Although your business may have an established UK market, there’s often no reason why it couldn’t successfully compete overseas too, growing your revenue and profit.
But before you start, you need to have sound knowledge of your would-be markets. You also need to consider whether your products are right for each target market and whether you have the necessary resources to start exporting.
Table of Contents
Planning to export?
Before you commit to exporting you need to honestly assess your export potential – both in terms of the readiness of your business and of your product or service.
It’s essential to carry out detailed market research to identify and evaluate the target market. Examine:
- the industry structure
- the predicted demand for your product or service
- competition and how you plan to fit into that marketplace
- any modifications required to make your product or service saleable
The UK Trade & Investment Accessing International Markets programme can provide support and help in planning your entry into new overseas markets, including market research. Find out about growing your business internationally on the GOV.uk website [opens in a new window].
After completing your market research, you can draw up an export plan defining how you will enter the new market.
Consider whether you have:
- a marketing strategy that incorporates international trade development
- the necessary financial resources
- the right people to develop the new export markets
- adequate knowledge of the requirements of your chosen market – eg modifying packaging to meet local regulations and standards
- an understanding of export payment mechanisms and export finance
Then assess whether your product is suitable for export. Consider:
- product standards and regulations in the overseas market – the British Standards Institution offers help for exporters
- the costs of adapting your product or service
UK Trade & Investment offers practical help with your ability to export. See the page in this guide on Helping your business grow Internationally.
You can also:
- read about the advice and support available to businesses based in Wales on the International Business Wales website [opens in a new window]
- get information and advice on exporting for businesses based in Scotland on the Scot.gov website [opens in a new window]
- read about the help available to businesses based in Northern Ireland on the Invest NI website [opens in a new window]
Selling and distribution in overseas markets
There are a number of elements you need to consider to sell successfully overseas. How you organise your sales presence in export markets is one of the key decisions.
Depending on your product, you may be able to sell directly. For example, you might be able to sell over the internet or by exhibiting at local trade shows.
Many businesses look for a partner who already understands the local market. For example:
- You can sell to a distributor who then sells your products locally.
- You can use a sales agent who sells products on your behalf, or puts you into contact with potential customers on a commission basis.
- You can enter into a joint venture with a local business. This gives you a share of the management and profits of the joint venture, but is a more complicated and expensive option.
- If you want complete control over sales, you can set up your own local office. This is the most expensive option.
The choice you make can have important financial and legal consequences. See our guide on selling and promotion overseas.
You can find your local International Trade Team on the Great.UK website [opens in a new window].
The UK Trade & Investment Accessing International Markets programme can provide support and help in planning your entry into new overseas markets. Find out about growing your business internationally on the GOV.uk website [opens in a new window].
When arranging a sales contract with an agent or distributor, you need to ensure that responsibility for delivery and payment is clearly defined.
It’s also important to remember that intellectual property (IP) protection becomes more complicated if you sell goods overseas. Patents and trade marks are only recognised and protected in the country of origin, so you will need to secure IP protection in each country you intend to sell into. For more information, read our guide to intellectual property protection overseas.
Marketing your product or service overseas
To succeed, your marketing strategy will need to be tailored to each target market.
You’ll need to appreciate the traditions, culture and legislation of the countries you are trading with to exploit your exporting efforts. For more information, see the page in this guide on working effectively with different cultures.
You can find language support services on the LanguageLine website [opens in a new window].
Sales promotion overseas
Customisation of your marketing activities is essential if there are cultural differences affecting the consumption of your product.
You should consider:
- Using different media. TV viewers in one country may belong to a particular socio-economic group, while in others TV ownership is far more widespread.
- Changing symbols. For example, you may need to respect different standards of dress in promotional activities in some countries.
- Changing the market proposition. For example, bicycles are presented as a leisure item in one country, but as essential vehicles elsewhere.
Using local agents
Non-specialist research can be conducted in-house but you will need to be clear about the data you require. You will also need to set a realistic budget to cover the necessary costs.
Alternatively you could delegate the research to local agencies to save money. Local market research agencies have direct access to your potential customers. However, you should carefully consider the reputation of the agency.
