Exporting goods abroad is not just for big corporations. So many of our business customers are enjoying growth and success after seeking out the right kind of funding and some are now looking into exporting for the first time. Stepping into the brave new world of exports can be a little daunting, and it does take some serious consideration and planning. However, we believe that lots of small business owners have the potential to do extremely well through exporting, so we’ve put together a guide for anyone who might be interested in branching out!
The Federation of Small Businesses (FSB) says that small businesses that export enjoy better levels of growth and competitiveness and are also more likely to survive. Despite this, the percentage of small businesses that export their goods abroad has remained reasonably static and many feel that exports aren’t right for them.
The majority of exporting small businesses start trading abroad within their first few years, with many too set in their ways to consider a radical change to their approach to business. With a little guidance though, and the know-how to make a start, many more small business owners could be reaping the benefits of creating a much larger market for their products.
Why start exporting?
The most recent FSB Export Survey shows that small business exporters report many benefits. These include expanding the market for their products, greater profit levels and increased turnover. The members of the FSB who were asked about their reasons for exporting also cited opportunities to grow much faster as a reason to start offering products overseas.
Obviously exporting isn’t for everyone. Some businesses, depending on their capabilities and their offering, may never consider branching out to overseas markets, and rightly so. However, many may have never considered exporting despite being perfect candidates for selling their goods overseas.
Small businesses that tend to make a success of exporting usually share certain characteristics. If you see yourself in any of the following descriptions, exporting may be worth considering - and at the very least, it’s worth your while to read the rest of this guide!
Consider exporting if your business meets any or all of the following criteria:
It is successful in the UK, with steady growth in sales and profits.
Your business has competitors already exporting and doing well
It operates in a field where there is clear demand overseas
It has the financial capabilities to fund market development and staffing in a new market
If you have local or specialist knowledge of contacts in a particular marketplace
You’ve been approached by overseas customers keen to buy your products
What type of exporter would you be?
If you are looking to export, you may fall into one of two clear categories. Firstly, there’s the ‘strategic’ exporter. For these businesses, export was always part of the business plan. In fact, for many, it would have been central to it. The strategic investors are likely to be those who start exporting early on - often when they are still regarded as start-ups. They will have a precise country or countries in mind when looking at their target export markets and funding will exist and will be allocated to fund the development of their overseas markets.
Then there are the ‘opportunistic’ or ‘reactive’ exporters who first consider exporting as a result of a specific opportunity that arises. Perhaps a new market opens up after they are approached by a potential customer who would like to buy goods and receive them in their own country. Alternatively, a partnership may open up through B2B channels. This approach is likely to be less costly and, depending on the nature of the deal or opportunity, may either be restricted to a single customer or territory or be open to any customer in any country.
What might hold you back?
When considering exporting, there are a few obvious factors that might put you off. These are factors that need careful consideration, but they needn’t deter you if you believe gains are still to be made.
Let’s look at a few of the things you need to look out for when starting your exporting journey:
Brexit has obviously had a major impact on exporting to the EU. Exporting certain goods is more expensive than it used to be and there’s no doubt that, for some smaller businesses, the terms involved in exporting to EU countries are no longer favourable enough to continue.
One piece of research found that nearly a quarter of small business exporters had halted exports to the EU. Many of these businesses cited greater paperwork load, shipment delays and loss of goods as reasons, while the costs involved are also obviously a factor. The main factor that will impact anyone selling goods directly to consumers in the EU is the end of the Low Value Consignment Relief (LVCR), which used to exempt goods valued at less than EUR22 from import tax, and the introduction of the Import One Stop Shop (IOSS).
There is plenty of information here specifically for small business exporters, which sets out what you need to do as a small business to prevent your customers paying VAT twice on goods you export to the EU.
There are extra barriers and costs, but if you’re serious about exporting, it’s probably worth jumping through the required hoops and investing a little up front in getting ready for EU exports. Some marketplaces, such as Etsy, for example, will take care of these extra requirements for you, collecting the correct import taxes at the point of sale.
This is an obvious factor to consider when looking into exporting goods abroad, however, there are simple ways to get around these issues. For example, businesses like Wise can help you negotiate around exchange rate fluctuations when trading overseas. Setting up local accounts in your new market can also help prevent you from losing out to changing exchange rates.
After paying attention to these fundamental issues, there are a whole other set of considerations to take into account:
Make or break factors when looking into exporting
Some of the following issues may be deal-breakers for you. Others may be easy to get around. Each should be considered at the beginning of your move into exportation.
Is it easy to ship goods to the international markets you are interested in exporting to? Do some research on shipping partners and the likely costs involved. Look into aspects like import duties, and make sure the financials and shipping times stack up.
Taking payments from customers all over the world has never been more straightforward. However, some countries can still be problematic. For example, consumers in India often don’t have bank accounts, while buyers in Brazil rarely have access to international credit cards that can handle payment to other countries. These are the small details that may make or break your export business, depending on your intended market.
Carefully considering your marketing materials, your packaging and even your brand, when starting to think about exporting, is really important. You might need to translate your marketing material or make it more relevant to the local market you are now targeting. Cultural faux-pas are easy to do and not so easy to fix.
Just because you don’t need a license to sell your products in the UK, doesn’t mean this will be the case anywhere in the world. Also, take care to research insurance requirements, employee rights and other important legal factors when expanding overseas.
While exporting can seem like more effort than it’s worth - particularly if your business is sailing along nicely as it is, expanding abroad will help you to reach new heights. If growth seems steady but slow, or you find yourself constantly turning down business from overseas, it might be time to take the leap.