Exporting: Why small businesses in the UK should do it

Exporting goods and services is a great way to boost a business. Gaining access to other markets could more than double your turnover, while also reducing the risk of operating in a single market. Indeed, research has shown that exporting can increase productivity by up to 34%.

But it isn't easy. Exporting well is challenging, taking both time and commitment. Previous experience is no guarantee of success and even successful exporters sometimes fail when entering new markets. Poor-quality products or services are magnified when overseas, and expensive to put right once in the market.

In this blog, we look at the reasons why small businesses might choose to export. We also cover the key things to bear in mind when considering becoming a business that exports its goods or services.

Why a small business might export

There are many good reasons for exporting, including the following.

• Rewarding – financially, emotionally and educationally

• Get to see the world and meet interesting people

• Helps a business scale up, with more opportunities with more markets, sectors and customers to target

• Makes fuller use of existing capacity, increasing productivity and growth

• Extends the lifespan of products or services

• Limits the risks caused by changes in global economies

• Makes a business more likely to survive

Download our free Go Global exporting guides

USA / China / India / Singapore / UAE / Germany / France / Australia

What you need to know to become export-ready

Whether you're planning to export, or an opportunity to export has presented itself, there are many things to think about. Here are some key areas to consider if you're to become export-ready.

The global economy

Understanding the world economy, in the context of your business plan, is crucial. Brexit, COVID-19, the war in Ukraine, or achieving net zero are all having an impact on business.

Issues such as volatility in raw materials, commodities, energy, shipping, currency, people and skills could also affect your ability to export. On the upside, different seasons in northern and southern hemispheres can benefit the lifecycle of a product, effectively doubling it.

So consider the economies' stability, the ease of doing business, and how your business might work within those economies. There is plenty of data available in this regard.

You could also visit markets first hand to meet businesses and government bodies, attend conferences and exhibitions, and build relationships with overseas contacts to boost your understanding.

Market intelligence and developing your proposition

As with any business, carrying out exhaustive market research is vital, so you can be sure there's demand for your product or service overseas.

Don't rely on hunches – at least carry out some internet research and ideally understand the available market, how much export is available, how the market is likely to grow, and what return on sales you're likely to see.

With this information, market by market, set about:

• developing your exporting business plan

• getting the proposition right

• building your customer personas

• analysing your competitors

• defining your market entry

• getting the pricing right

Trade shows are a great way to meet customers and understand their behaviour and buying style. They're also a good way to look at your competition.

Build your reputation through the quality of your customer engagement and delivery, rather than relying purely on marketing or raising brand awareness.

Culture, language and bureaucracy – talking the same language

These three things are the greatest barriers when exporting, irrespective of how great your product or service is. Being unfamiliar with the local culture can really trip you up on your road to global success. So get help, get up to speed and keep up to date.

Never assume overseas customers have any competence in English. Translating from and to the local language is crucial when communicating with them. You may need to create websites and produce marketing and training materials and operation manuals in a number of languages, even to the extent of changing British English to American English.

Bureaucracy means becoming familiar with the export documentation team in your local chamber of commerce, or enlisting a freight forwarding company, to make sure you have all the correct paperwork. Getting paperwork wrong risks delays with shipments and unhappy customers.

For more complex products, there are export licences, dual-use items, local standards, tariffs, duties and quotas to consider. Some local manufacturing or service content may reduce tariffs and duties altogether or set up operations in market using local staff.

Getting paid

Every business owner knows that cash flow is vital for paying salaries and bills or investing into new marketing, new market development, production, stock, or research and development (R&D) into new products or services.

Exporting may be long-term projects resulting in commercial risk from fluctuations in foreign exchanges, prolonged payment terms, variations to shipping costs, bonds, guarantees and warranties. These risks can easily wipe out profitability – or, even worse, mean you don't get paid at all.

Protect yourself with contract conditions, letters of irrevocable credit, and upfront payments. Use UK export finance, or charge higher prices if a market can stand it. Always agree a delivery and payment schedule upfront and stop all work until the money reaches the bank.

Build a strategy to deal with lower-cost economies to protect your intellectual property and prevent breach of copyright. Capitalise on your innovation, quality or problem-solving abilities through continuous improvement and creativity to stay ahead of the competition.

Delivery

Whether you're posting a package, loading a container or issuing a report electronically, the cost, quantity, quality and timing of a delivery are all important to the customer.

There have been fluctuations in shipping costs and availability of sea containers – with a 400% rise during the pandemic – but things are getting back to near normal. Be aware of Incoterms (international commerce terms) so you understand your and your customers' responsibilities in the shipping process.

It's also important to have good knowledge of sustainable packaging, market standards, and labelling of shipments.

Project handling and operations

Any flaws in your product or service are multiplied many times over when doing business overseas, so make sure your production or operations are of the highest quality. Confirm in writing that the product or service is what the customer wants and meets their standard, before production starts.

Make sure everything is right before shipping, as it's very difficult and expensive to rectify once you're overseas. Having local agents, handlers or distributors who are familiar and trained to understand your product can be your eyes and ears in the market.

Lead times have more than doubled in the last few years, so look carefully at your supply chains and think about bringing production closer to home to save on shipping costs and time.

Building trust and confidence

Your customer could be on the other side of the world. So, building trust by getting closer to them, particularly with time-zone differences, is vital in managing their expectations.

Poor communication, or a lack of it altogether, is always disturbing, so regular video conferencing or putting people in-market will help. Now the world is getting back to near normal, you can build relationships face to face through trade missions, trade shows or direct customer visits.

Building a client relationship management (CRM) system is a useful way of managing your customers and is good practice to get feedback on your performance. Choosing the right customers and partners with similar ethics around environmental, social and governance (ESG) is key.

It's well known that a reputation can take years to build and seconds to ruin!

Relevant resources

• Developing an export strategy: A step-by-step guide

• International trade: Importing and exporting basics

• Lunch and Learn: Why sell overseas? Benefits and challenges

About Go Global

Kickstart your international trading with this free programme of support from Santander and Enterprise Nation. Take me to the international trade hub