The UK Trade & Investment Accessing International Markets programme can provide support and help in planning your entry into new overseas markets. Find out about growing your business internationally on the Great.uk website [pens in a new window].
Read about how to go to market on the Business Wales Export website [opens in a new window].
Your legal responsibilities as an exporter
You’ll need to familiarise yourself with the VAT rules administered by HM Revenue & Customs (HMRC).
In most cases, exports will be zero-rated for VAT although there are exceptions. Check with the HMRC VAT Helpline on Tel 0845 010 9000 to find out what applies to you.
Details of any exports you make must be entered on your VAT return. If you have a high level of exports to European Union (EU) member states, you may have to submit more detailed declarations in an Intrastat return. Intrastat thresholds are reviewed annually. The 2011 thresholds are £600,000 for Arrivals and £250,000 for Dispatches.
Learn more about the Intrastat return in our guide on an introduction to Intrastat.
For exports outside the EU you must report sales to HMRC electronically using the National Export System (NES) or using the single administrative document (SAD).
For information on VAT rules, see our section on international trade, international visits and VAT.
HMRC has introduced a new status for businesses – Authorised Economic Operator. While the scheme is not compulsory, companies that meet the requirements can take advantage of simplified customs procedures. See our guide on Authorised Economic Operators.
New security laws mean that you must declare your goods leaving the EU. If you supply normal export declarations such as the SAD, you will be covered, but if you’re not declaring them in the usual way, you must complete an Exit Summary Declaration.
Export controls
Certain goods may only be exported following the issue of an export licence. Examples of goods subject to licensing control include fine art, firearms and chemicals. See our beginners’ guide to export controls.
Understanding the law
As soon as your goods enter another country they become subject to that country’s laws.
Transport considerations
Your responsibility for transport depends on your agreement with your customer or supplier. For example, you might be responsible for delivering the goods to a warehouse in the customer’s country. Your obligations should be clearly set out in a written contract using Incoterms. Incoterms are standard trade terms that set out who is responsible for transporting goods, insuring the goods during transportation, paying duties and customs clearance. Read our guide on International Commercial Contracts – Incoterms.
The best mode of transport for your goods will depend on the type of goods and how quickly they need to be delivered. You may need more than one mode, for example, sending goods by lorry to a port in the UK and then by ship overseas. The goods will need suitable packaging and labelling for transportation. It may be possible for your goods to be sent via post. See our guides on international transport and distribution and importing and exporting by post.
Depending on the contract, you may need to arrange insurance. Marine insurance can cover transport by air, road or rail as well as by sea. Find a member who can help you arrange insurance on the British Insurance Brokers Association website [opens in a new window].
Normally, you are responsible for UK customs procedures and your customer looks after customs in their country. In any case, you must ensure that you have the right paperwork.
Most companies use a specialist freight forwarder to handle transport. Confirm exactly what they will do and whether they can handle all documentation and other procedures. See our guide on Using brokers and forwarders.
Look for a forwarder who exports regularly to that destination. They can ‘consolidate’ your goods with other consignments in a single container to reduce costs. Reputable freight forwarders are usually members of the British International Freight Association (BIFA). You can find a forwarder on the BIFA website [opens in a new window].
Getting international transport right can be complicated. You can get advice from a member of UK Trade & Investment international trade team. Find your local international trade team on the Great.uk website [opens in a new window].
Financial considerations
The delay between the shipping of goods and your receiving payment for them will affect your cashflow.
It’s worth discussing your cash position with your accountant and bank manager before committing to exporting.
It’s also important to insure your business against not being paid in case one of your overseas customers goes out of business. UK Export Finance, run by the government, may be able to offer insurance and advice, depending on the type of export. Find out about export credits on the UK Export Finance website [opens in a new window].
Other commercial providers can also give information on credit insurance and offer cover. You can find a listing through the British Insurance Brokers Association (BIBA) website [opens in a new window].
There are also currency issues you need to consider. Some of your customers could face problems obtaining foreign currency to pay for your exports. In this case, it’s worth insisting on a (confirmed) irrevocable letter of credit that secures payments according to the terms of the credit and often at an agreed rate. See our guide on letters of credit.
