How to: manage export growth
Selling beyond your domestic market opens up a range of new opportunities for your company. Potentially, if it goes well, it could significantly increase sales and boost your bottom line. But there are also risks involved. Most exporters say it takes a minimum of one year to make an initial breakthrough, and often a lot longer to become established, in a new market. Can your company afford the cost – both financial and in staffing terms – of business development in a different country? Beware of stretching yourself too thinly. By choosing you over a competitor that may be a local company, your customers are also taking a (calculated) risk. It’s up to you to prove their decision was the correct one – not just in the product or service that you sold, but in providing the standards of after-sales care and support that they will expect.
Simply put, can you sell to an international market, or multiple ones, in a sustainable way so that your resources aren’t stretched nor your existing customers affected? Does your business have the economies of scale so that production or service costs fall as volume rises? Imagine a scenario where your exports rise significantly: is your company ready for such an outcome: can your factory handle increased order volumes; do you have sufficient staff to provide service to markets in different time zones?
To achieve sustainability and success in international markets, our companies need to scale, regardless of their stage of development or industry sector. Scalability needs to be at the heart of your business and revenue model; however, not every company has a business model that can scale. Ask yourself whether it is possible for economies of scale to be achieved in your business (do production or service costs continue to fall as volume increases)? Also consider the cost of acquiring new customers and the cost of servicing customers in multiple, overseas markets. What about the long-term revenue and profit that can be derived from these customers?
When developing a coherent export plan (see section 5), you will need to decide whether you have sufficient staff in your company to take on the additional work of business development in a new market. If you do, decide who in your company are the most suitable representatives. Keep in mind that some of your chosen employees’ original responsibilities may need to be reallocated to other members of your team while they are working on exports. If you don’t have sufficient staff numbers to cope with the extra workload, consider whether you need to hire people with specific language skills, or knowledge of a particular country.
Financial resources are also critical. You will need to ensure you are sufficiently well funded when selling internationally, because exporting by its nature tends to involve longer sales cycles than in your home market and it usually incurs higher costs.
Sharing the load
Business owners, particularly in SMEs, can sometimes be so immersed in the day-to-day running of the company that it’s hard for them to take a step back and see the bigger picture. What’s more, because exporting is risky and can involve diverting some resources from your home base, it’s important to have some checks and balances. One way to do this is by sharing the management of your exporting enterprise across your senior management team. Review your progress at least once a quarter, and undertake a strategic analysis of your efforts. How much are you spending, what are the prospects of seeing a return, and when?
Don’t leave your current customers behind!
The prospect of selling in a new market is understandably exciting, but it’s important not to let this detract from maintaining current levels of service with your existing customers. This is especially important for companies with small management teams. You must ensure that your domestic customer base isn’t neglected while your business chases sales elsewhere.
Growth through international trade (Invest NI)
Tips for export success
- Carefully choose which markets you want to export to, and follow through in a structured way
- Conduct scenario planning – how much growth could your business handle with existing resources?
- Communicate regularly with customers when making commitments
- Spread the responsibility for your export strategy among several people, not just one
- Audit your resources to see how you can meet current levels of demand.
Case study: SAM
With one of the most advanced production facilities in Europe and an ever-expanding range of products, SAM (www.sammouldings.co.uk) is the UK market leader in MDF mouldings. After 2008, the Antrim company instigated a move into exporting, working closely with Invest NI to evaluate new markets. SAM began by selling to the Netherlands and has since established distribution networks in Belgium, German and Denmark. Exports now account for around 10 per cent of turnover. Gerard Wilson, Sales Director, explains how the company is able to grow sustainably while meeting the demands of overseas customers.
What has been the biggest challenge in managing expanding into new markets in a way the company can handle?
Capacity management at the factory in terms of our growth. Even before we became exporters beyond the UK and Ireland, we were always prepared to grow the company in terms of size, people, or machinery: whatever it took to meet demand. We make sure that we don’t treat export sales differently. To us, it’s all the same demand. At times, we have become really busy, but it’s about making sure your lead times are relevant, and doing forward projections as much as possible. We talk to our customers about forward ordering to ensure the factory keeps up to speed. We deal in the truth so it is critical to keep clients informed of despatch dates and to any change in as much advance as possible as often they are planning their own distribution based on SAM deliveries coming in.
“Slow and steady into new markets is our approach. We’re very deliberate and focused”
How do you manage customer expectations effectively?
The essential element is that our logistics team and not sales that dictate customer lead times. This ensures that customers are told the reality. It’s making sure the factory dictates: can we make it and when can it leave. Hence, you’re dealing with the truth and that’s always been our mantra.
With exporting, as it does, bringing on board new clients with new tweaks and specifications, our technical and production departments get heavily involved. We have a process called NPD, or New Product Development, where we assess new products or new customers. We ask ourselves, can we make this product, what does it take to make it and how long will it take to do so?
Through the NPD process, our technical people get involved with the customer directly and deal with relevant technically orientated questions. You need the right people to speak to the right people at the customer’s end, and they get to the bottom of the question, for example “do you need this product at this exact specification?” Through that discussion, you eventually come
to a conclusion where it’s a win-win.
How did you pick your export markets to ensure you didn’t overstretch capacity?
We didn’t just do a shotgun approach. We didn’t just invade Europe with people and products and see what was picked up; we worked with Invest Northern Ireland very closely to see what would be a good starting point for our research and the Netherlands came up first. Language was no barrier, logistically it was close, there are good trading routes to get there quickly and efficiently, and the supply chain from distributors on to house builders was similar to Great Britain and Ireland.
What advice would you give about building up exports without affecting your existing business?
low and steady into new markets is our approach. We’re very deliberate and focused. From my perspective, what I want to do next is enhance our situation in Germany, where there’s definitely a lot of MDF profile business, and to move into Sweden where we have a couple more targets. Once we had a foothold in the Netherlands, it gave us an avenue into Belgium and it flowed from there. If you took a map of Northern Europe, you would see a very consistent line of attack moving from the Benelux, then into Germany and upwards to Scandinavia. It makes sense that we’re not stretching ourselves. It is a nice, tightly controlled map that we’re evolving.
To prospective new partners, the fact that you’re already exporting gives them more confidence. It says you can do this for them as well. Because we were very strategic in our distribution partners selection process, we are with key people and industry leaders that are very well known in those markets. If you mention other reputable people’s names that you’re selling to, the others recognise that and it works well in your favour.