CRASH COURSE: SELL BEYOND THE HOME MARKET

CRASH COURSE: SELL BEYOND THE HOME MARKET - An e-mail has arrived from Latvia. They want to order a wagonload of your top-price product. You've thought about exporting before but done nothing about it, and this seems a heaven-sent opportunity to start. So

by ALEXANDER GARRETT
Last Updated: 31 Aug 2010

An e-mail has arrived from Latvia. They want to order a wagonload of your top-price product. You've thought about exporting before but done nothing about it, and this seems a heaven-sent opportunity to start. So how do you establish a market overseas?

HAVE AN OBJECTIVE. Don't export for the thrill of it. Sound reasons are: to achieve economies of scale in manufacturing; to offset the cyclical nature of your domestic market; or to fulfil a potentially profitable demand in other markets. 'If you have saturated the UK market and you still have production capacity, that's a good time to dip your toe in the water,' says Nicki Sparrow, an international trade team leader at Barclays.

WHERE IN THE WORLD? Look for countries with a gap in the market. Contact the Government's export body Trade Partners UK, which has more than 260 market-sector reports prepared. Trade visits and trade fairs are another good way to gauge demand. Consider making Europe your first port of call.

'There is free passage of goods, it is easiest to get to, and it is easiest for finance and regulations,' says Robert Rawlings of the Institute of Export.

FIND A PARTNER. The most efficient route to market is usually a local partner. Distributors buy product from you and sell at an agreed margin; agents negotiate sales on your behalf in return for a commission. In either case, draw up a watertight contract that covers exclusivity, the territory and products covered, and the period of agreement.

ACCLIMATISE YOUR PRODUCT. You need to get more than the name right when sending your product abroad. Customer needs may be different and elements such as packaging may be an issue. Where electrical goods are concerned, power supplies and technical standards must be conformed to. Again, study the market.

GET YOUR PAPERS IN ORDER. If your product could in any way be used to make weaponry - that could include chemicals, electronics or even pipework - you may need an export licence. You should be able to check this on the DTI web site. More commonly, you may be required to provide documents such as certificates of origin or invoices when shipping goods. These are vital, says Rawlings, 'otherwise your precious goods may end up sitting on a quayside somewhere, all because you didn't fill in the right forms'.

BOOK YOUR PASSAGE. The British Institute of Freight Forwarding will help you find a forwarding agent covering any special needs - such as refrigeration or fragile items - and the countries you are exporting to. Make sure you're familiar with schedules and costs before you quote prices and delivery times to customers.

SET TERMS. Trading and payment terms must be clearly defined from the outset. If you've any doubts about being paid, use letters of credit, which ensure that the goods aren't released until the customer's bank has guaranteed payment on receipt of correct documentation. Once you're confident about the customer you may opt for an open account with 30 or 60 days' credit, but make sure you have credit insurance. The vital thing, says Rawlings, is that you quote 'incoterms' - clearly defined internationally recognised terms of trade. 'If a ship goes down in mid-ocean with your goods on board, you need to know whose loss it is,' he says.

HEDGE YOUR BETS. If your product is unique, you can demand payment in sterling, says Sparrow. If not, quote in the local currency (or dollars outside Europe). 'If you have a tight margin you'll probably need a hedging strategy,' she says. Currency is booked through a forward contract at a specified rate on a particular date.

DO SAY: 'Exporting will help us to defend our home market, understand the competition, and spread the risk base of the business.'

DON'T SAY: 'They're gagging for our product over there. All we have to do is chuck it on a ship and wait for the dosh to roll in.'

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