Businesses that sell on credit to foreign customers can use factoring or invoice discounting to free up cashflow. Export factors specialise in the collection of money from overseas. The factoring company pays you a percentage of the invoice value up-front and the balance (less their percentage) once they have collected payment.
See our guide on getting paid when selling overseas.
Trading abroad
When arranging your sales contract you should ensure that delivery responsibilities are clearly defined using the Incoterms 2000 terminology and contracts. Read our guide on International Commercial Contracts – Incoterms.
You can get advice from a member of UK Trade & Investment international trade team. Find your local international trade team on the Great.uk website [opens in a new window].
Working effectively with different cultures
You’ll need to understand the culture of your target markets to establish a successful relationship with your potential customers.
Being able to speak the language of your potential customers can help to establish mutual confidence. If you don’t speak the local language, you could consider investing in foreign language training for your staff. Alternatively you could employ a translator or interpreter.
It can also help to have your promotional material translated. However, it’s a good idea to avoid colloquialisms and metaphors in promotional material – they could be embarrassing in the local language.
Get help with cultural and language issues on the Great.uk website [opens in a new window].
For more advice on conducting business with another language, see our guide on doing business in another language.
Research
You should conduct research into your target market to establish local considerations. These may include product or packaging modifications to enable your product to conform to local cultural demands. Or it could be that local sales and marketing channels for your particular product are different from those in the UK – mail order in one country, shops in the other, for example.
See our guide on researching and entering overseas markets. You can also read reports and data on specific countries on the Great.uk website [opens in a new window].
You can also find your local international trade team on the Great.uk website [opens in a new window].
Helping your business grow internationally
UK Trade & Investment staff are experts in helping your business grow internationally, providing expert trade advice and practical support to UK-based companies wishing to grow their business overseas. With 2,400 staff and a presence in 96 countries, UK Trade & Investment can assist on every step of the exporting journey, giving you the support that you need to expand and prosper.
Through a range of unique services, including participation at selected trade fairs, outward missions and providing bespoke market intelligence, UK Trade & Investment can help you crack foreign markets and quickly get to grips with overseas regulations and business practice.
Speak to your local expert
UK Trade & Investment’s International Trade Teams are located in local offices all over the country. Every UK region has dedicated sector specialists, helping new and established exporters every day. UK Trade & Investment’s local teams can provide support tailored to your company’s particular needs and growth stage. You can contact UK Trade & Investment’s regional and international teams on the great.uk website [opens in a new window].
Find out about Passport to Export
UK Trade & Investment’s Passport to Export programme offers new and inexperienced exporters free capability assessments, support in visiting markets, mentoring from a local professional, action plans, customised and subsidised training, and ongoing support once you’ve started to export. Find out about the Passport to Export programme on the UK Trade & Investment website [opens in a new window].
Access UK Trade & Investment’s market expertise
Each business and each market is unique. UK Trade & Investment’s aim is to help you through research and advice, to make those initial approaches into new markets. It offers two key research and contact services, the Overseas Market Introduction Service (OMIS) and the Export Markets Research Scheme (EMRS).
Additionally, the UK Trade & Investment website offers access to two market intelligence services for exporters. FCO country updates are assessments of business -relevant political and economic issues in key markets, and Overseas Security Information for Business (OSIB) provides declassified strategic information on business security related issues.
Break down barriers
If you need help with the linguistic and cultural aspects of doing business overseas, the Export Communications Review (ECR), jointly run by UK Trade & Investment and the British Chambers of Commerce, offers companies a variety of options and advice, including cultural awareness reviews and communications planning.
Visit a market
Taking part in overseas events, trade fairs or missions is an effective way to test markets, attract customers, appoint agents or distributors and make sales. UK Trade & Investment helps arrange groups of UK companies to attend tradeshows and missions worldwide. Read about all Events on the Great.uk website [opens in a new window].
Ten key steps to successful exporting
- Research your market – does your prospective foreign customer need what you are selling at the price that will yield you a profit? What is the competition and how will they react?
