Preparing to export

Exporting can extend your market, boost your turnover and prevent you having too great a dependence on your UK-based customers. But it isn’t always an easy option. Starting to export poses a whole new set of challenges, from identifying promising markets and customers to ensuring that you can fulfil your export contracts. Developing new export markets takes time and money.

A planned approach helps you to identify the best opportunities. It ensures that you understand what’s involved, and have the resources and skills you need.

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Understand the challenges of exporting

Exporting isn’t simply an add-on to your existing business. It should be part of an overall strategy to develop the business.

Before you start exporting, it’s worth making sure you have developed a complete export plan looking at all the costs and risks involved:

• Exporting presents all the normal challenges of marketing in the UK – it’s up to you to find customers and convince them to buy from you. Understanding what customers want and how the market operates is vital. See our guide on researching and entering overseas markets.
• You need to cope with extra logistical problems, contractual issues and paperwork. You’ll probably want a contract drawn up using internationally recognised terms and conditions and standard commercial practices to make it clear what your responsibilities are. There’s also a range of paperwork for sorting out transport, customs clearance and payments. See our guide on international trade paperwork: the basics.
• If you are VAT registered, you must provide details of all your transactions with other European Union (EU) member states on your VAT return. If the value of goods you buy from or sell to other EU countries reaches the sales or purchases Intrastat threshold during the course of a calendar year you must submit additional monthly supplementary declarations to HM Revenue & Customs. Intrastat thresholds are reviewed annually. The 2011 thresholds are £600,000 for Arrivals and £250,000 for Dispatches. See our guide: introduction to Intrastat.
• You need to comply with regulations in both the UK and overseas. For example, some goods that are allowed in the UK might not satisfy another country’s standards or even be legal there.
• Exporting demands additional resources, both in terms of financing and skilled personnel. See the page in this guide on how to assess your skills and resources for exporting. It can also present extra risks. See our guide on how to manage the risks of exporting.

With the additional costs, such as international transport, you may find you simply can’t compete with local suppliers. If the market only offers low margins, or you haven’t got the resources you need, you may decide that exporting isn’t for you.

But if you have got a good product to offer and a well-run business, the chances are there are opportunities out there. If the rewards you expect justify the investment and the risks, you should commit to your export plan and make it happen.

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Assess your skills and resources for exporting

To start exporting successfully, you should take a planned approach and decide what your export strategy is. You need to spend time and money planning, researching market opportunities and building relationships. You may also need to invest in modifying your product and service to suit overseas customers.

Exporting is usually a way of growing a successful business, rather than an easy way out for one that’s in trouble. If you’re struggling with limited finances or overworked employees, you may not have the resources to take on the extra work. 

Special skills

Once you have planned your exporting activities, you also need to devote extra resources to handling your exporting business. Marketing to overseas customers tends to be more demanding than selling within the UK. Exporting also needs special skills – such as organising international transport and handling customs clearance.

Many businesses find that the best way to get started is to buy in the services they need, and build in-house skills and resources later. For example, you might use a local agent to sell, and a freight forwarder to handle deliveries. See the page in this guide on how to use the right export support services.

Additional financing

Exporting can also be financially demanding. Customers often want credit from the time they receive the goods. For a long distance shipment, this could be weeks after you produced and shipped the goods, so you get paid later than you would by a customer in the UK. At the same time, you may have to meet extra costs like transport and insurance.

The more successful you are, the greater the demands placed on your business will be. It’s worth planning ahead to be sure you have the capacity to handle the extra production, selling and after-sales support.

Find out about the training, planning and support services offered by the Developing your International Trade Potential programme on the UK Trade & Investment website- Opens in a new window.

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Assess export market opportunities

You might first consider exporting in response to enquiries from potential customers overseas. Or you might actively decide to look for opportunities. In either case, thorough market research is essential.

You need to understand what overseas customers want, and what the competition is like. As well as local suppliers, you may be competing with other exporters from around the world.

Reaching customers

It’s worth thinking about how you will reach customers. For example, the internet might be a good way of reaching customers – or even selling directly – in a market where many customers use the internet. See the page in this guide on how to plan your export market entry strategy.

You’ll also want to understand all the issues that affect doing business in that country. There may be legal considerations, like product regulations or licences or extra taxes that make it difficult to compete. See our guide: do you need an export or import licence? You might be faced with a different business culture, and need to communicate in the local language.

Deciding what to offer

UK products and services often need to be modified to suit local regulations and customers’ requirements. You’ll also need to think about what after-sales service you need to provide and the best way of doing so.

Identify your business’ current capacity to export with the Export for growth tool on the Growth and Improvement Service- Opens in a new window.

All this adds costs – over and above the additional costs such as delivery. Many exporters find that they need to position their product as a premium brand to justify higher prices and cover all these costs.

For more information, see our guide to researching and entering overseas markets.

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Choose which export markets to enter

Different markets often have different requirements. For example, product modifications that suit customers in China might be the opposite of what customers in Canada want.

Trying to export to several different countries can be very expensive. Unless you tailor what you offer to suit each individual market, you may fail to offer what customers really want.

Instead, it’s usually best to focus on selling to one or two individual markets. In large countries like the US, you might even concentrate on a particular region, and roll out gradually across the country as you build your market presence.

Your nearest International Trade adviser help you choose the most appropriate market for your product. Find your local international trade team on the UK Trade & Investment website- Opens in a new window.

