START small” is not a phrase that many ambitious entrepreneurs like to hear, but this was the main piece of advice given on preparing for export at the Santander Breakthrough Box Live event in London last week.
An audience of business owners was gathered to get practical insight into how to take their growing ventures into international markets, and the message was clear: “export is a journey, so test your strategy first.”
TESTING THE WATER
This came from Richard Foxall of UK Trade & Investment. “Finalise your export strategy in smaller markets, such as Ireland, and make mistakes there before you target more significant regions,” he said.
Alongside advice from the experts, entrepreneurs were on hand to share their personal experiences of going global. Peter Grainger, founder of CafePod, admitted that he had learned his lessons the hard way.
“As an entrepreneur, you want to attack everything at once,” he said. “We knew we wanted to be an export business from day one and we have some massive markets on our doorstep in the UK. But they are so big, and there is so much to learn. It’s far better to start with a less ambitious market.”
Grainger, whose business makes fresh coffee capsules, currently exports to eight markets outside the UK, but the journey wasn’t easy. “We’ve been through a lot of pain to get here.
“After building profile and revenue here in the UK, we began getting regular requests from new markets to take our product overseas. That was exciting for us, but it led to a reactive, scatter-gun approach to export. We agreed to deals without the right structures in place and came up against problems.”
“We realised that physically sending the goods to another country might be simple, but there are always hurdles to overcome in terms of paperwork and regulations. That is the kind of stuff you need to prepare for in advance.”
One of the key issues that Grainger came up against was the cultural differences in how markets do business.
“The best thing to do is to export to a country that has a culture similar to your own. Everywhere is wildly different so it is a real challenge. From regulations to taxes, how they negotiate and do deals, you can’t just go to a different market and expect the process to be the same as that you have in the UK.”
“For example, if you go to Brazil, or even Spain or Portugal, there is a lot more emphasis on building relationships, so be aware that there will be a lot of flying back and forth to do negotiations. In Germany, things seem to be a lot simpler, like in the UK. So even considerations like how much you’re spending on air fares become really important.”
Foxall offered his tips from UKTI, a government service which offers free advice to businesses looking to export, on how to avoid these pitfalls. “Do your research and apply the data and resources available to you. Ask yourself; is your product or service relevant? What is your route to market? Benchmark your competition. Check them out on social media and see how established they are.”
IT’S A NUMBERS GAME
The audience also heard from fashion entrepreneur Gavin Aldred, the former managing director of high street brand New Look and now chairman of urban fashion label Supreme Being. The brand exports to over 30 countries via wholesalers, and has supplied over 100 countries over the last 18 months.
“The number one lesson I’ve learnt is that you’ve got to be really careful about giving away margin. You might make a healthy mark-up on items you sell wholesale abroad, but after agents, taxes, VAT, distributor fees, shipping charges and the cost of samples, you can very quickly be losing money on each sale. You can’t afford to be bad at maths.”
Aldred is working heavily in Asia – a market that he claims will soon represent half of Supreme Being’s business and has “huge” opportunities for UK exporters. “For all the frustrations, brought about by cultural differences and poor communication via social and digital media, the pace of growth is phenomenal,” he said.
However, it is clear that tapping into that market relies on understanding the shifting needs of consumers. “We are changing our product to tap into different fashion trends, using brighter bolder colours than we like in the UK. We’re also taking advantage of the one-child policy, which has led to a lot of young men with high-levels of disposable income.”
Aldred’s final piece of advice came from the US businessman and founder of IMG Mark McCormack, who once told him to simply “get on the plane and go”. Aldred echoed this sentiment in his advice to the audience and urged them to “be prepared, and fly anywhere to do a deal”.