Brexit or not, for a small business looking out into the wider world, the globe is smaller than ever. This is mostly due to economies of scale. The largest container ship – the OOCL Hong Kong – can hold over 21,400 containers. It’s also because platforms like Alibaba, Amazon and JD.com make sourcing and selling goods globally much easier.
But it’s not that simple. Here are six steps to take before you take the export leap.
While there are a number of drivers to start exporting, three stick out:
Once you know why you’re exporting, it’s time to figure out where your goods are headed. Start by answering these two questions:
What is your company’s competitive advantage? Make sure you know what you offer that existing solutions in your target countries don’t.
What are your country’s competitive advantages? That is, understand why the country you’re shipping to needs the goods your country can provide.
To help answer this question, start with MIT’s Observatory of Economic Complexity. You can also use tools like customs datasets (start with Panjiva or Tradesparq) to explore actual customs records. Look for affirmation that other companies are exporting from your country to another to ensure that your target country is a good fit.
Now think about how you’re actually planning to sell your goods. Increasingly, the easiest way to explore a new market is by selling through Amazon’s fulfillment (FBA) program. However, make sure to explore these options as well:
For the three latter options, getting on a plane and attending a trade show in the target country is the best way to identify partners. And if you’re already at the show, make sure to take a peek at what the local competition is up to.
You’ll almost certainly need to adapt your product’s packaging for the local market. But localisation isn’t just about translation; your product also must adhere to local standards. For example, if you sell a baby walker in Canada, you could get fined $100,000. Research your product thoroughly before going to market and avoid costly fines.
Even if you’re only selling through a third-party, carefully consider unit costs. Project freight spend with freight quote comparison services. Then assess local sales taxes, customs, duties and other fees that may arise. If you’re not sure, find a freight forwarder to help. Also, make sure you factor in insurance for the goods when shipping; things can go wrong when selling globally.
Follow the same business practices you stick to when you sell locally. Make sure you have incoterms – terms for who takes responsibility for the product and its movements – worked out with your buyers in advance. Then ensure that sales orders and purchase orders are clear to both parties, especially if multiple languages are in play. Finally, be prudent about credit lines and assessing credit risks; prolonged legal battles can be a killer for small businesses.
Going global with your business is complicated but can be incredibly rewarding. Don’t be intimidated, though; research carefully, plan your costs and go-to-market strategy, and, of course, look into government organisations that exist solely to help exporters.