- Implement an export strategy and review your capabilities – ask yourself: what would my business gain from exporting?
- Construct an export plan – define how you will enter the foreign market. Finalise human resources and marketing strategy and allocate an adequate budget to cover export start-up costs.
- Choose your sales presence – establish whether you need a direct sales operation. Or is an agent or distributor more effective? How will you manage your overseas sales presence?
- Promote your product – how are you going to market and sell your product? Customise marketing to the target country.
- Get the Customs side right – contact HM Revenue & Customs and the UK embassy of your destination country to clarify requirements. Make sure your reporting practices are watertight.
- Get paid on time – ensure your cashflow will remain at a safe level. Guarantee sufficient credit for your future sales. Take out insurance cover if necessary.
- Choose your distribution methods – consider the implications of selling over long distances and across national frontiers.
- Transport goods effectively – assess and choose the most effective transport method and make sure the goods are insured by you or the importer.
- After-sales policy – regularly liaise with customers, export agents and banks. Monitor political unrest or other adverse conditions in the country of destination. Manage regular servicing and warranty claims
CASE STUDY
Here’s how I developed a strong export market
Established in 1965, Halifax Fan Ltd designs and manufactures customised industrial fans. Based in Brighouse, Yorkshire, the company employs 53 people. Managing director Malcolm Staff describes how a joint venture with an Indian manufacturer enabled the company to export to the growing Asian market.
What I did
Assess risks and benefits
“About two years ago, we identified new sales opportunities in the expanding Asian markets. At the same time, we needed to reduce our cost base to existing customers.
“We soon established that opening a factory overseas would be difficult and expensive. Our preferred solution was to establish a joint venture with a company who would manufacture the product in their country, driven by UK design and technical know-how. We also wanted the chosen partner to have its own sales force to establish an immediate local market presence.
“We had many issues to address, most fundamentally how we would retain control and protect our investment. We got advice on planning, plus grant assistance, from our local authority.”
Research the market
“We concentrated initially on the Indian market because we saw it as a growth area and English is commonly spoken. Following desktop research we identified 40 potential partners and decided to visit six.
“Our first visit proved quite difficult, because we hadn’t prepared for the different ways in which business is conducted. However, we learnt from the experience and during subsequent visits we became more relaxed while remaining focused on what we wanted. For example, it’s easy to turn your nose up at a factory that looks more like a barn, but the quality of workmanship can soon change your view!
“Having met all six during the initial trip we made our final selection during the second.”
Choose the right partner
“While cost was an important factor in choosing a partner, we looked at all aspects of the shortlisted companies, including financial history and quality assurance. Once we’d selected a preferred partner we arranged for key Indian employees to visit our UK operation. It’s important to build trust and mutual understanding.
“Having a local presence in India has really given us an edge over competitors because we have representation on the ground. We have won a number of export contracts because of it.”
What I’d do differently
Talk to other exporters
“Looking back, I wish we’d contacted businesses who’d already been through the process, perhaps via our local Chamber of Commerce. We could have learnt a lot from their experience.”
Find a local lawyer
“It would have saved time and hassle at the agreement stage if we’d sourced a local lawyer during our trade visits. We left it until we were entering final negotiations, which wasn’t ideal.”
CASE STUDY
Here’s how I kept my business profitable by exporting my products abroad
RC2 is US-owned and part of the RC2 Corporation, a leading designer, producer and marketer of innovative, high-quality toys, collectibles, and infant and toddler products. The European business is led by Managing Director – Sales and Marketing, Clive Wooster and Managing Director – Finance and Operations, Damien Weight and employs 53 staff in Exeter.
RC2 has been particularly successful in recent years and turnover increased by 20 per cent in 2008 as the business introduced new product lines and expanded further into Europe. Sales growth in mainland Europe (excluding the UK) was 50 per cent.
Transcript
Clive Wooster: “My name is Clive Wooster. The company is RC2 and I’m the joint managing director.”
Damien Weight: “My name is Damien Weight. I’m the managing director of Finance and Operations of RC2. RC2 is a manufacturer and distributor of toys and nursery products.”
