The bigger the market the more you can sell. That’s the simple logic underlying the desire to export, and the evidence is that companies are keener than ever to do so. But how do you go about taking your business in an exciting and lucrative direction without putting your livelihood at risk.
Even at a time of economic uncertainty, companies remain keen to explore the opportunities provided by export markets. They understand that exporting can enable them to extend the life of products, minimise spare capacity, reduce reliance on the domestic market – and simply sell more and grow faster.
But of course with every potential reward there is a potential risk. Getting goods to their destination, communicating with customers and securing timely payment can all be much more difficult than when dealing with domestic customers. So while exporting is a proven way to grow many companies are understandably wary. So how can you achieve export success? Here’s our 4 point checklist.
1. Research your market
If you are starting to trade in a new place the starting point is to find out as much as possible about it. However a visit to the country isn’t always feasible and even if you do travel to meet your prospective customer, you can’t learn all you need to know about the place and its culture in a short visit – especially if you don’t speak the language. Questions you need to ask include:
- Can the roads, railways, ports, airports and other infrastructure support prompt delivery?
- Are there signs of political instability or social unrest that might disrupt trade?
- Will the local legal system operate effectively in the event of a commercial dispute?
Find a source you can trust: Coface economists produce regular reports that assess economic, political and corporate risk by country and business sector.
You can also find general advice on the ‘Exporting is Great’ website created by the Department for International Trade and from the British Exporters Association (BExA)
2. Know your customers and check their creditworthiness
Exporters can start out not knowing essential information about their prospective customers. Are their premises real? Are the claims they make about themselves true? What is their ability to pay and record of doing so? This becomes difficult with customers in other countries, when it isn’t always possible or affordable to visit them in person.
In these instances it is tempting to rely on websites, directories or references, but people can create the illusion of a reputable business very easily. Before agreeing to deal with a company find out if the country has an official registration for the business. As for references, they are best treated with scepticism. If a company has ever had an unfavourable reference from a bank or trading partner, you can rest assured they won’t let you or anyone else see it.
A reputable credit insurance provider is the ideal source of information on international customers. The data is sure to be up-to-the-minute, because credit insurers need the most current data in order to assess their own risks accurately.
Coface, for example maintains a database of 80 million companies throughout the world, and information on any of those companies are all part of the service available to policy holders. This enables you to check any company’s solvency before agreeing to do business.
3. Protect your sales revenue
You have done everything right in terms of market research, and you’ve undertaken due diligence on a new customer. However, non-payment still occurs, leaving you with a gap in your cash flow. How can you protect yourself from this?
Some exporters rely on letters of credit, but they can be costly and cumbersome to administer. They are also limited in scope as a separate letter is needed for each customer. By contrast a credit insurance policy allows you to cover either all of your customers or a cross section of customers, making it the simplest, most reliable and cost effective way to replace cash lost through non-payment.
4. Underpin your credit management
Exporting can put additional pressure on the existing credit management function of any business. Committing to delivery timeframes, setting payment terms, agreeing credit levels and language barriers are just some of the considerations.
A credit insurer can provide you with information on the typical trading terms for a particular market, and their country reports will advise on the transport infrastructure and hub. In addition to this, when it comes to collecting overdue invoices, experienced collectors who speak the language and understand the culture can step in and recover the debt on your behalf.
The key to successful exporting for companies is accurate and up to date information about firms, countries and sectors around the world. The more you know about your trading partners, the lower the risk of dealing with them. The single most reliable source of such information is a globally successful credit insurance provider such as Coface.
As with most aspect of business, preparation and intelligence are the keys to success and if a company takes the right advice, runs the right checks and takes the necessary precautions, the export journey can be a profitable and enjoyable one.
This article has been brought to you from Coface – a world leading credit insurance provider