Many new exporters choose to start by exporting to markets that are relatively easy to deal with. For example, the practicalities of dispatching goods to countries within the European Union (EU) are relatively straightforward. Many trading practices, regulations and standards apply throughout the EU, and key tasks such as accounting for VAT have been simplified. This can be a good way of building your export skills.

Or you might choose to target a market where you have some links – eg through your family, personal contacts or employee knowledge.

Developing countries can be riskier to deal with. The risks are generally lower if the country has an investment protection and promotion agreement with the UK. Find information on investment promotion and protection agreements on the Department for Business, Innovation & Skills (BIS) website- Opens in a new window.

Ultimately, it’s up to you to decide which markets offer the best opportunities and suit your own export strategy. For more information on identifying potentially promising markets, see the page in this guide on how to assess export market opportunities.

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Plan your export market entry strategy

The best way to sell into an export market depends on your circumstances and local market conditions. For example, if local wholesalers dominate the market for your product, you might target them rather than trying to sell directly to end-customers.

You also need to think about how to promote yourself. It’s important to take local culture and regulations into account. For example, it might be illegal to advertise your product to children, or the name of your product might have an unwanted meaning in the local language.

If you work with a local agent or distributor you will benefit from their local contacts and expertise. In some countries, working with a local partner is almost essential – or even legally required.

For many businesses, the internet is a good way of marketing to customers overseas, or even selling directly to them. See our guide to planning for e-commerce. Trade visits can also be an important part of creating awareness, building relationships and making sales.

You should think about practical aspects as well, such as clearing goods through overseas customs. If you are dealing with experienced importers, they may be prepared to take responsibility for this themselves. Otherwise, you might want to work with an experienced agent or freight forwarder who can handle this. See the page in this guide on how to use the right export support services.

For more information, see our guide on selling and promotion overseas.

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Manage export contracts and logistics

Like any sales contract, you need to agree what goods you will deliver, and when. The agreement should make it clear who is at risk if the goods are lost or damaged at any stage during delivery. Your agreement also needs to cover where you will deliver the goods and whether you will arrange for them to be cleared through customs.

It’s good practice to use internationally recognised Incoterms in your contract to set out the responsibilities for transport and insurance. See our guides to international trade paperwork: the basics and International Commercial Contracts – Incoterms.

Taking on more responsibility can help you to be more competitive, particularly if you are selling to customers who do not have import experience. But you also face increased costs and risks. Whatever you agree, it’s important to be sure that you can handle your responsibilities. International trade paperwork can be complicated, and mistakes can be costly. You may want to use specialist help such as a freight forwarder. See the page in this guide on how to use the right export support services.

Payment

You need to agree how much the customer will pay, when payment will be due, and how payment will be made. Different payment methods, such as advance payment or letters of credit give you more security than giving your customer open account credit. See our guide to getting paid when selling overseas.

Pricing in the local currency, rather than pounds sterling, can help make you more competitive but puts you at risk if exchange rates change. See our guide to foreign currency and exchange risks.

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Use the right export support services

UK Trade & Investment offers a range of services for UK exporters, including market information and help breaking into new markets. Many of these services are free. Find out about UK Trade & Investment services on the UK Trade & Investment website- Opens in a new window.

The British Chambers of Commerce (BCC) also offer export services such as export training and help with export documentation. Find export information and advice on the BCC website- Opens in a new window.

You may want help with foreign languages, eg translating marketing brochures or using an interpreter to help at meetings. Find help with language and cultural issues on the National Centre for Languages 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 UK Trade & investment website- Opens in a new window.

You may also want help in several other areas:

• An experienced lawyer can help with contract negotiation. See our guide on how to choose and work with a solicitor.
• Your bank can advise you on payment methods, financing and handling foreign exchange.
• A freight forwarder can handle transport. See our guide to international transport and distribution.
• You may want to use a broker to find the right insurance. See our guide on insurance for international trade.

For more information on government support services, see our guide on government help for exporters.

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Review your export readiness

You can use these points to help you decide whether you are ready to start exporting or what else you need to do to prepare.

Planning and strategy

• Do you have a well-defined export strategy and a thorough plan? How will you start exporting, and how will you develop your export business?
• Do you have the resources you need to carry out your plan, eg finances, personnel, production?
• How will you build your export skills?
• How much do you expect to invest, and what return do you expect?
• Are you committed to exporting? Have all the key people in your business agreed?

Marketing

• Do you know what markets you will target?
• How much research have you done into your target market? Do you understand the business culture and legal environment? Read our guide on researching and entering overseas markets.
• What is the market for your product? Who are you competing against and what do they offer?
• Will your product need to be modified to meet local regulations or customer requirements?
• How will you position your product? What price will you charge? What currency will you price and sell your products in?
• How will you market and promote your product? What distribution channels will you use? Read our guide on selling and promotion overseas.

Export procedures

• What contracts will you aim to negotiate? What are your preferred Incoterms and will these suit your customers? Read our guide on International Commercial Contracts – Incoterms.
• What payment method and terms will you offer? Do you have the skills to handle any specialist methods such as letters of credit? Will you require a foreign currency bank account or accounting software that can handle foreign currency transactions?
• How will you transport your products? Will you use a freight forwarder? See our section on transporting your goods.
• Have you identified all the costs, such as transport, insurance, duties and taxes? Will your export business be profitable after taking these into account?