Your decision to start export operations may be prompted by a range of factors – to increase sales and profit, establish a wider client base, diversify your market, consume excess local production capacity or enhance the domestic competitiveness of your business.
However, before implementing an export strategy, it’s important to assess your business’ readiness for export.
Read more: Export essentials: What SMEs should know when expanding to China
Here are 10 key factors to consider prior to progressing down the export track:
1. Domestic performance
Robust domestic sales are usually a good indicator of export readiness. It gives international buyers confidence in you as a supplier as well as ensuring that you have the financial capability to enter a new market. Carefully consider your current business performance before deciding whether to expand internationally.
2. Process documentation
It is important to ensure your business’s process documentation and standard operating procedures are well defined and in use within your current operation. Expanding into an export market adds another level of complexity to the business and robust process documentation can ensure that productivity and efficiency are maintained and that time, materials and resources are not lost or wasted due to re-work or ineffective systems.
3. Quality accreditation
It is important to assess the importance of achieving international quality accreditation prior to entering an export market as it could demonstrate to the consumer your business’s intention to grow the business globally is serious. It also demonstrates you have been prepared to invest significantly in your business to ensure its success internationally.
4. Spare management staff
Starting up an international business is no different to starting and growing a domestic operation. It is an extensive, time-consuming exercise and it can be assumed that exporting will require a significant time commitment from management across the entire business, not only from the chief executive, sales and business development managers. In addition, more staff may be required to meet the operational demands of setting up a new business. These issues need to be considered prior to progressing down the export track.
5. Spare product/service capacity
When assessing your export readiness, take into consideration your product and service capabilities to ensure that there is spare capacity to maintain domestic sales as well as meet the demand from new markets. Also consider whether your business would be able to expand this capacity quickly if and when you need to, to ensure customer expectations are met in terms of time and quality.
6. Marketing documentation
Cultural differences need to be considered carefully when determining an export strategy as culture can have a significant impact on people’s buying habits, their reaction to different marketing messages, and even how your brand colour palette is perceived. In addition, advertising requirements vary in different countries. To export successfully, you need to be able to adapt your marketing documentation to meet the needs of the local market.
7. International trade experience
When deciding whether to move into an export market, it is important to assess your knowledge of international trade or your willingness to learn about it quickly. There are a wide range of issues that you need to be familiar with such as what documentation is required for exports, how to manage foreign currency and how foreign markets operate to ensure export success.
8. Financial strength
As mentioned previously, not only does your business need a robust domestic performance, it also needs strong financial resources to expand overseas. This is to ensure that you have the capability to cover the additional costs associated with exporting, such as product modifications, R&D, travel and international marketing, to name just a few.
9. Level of passion for export
The complexities involved in setting up internationally can be emotionally demanding and taxing. You need to ensure that you have the passion in the business and the tenacity to endure and overcome the challenges faced when entering a new export market.
10. International travel
Another key consideration to assess is your proclivity for international travel. You will spend a considerable amount of time in airports, using multiple modes of transport and navigating around unfamiliar places as well as communicating with different cultures. If this is not something that you find appealing, it may be a signal that international trade is not for you.
By taking into consideration these 10 factors, you will have determined if your business is ready for the foray into a new market abroad and you will be in a better position to make a decision on whether to pursue your export strategy or focus on your domestic capabilities.
Grant Field is Australasian chairman of accounting firm MGI and has 30 years’ experience, specialising in advice for family and privately owned businesses.
The information contained in this article is general in nature and readers should seek their own professional advice in relation to these areas.
Grant Field is Australasian chairman of accounting network MGI and has 30 years’ experience, specialising in advice for family and privately owned businesses.
