While markets in Europe are flat, it makes sense for businesses to look further afield for new growth opportunities.
Businesses outside the Continent grow more quickly, are more innovative and have a higher turnover on average than those with a purely domestic base.
Last week, HSBC announced a £4bn loan fund for small and medium-sized enterprises that are looking to trade abroad – providing extra incentives to ambitious companies.
But while the advantages of “going global” are clear to see, many businesses fail to take up the opportunity.
According to government estimates, just 20 per cent of small and medium-sized enterprises (SMEs) are exporters, and most of these export only to Europe. As a nation, UK Trade & Investment says we export more to Ireland than to Brazil, Russia, India and China combined – meaning that we are not taking advantage of these fast-growing markets.
However, taking a company into the international arena is not a simple process for a small business – as I know from experience.
Selling abroad can be complicated and risky, because it is expensive and the outcomes are potentially uncertain. Understanding foreign business cultures and values, using the right language, finding the right partners, conducting substantial market research and building commercial relationships are vital – but they take up a lot of time with relatively little immediate return.
Sales teams need to go to a target country many, many times to develop networks and trust with local suppliers, customers, and staff – but this increases the risk of taking an eye off domestic core markets.
My company, Delta Economics, is a young, small service business with 20 people working worldwide. Around 10 per cent of the company’s revenue since launch has come from overseas markets. We want to increase that, so half of our team is now based outside the UK. Now that the technology exists to make global communications simple, immediate and secure, the cost of moving staff abroad has become more cost effective.
A number of businesses already have more international exposure than they might realise, if they broaden the definition of international activity beyond “exports”. Our research shows that more than half of all businesses have some form of exposure through currency exchange, assets abroad, or foreign infrastructures.
Small businesses also have an advantage over bigger companies in that they can move quickly, be more flexible and take up market niches that larger suppliers find it more difficult to move into. They play an important role in global supply chains and this is the real route to developing a sales strategy abroad.
In the first instance, you work within a set framework that might not generate substantial revenue but after a while, this turns into networks, understanding and further relationships – all of which are key to success and which build an international sales platform.
But it is still incredibly difficult for a small business to develop a revenue stream internationally without a partner. Whether that partner is a client or another business in the supply chain, working with an organisation that already has international interests and revenue streams makes the process easier.
It’s a huge opportunity: the government has said that if the percentage of exporting SMEs rose to 25 per cent, an additional £36bn would be added to the British economy.
Achieving this may prove to be difficult, though. Businesses – particularly small ones – cannot suddenly pitch themselves on to an international stage. In order to gain greater international exposure, SMEs are going to need help. They are going to require mentoring and advice alongside loans.
Dr Rebecca Harding is the founder and chief executive of Delta Economics, a research consultancy specialising in trade forecasting
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