Exploring new markets

Richard Austin, Partner at the Cheltenham office of Crowe Clark Whitehill, the national audit, tax and advisory firm, has some advice for ambitious owner-managers looking to export themselves out of the downturn

Just as economists are revising down their medium-term growth forecasts for the UK economy, business owner-managers in the Cotswolds are finding themselves in a similar position of having to reassess the growth prospects of their business based on lower trading revenues and higher costs.

When growth is slow at home, it only seems logical to explore exporting opportunities overseas. However, succeeding with such a strategy is far from simple.

The latest SME Snapshot, a survey conducted by the Association of International Accountants earlier this year, revealed that 84% of business owners have seen no indication of an economic recovery in the day-to-day running of their business. The same data also showed that 82% would be investing in developing new markets over the next 12 months. Faced with weak domestic demand, many owner-managers are taking the next logical step of finding new customers abroad.

Although the statistics prove the mettle of many small business owners, exporting won’t be easy. Ongoing uncertainty over the debt crisis in Italy and Spain, not to mention Greece’s troubled bailout, have harmed growth prospects across the Eurozone. Further afield, China has taken steps to reduce its export dependency to stimulate internal consumer demand as a means of boosting economic growth.

Exporting undoubtedly offers many opportunities for local businesses, however, pure ambition will not be enough to succeed. If the products and services are suitable for export, careful research needs to be done before entrepreneurs take the plunge in overseas markets. So how does a company start exporting?

Firstly, the required funding must be in place. The SME Snapshot showed that almost all (94%) SMEs were finding it difficult to access funding from banks. However, this doesn’t have to be the end of the line as far as funding is concerned as there are venture capitalists or business angels, who can plug the funding gap. Groups, such as The South West Angel and Investor Network (SWAIN) can connect private investors with SMEs looking for investment to export. These organisations specialise in helping entrepreneurs to find equity finance and assist private investors in the region to search for investment opportunities in businesses with growth potential.

As a result of the credit freeze, which is depriving small companies of crucial cash, more owner-managers are turning to family and friends for investment. A staggering 69% approached family and friends as alternative methods of raising funds, according to the Snapshot findings.

Secondly, entrepreneurs should try to meet like-minded people who are doing like-minded things. Chambers of Commerce offer export advice as well as introductions and networking opportunities. They frequently host visits from companies looking to buy or invest in the UK and provide connections to other organisations that can help businesses to export successfully. They can also offer market research and intelligence as well as translation services and export documentation services, all crucial factors when forging into overseas markets.

Equally, the Institute of Directors assesses export potential, finds out about would-be markets, selling, distributing and transporting exports as well as organising the paperwork and legalities.

Thirdly, the Export Credits Guarantee Department (ECGD) offers owner-managers a number of services to export-ready companies, such as insuring UK exporters against non-payment by their overseas buyers. This government department also shares credit risks with banks to help exporters in the raising of tender and contract bonds, in accessing pre- and post-shipment working capital finance and securing confirmations of letters of credit.

Last, but by no means least, entrepreneurs should seek professional advice on legal and accounting matters in new markets. As part of the Crowe Horwath International network, we are able to provide a global service to our clients across 109 countries. We can assist with matters, such as branch registrations, recruiting local people and how to sell in overseas markets as well as ensuring compliance. All this should enable small business owners to take full advantage of alternative markets and make international trade commercially viable.

For more professional export advice, contact Richard Austin at the Cheltenham office on 01242 234421, email Richard.Austin@crowecw.co.uk.