to the arrangement.
Guard yourself against non-payment
- Credit check all overseas customers.
- Decide how much credit you are prepared to extend yourself or take out insurance.
- Always ask whether a prospective customer is a properly formed company and can pay its bills.
- Be clear about how you are going to chase up payment. Ask your bank about invoice discounting to protect your cash flow.
- Have a back-up plan for re-selling your goods if the customer refuses to accept them.
Negotiate a method of payment to reflect the risks that you are running
- Advance payment is safest. You are paid before the goods are shipped.
- Letters of credit confirmed by a British bank are highly secure, but you must ensure that your documentation is absolutely correct. Any error and the bank will turn down payment.
- Documentary collections allow you to raise payment directly through your customer’s bank.
- If you sell on open account, you offer credit of 30 days or more, so only use it with customers you know well.
- If you have a series of contracts, rather than a single project, consider setting up a line of credit with your bank.
- For countries with foreign exchange difficulties, countertrade or barter might secure you an order that you would have otherwise missed.
Take care about how funds are transferred
- Cheques can bounce and are slow to clear. Banker’s drafts and international money orders are safer, but they are more expensive and can still be lost in transit.
- Your customer can arrange payment through SWIFT, the standard for inter-bank transfers, to any account you choose.
Before dispatching any goods, think about insuring yourself against common risks
- Credit insurance offers protection against non-payment. UK Export Finance mainly provides insurance for capital goods and major projects, or you can use a private insurer.
- If you are being paid in local currency, guard against any fluctuations in foreign exchange rates by setting up a forward contract with your bank.
- Take out cargo insurance to cover any damage or loss to goods in transit.