Clive Wooster: “The main difference probably of international business is you tend to get very used to what you’re doing in your local market. To a certain extent, international business does make you think outside the box. You start from the very basics. You say, ‘Why does this person need my product? Does this retailer have it already? In which case, could I do a better service? Could I sell it at a better price? Could I provide add-ons that would really make it worthwhile?’ So, it is a good exercise in just taking yourself out of your comfort zone and saying, ‘Where is our position in this market? What do we offer?”
“We made a big change in the way we run the business in terms of export about four years ago, when we, previous to that, did a little bit by using distributors very much third-hand. And now, four years on, we’re much more directly involved with export.”
Damien Weight: “To show we’re profitable, we’ve got a kind of pricing model that we apply our brands and we ensure that we’re pricing to market in each local country. But we’ll only put forward brands that will become profitable. So it means that some brands just don’t work in some of the countries we’re selling to, whereas other ones work very well. So the product range might be different from country to country.”
“The main difference in operating in Europe to the UK is things like payment processes, credit terms and the kind of information that customers require on documents. So we’ve had to think globally, but act locally to fit those requirements. One of the problems we faced was the way the different countries approach toy safety regulations which we have to adhere to. And even though we’re in the European Union (EU), different members of the EU have different applications of those regulations. So we’ve had to aim at the highest standard to fill each country’s requirement.”
“We found that typically, the European countries expect far more credit than we would allow our UK customers so some of them might want 120 days credit before paying and they have specific payment methods they would use in their country other than payment by cheque or BACS. We’ve had to work with local banks to understand the type of payment method our customers would expect.”
Clive Wooster: “Certainly, the last 15 or 10 years, things have got a lot better. The internet has helped of course a lot, but I do feel that countries have broken down a lot of the cultural barriers for international business… apart from one or two exceptions – Germany, Spain and so on – are very welcome to international business and accepting it as the norm these days.”
(Cut to Damien and main office; staff working)
Damien Weight: “We have four branch offices that sell directly into those countries that have sales and marketing presence in each of them with very strong general management. But all of the back-office and logistic services are carried out here in Exeter. The major barriers in setting up these branch offices in Europe has been the bureaucratic requirements they have for things like employment law, tax filing and the creation of the branches in the first place. The benefit of setting up branch offices in the local countries we deal with is that we are portrayed to our customers as being local to their market. So for example, our French customers believe we’re a French supplier which is key to them. It’s meant we have had listings that otherwise we wouldn’t have obtained.”
Clive Wooster: “The way to get intelligence really is to speak to people in industries at seminars. Try and find out where they started. I think, do a lot of research, be very clear what the targets you’re aiming at – where you want to go. Be very clear about the timelines, as we said earlier, it’s not work of a moment. I think recruit really good people at a local level. At back-office level, make sure the people here understand what you’re trying to achieve cos they can get disorientated as well. They just think, ‘Why the hell am I speaking to somebody from Croatia? I don’t understand this.’ But if they understand where we’re trying to go… And I think perseverance, keep going… If you’ve got the right elements in place, they eventually do come right, even though at times it feels like you’re pushing water uphill.”
Disclaimer: The material in this audio/video may include the views or recommendations of third parties, which do not necessarily reflect the views of Kraken, or indicate its commitment to a particular course of action. We assume no responsibility or liability arising in respect of any such third party material.
Could this article be better? Are details incorrect? Do you have something to contribute or a relevant article we can link to?
We’d love to hear from you and continue to keep this a free, useful resource for everyone! Get in touch.
Every effort has been made by the author(s) to ensure this article’s accuracy but it does not constitute legal advice tailored to your circumstances. If you act on it, you acknowledge that you do so at your own risk. We cannot assume responsibility and do not accept liability for any damage or loss which may arise as a result of your reliance upon it.
Related Guides
-
Outsourcing
Outsourcing is when you contract out a business function – a particular task, role or process…
-
Responsibilities to employees if you buy or sell a business
Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), when all or part of…
-
When an employee resigns
When an employee wants to resign, you can try to persuade them to change their mind…