Exporting overseas key for SME growth26 Feb 2014
Clive Lewis, ICAEW’s Head of Enterprise, offers tips for small businesses looking for growth overseas
Recent research by ICAEW has shown that 70% of UK businesses are looking overseas to further their recovery and that the downturn has increased the pace of globalisation in advanced and emerging economies, writes Clive Lewis, ICAEW’s Head of Enterprise.
With spending cuts and slow growth in the UK cutting domestic demand, access to new markets is cited as the primary benefit to expanding abroad. Small businesses however need to consider a number of factors before they start the globalisation process.
The UK is an almost saturated marketplace. Economic growth will be delivered by SMEs and those that look beyond these shores to market their products and services. There are three key things to get right before starting in the exporting business; the Plan, the Place and the Process.
- Research is critical. This may be difficult but it should not be neglected especially as many decisions to export are opportunistic. Investigate on a social, economic and political level.
- Assess the product range and identify which products to export and the modifications that will be needed to enter different markets eg images and language on packaging.
- Get the finances in order. Entering new markets differs from increasing a share in the UK. Start-up costs, contingency funds and currency fluctuations should all be budgeted for.
- SMEs should be clear about their strategic objectives, have a clear plan to achieve them and ensure it is stress tested.
- Consider all options of where your international base would be, as any number of things can affect the success of a move like this. If you’re thinking globally, you have to look at the bigger picture.
- Know your legal position in relation to UK Tax; export and import controls; and what documentation is required such as Movement Certificates or Carnets.
- Find out about the laws in the potential marketplace too. What is the tax system like (including taxes on sales)? When exporting to the Gulf, for example, what impact will Islamic banking practices have on your business?
- Talk to freight/transport agencies to decide on the logistics of moving goods.
- How will you physically manage the operation? Will you recruit a team on the ground or have UK staff travel abroad? In some countries companies are required to have a minimum number of local directors in the board.
- Will you operate through an incorporated body or set up a joint venture with a local partner? This choice can have huge implications on the laws which govern the venture and the taxes that apply.
- What impact will all this have on your UK operation? Consideration should also be given to the transfer of funds to and from the UK.
There’s good news to support the prospect of growth from exports. With the current exchange rates UK exporters are enjoying an increasingly competitive position, and more UK businesses are already choosing to exploit international markets to take advantage of the situation. For more information on exporting and many resources for businesses visit http://www.businessadviceserviceblog.com/
ICAEW is sponsor of the Sustainable Business Award, which was won by an SME in 2013 - London Bio Packaging – despite competition from finalists including Anglian Water, Veolia Environmental Services and Jewson. If you’re an SME that has embedded sustainable business practices to support long term growth, why not enter in 2014 to gain national recognition for your achievements.