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Looking back, Malcolm and Sally Green, co-founders of The Birdcare Company, might have guessed that building an export business for their budgie food firm would not always be straightforward. But shipping packets of white powder around the world has not been without difficulties since the pair decided to seek overseas markets for their products, which include food supplements for racing pigeons, birds of prey, poultry and small animals.
The Gloucestershire-based venture once sent a large shipment to an American pet store via the port at Los Angeles. Weeks after the goods had been unpacked and put on shelves, the US authorities recalled the delivery for further inspection under new Homeland Security rules. In another incident the company became indirectly involved in a strike by Californian dockers. As a result, £5,000 of bird food was diverted to a port in Mexico. In the hot southern sun, it literally cooked on the quayside – an accident that insurance did not cover.
“Exporting to the United States has been a nightmare, because all the paperwork changed when it brought in new anti-terrorist measures,” said Malcolm Green. “And now Avian flu is taking its toll, too.”
Such tales of woe explain why many smaller companies avoid overseas expansion. Chasing payments, tackling different currencies, speaking foreign languages and dealing with red tape can all appear daunting. But for some growing businesses, persistence pays off. Gaining a foothold in rich overseas markets, such as the US and Japan, can transform a company’s fortunes. Finding foreign customers can often be a smoother path to growth than diversifying in a crowded domestic market. At The Birdcare Company, sales in Europe and the US were just 1% of revenue in 1998, but by last year these had climbed to 50% of turnover and 60% of volume. Astonishingly, around half of all exporting entrepreneurs begin selling abroad by accident, when overseas customers find their website or mail order catalogue. Only about a fifth actively market their goods in foreign countries.
Acme Whistles, a Birmingham-based manufacturer, built a business in India after receiving an order via the company’s website from a local basketball referee. Chief executive Simon Topman persuaded his customer to promote the firm to colleagues. Since then, the company has racked up sales on the subcontinent of almost £100,000.
“I’ve never been to India,” Topman admitted. “He found our website by accident, but we contacted him and asked him to pass on the message. It started with one or two customers and now it’s 83,000 by word of mouth.”
So how should aspiring exporters begin? The key to success is to research demand, competition and pricing thoroughly before taking the plunge. The British Chamber of Commerce and UK Trade & Investment both offer practical advice – and sometimes grants – to help investigate overseas markets. Research material is also available from British embassies overseas and local chambers of commerce and other trade organisations. UK T&I suggests that as well as a detailed pre-investment study, entrepreneurs should make at least two short visits and perhaps purchase some market research. Some owner-managers join trade missions, organised by the Department of Trade and Industry or their local Business Link, during which participants are introduced to potential customers. Others visit local trade fairs.
“We went on a trade mission to Australia organised by Business Link and found it a cost-effective way of checking out the market. We paid an extra £500 for a market research report and came back with a list of distributors,” said Mark Auty of Fantas-tak, which sells glue dots used for sealing packages in 36 countries.
The next stage is to consider how to establish the overseas business. How will the venture be managed? How will the product be sold? How many extra staff will be required? How much will everything cost in terms of both time and money?
Many new exporters appoint an agent or distributor to sell the product in return for a slice of sales income. Hiring professionals who are familiar with the market, the bureaucracy, culture and language is a big help, but it is important to pick someone who is hardworking and trustworthy, especially in countries that are geographically and culturally distant.
For example, smoothie maker The Big J was approached at an international food fair by a distributor offering to supply Japanese retailers. Now Japanese exports account for more than 5% of the company’s total turnover. John James, its export manager, said the arrangement is the easiest way to get products on the shelves.
“We asked our account manager at UK T&I to check out the distributor, which then flew our whole team out to meet them. We liked what we saw,” said James.
Other growing firms prefer to retain control by opening an overseas office and staffing it with either British or foreign nationals. Sometimes grants or loans are available to entice inward investors. Local embassies or UK T&I can advise on an individual country’s legal and financial requirements.
Next, think about promoting the product. Tailoring the marketing to the prevailing culture is vital. English is the international language of business, but it’s not necessarily the preferred tongue of clients and consumers, so consider translating brochures, websites and advertising material, or even hiring translators for important meetings. What’s more, trade regulations in some countries ban English packaging, especially in the food and drink sectors. UK T&I and the Institute of Translation & Interpretation can both provide assistance, while some companies opt to approach their distributor for guidance.
Making an effort to understand foreign business etiquette can also pay dividends. For example, in Israel the business week runs from Sunday to Thursday, while in India clients expect to barter for discounts. In Japan the emphasis is on precision and punctuality, but in Brazil business culture is based on strong personal relationships. Whatever the country, putting the legal and financial paperwork in order is very important. Certain goods, such as chemicals or fine art, require an export licence. Most exports are zero-rated for VAT, but details must be included on the company’s VAT return. Remember that as soon as goods enter another country, they are subject to that country’s laws and controls.
Next, think about how to receive payments. Some companies insist on sterling payments to avoid the risk of foreign exchange fluctuations while others, especially in highly competitive sectors, allow customers to deal in their own currency. Opening foreign bank accounts can take time, so it makes sense to start planning early. Paperwork has become more rigorous since concerns were raised about terrorist money laundering. Typically, banks ask for at least two forms of identification, a visa if applicable and a local address. Some companies choose to open a currency account – dealing in euros or dollars, for example – at their UK bank. For entrepreneurs who are unsure about taking the plunge abroad, it can be simpler than setting up overseas banking facilities.
Transporting goods abroad is an important part of the process, as the Greens’ experience in Mexico proved. Remember that shipping cargoes around the world can be time-consuming and always make sure that products are insured. Business owners like the Greens draw on all their entrepreneurial talents when they begin their overseas ventures. Biography
Catherine Wheatley is a freelance writer specialising in enterprise and growing companies. She writes for The Sunday Times’ Fast Track and is a regular contributor to The Daily Telegraph’s Business Club. She was New York correspondent of Sunday Business during the paper’s first year before returning to London to cover enterprise and management issues. She was editor of The Sunday Express Enterprise Exchange section and has written for many other newspapers and magazines, including The Independent, Scotland on Sunday, Real Deals and Real Business.
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