Given the geo-political changes of the past year and the UK’s forthcoming negotiations with the EU, it is no surprise that SMEs are thinking differently about exporting. Bibby Financial Services’s latest SME Confidence Tracker found that one in ten (10%) SMEs are planning to invest in their exporting capability over the coming months. Here, Edward Winterton, CEO for BFS, offers his top tips for those looking to take business overseas.
- Where to go?
Recent research by BFS found UK SMEs overwhelmingly viewed Germany (59%) as the most important country to the UK’s economy within the EU. This was followed by France. Small businesses – particularly those who have little experience exporting outside the EU – are drawn to nearby countries with similar trading environments. While such markets may be a good place to start due to proximity and ease of doing business, don’t be limited and let the market opportunity help decide where you choose to export to.
- Research the market thoroughly
Research the best markets for your product or service thoroughly and identify the scale of your potential customer base in each region. Establish the competitive market, including who your competitors would be in new markets and their current market share. You should also consider language barriers, time zones, and legal and cultural nuances of new markets to evaluate the impact such differences could have on sales, operations and – critically – bottom line profitability.
- Don’t put all your eggs in one basket
Having a good spread of customers in different countries can help to protect against an overreliance on a small number of markets. It can also help to minimise the impact of economic or political changes on your business’s customer-base.
Emerging markets such as China and India have long been touted as markets that present great opportunities for UK SMEs and there are other economies where the ‘Made In Britain’ brand goes a long way, including the US and the Far East.
- Be aware of currency changes
Changes in the global political landscape have impacted currency markets significantly over the past year. For businesses that buy and sell overseas, currency fluctuations can increase input costs and reduce profitability hugely. It’s, therefore, important to keep an eye on currency and market fluctuations to protect against such impacts. Foreign Exchange providers can help by locking-in rates to protect against further currency movements.
- Keep your cashflow in check
While exporting presents fantastic opportunities for businesses to grow, it also brings challenges relating to extended customer payment terms and subsequently cashflow. There are now many types of export finance packages available from different funders, so it is important to do your research and find our which best suit your needs.
For more information on how we support those wishing to export or those already selling to overseas markets, visit: www.bibbyfinancialservices.com/funding/specialist-funding-solutions/export-finance.