Even for successful businesses, continued growth in the current domestic economy is no sure thing in this challenging climate. While some indigenous sectors and regions are outperforming, most economists predict only modest growth this year. For most companies looking to grow, setting their sights abroad seems an obvious course of action.

However, even more than growing domestically, international business is a marathon rather than a sprint and the fruits of international markets won’t come to you immediately. The most successful exporting companies approach international growth methodically, weighing the substantial time and money investment required to crack an international market against the potential benefits.

Fortunately, for most businesses, those benefits are pretty vast. “The evidence about the business benefits which can be achieved through exporting is clear and compelling,” explains Heather Booth di Giovanni, Director of Economics and Evaluation at UK Trade & Investment (UKTI). “In the context of a depressed British market, the benefits of sustained revenues from a well-diversified portfolio of overseas customers are even more vital. We should not forget that there are opportunities overseas which are still growing, and that new opportunities are constantly opening up. With the benefit of UKTI’s expert help, negotiating the challenges of unfamiliar markets overseas can be much more rewarding and less daunting than many companies might anticipate.”

Hedging your bets
First and foremost, a portfolio of stable, international clients acts as an invaluable hedge against the kind of shocks that can kill off a purely UK-focused business. Huge uncertainties exist about domestic growth, growth in the world economy, political events and even currency fluctuations. Just as any smart business person seeks to gain several clients in the early stages of selling – spreading risk rather than becoming dependent on any one customer – having irons outside the UK fire will protect you against a change in the domestic economy or even in your specific sector.

What’s more, certain international markets may be less mature in your sector than in the UK. This means that, if you pitch your offering correctly, you may well find quicker growth against lighter competition than you would at home. If you select your market carefully, a product or service that’s achieving modest success at home could really take off on other shores.

CASE STUDY
Fellas wipes
Walsall-based Fellas Wipes announced its first major orders from Australia in February 2012.

Colin Brutton, who established the company in April 2011, spotted a gap in the global market for an intimate male grooming product. He then introduced simple and convenient cleansing wipes, just for men.

“We all clean our teeth in the morning; yet many of us would still pop a chewing gum or mint into our mouths to freshen our breath throughout the day. Fellas Wipes is no different. They help men stay clean and fresh whenever they need to. They are individually wrapped;  flushable; biodegradable; pH balanced for men, dermatologically tested and fragrance free,” explains Brutton, who had a firm eye on the export market from day one, and initiated early contact with UKTI.

Maggie Neale, International Trade Director for the Black Country, explains how UKTI helped the fledgling firm. “With ERDF funding we were able to support them with international branding, promotion and exhibiting at international trade shows.

As a result the company has been able to secure what could be very lucrative business in Australia,” she notes.

“I found out as much as I could about exporting but if you’re thinking about marketing your products overseas, talk to UKTI; you will be assigned an International Trade Adviser so just start asking lots of questions and go on some courses,” advises Brutton.

“We’ve been on UKTI’s Passport to Export Programme, which is excellent. We’ve had invaluable advice regarding FDA (Food and Drug Association) approval, so we can sell in the USA and Canada. We’ve also had a grant to help with marketing – it’s really starting to pay off. Without Maggie’s advice I wouldn’t be starting to sell in the USA now. We are in the process of talking to a new distributor in the States who has big plans for marketing our product.”

The company, which has recently added Australia, New Zealand, Canada and the USA to its selection of markets, plans to introduce a further five male grooming products in the next three years. “Exports currently account for 25 per cent of the company’s turnover but within two years, we expect the USA market to account for around 75 per cent of our turnover. We intend to develop an international male-grooming brand and sell British-made products around the world,” says Brutton.

Return on investment
In any case, the chances are that you’ve already made a substantial investment to develop your product or service to the point where you’ve stabilised in the UK. With a fundamental template in place, the set-up costs of a new business elsewhere – even allowing for the necessary market research and any complications or bureaucracy you may face opening an international office – are likely to be lower than they were to start the business from scratch. By looking internationally, you can leverage the hard work and investment you made developing a product or service into a greater return.

Also, depending on how much they change their product or service, most exporting businesses will be able to utilise some of the same key staff or facilities to service new markets. For example, a call centre running at 80 per cent capacity to handle UK business should be able to ramp up capacity efficiently when more work comes in from abroad. By exporting, you’ll be getting more out of the assets that you already have at home, and achieve greater economies of scale.

This increased return on investment and stability from exporting adds value to your business for potential buyers. Even if you can’t ever foresee selling up to an outside buyer, adding this extra equity makes your business more attractive to potential lenders. Success breeds success and a business that’s been proven to work in more than one market will be seen as an attractive candidate for financing future growth. It is well worth considering contacting UKTI to talk about export options.

New approaches
Expanding into new markets, moreover, can also bring successful business people into contact with new services or products that could succeed in the UK. British business does not have a monopoly on innovation, and markets around the world are filled with strong ideas that – if taken up by the right company – could make a major impact. Reaching abroad, therefore, can easily end up boosting growth at home.

Academic research bears this phenomenon out. An Aston University Survey (Impact of Trade Services on R&D) in 2009 revealed that the average exporters invest an extra £65,000 in research and development. As they develop and introduce new ideas and products, the survey found, UK-owned exporters accounted for nearly twice as large a portion of the UK’s overall research and development spend than their share of GDP would predict.

CASE STUDY
Shadow Robot
Islington-based Shadow Robot is a business that, early in its lifetime, adopted an export based strategy. The robotics firm, trading since 1987, has spent the last five years specialising in dexterous manipulation for humanoid robotics. This has led to the creation of the Shadow Dextrous Hand, one of the world’s most advanced robot hands.

“It was clear from very early on that potential customers with money were in Europe, Japan and the USA. We now see most of our business comes from a range of overseas customers, and we continue to reach out abroad to international trade events where we can expect to find new areas to exploit our key technologies. This contact also gives us insight into other customer needs that our R&D group can help us work towards,” explains Technical Director, Rich Walker.

Efficiency gains
The academic research also bears out a trend that many experienced business people have encountered on the ground: that exporting internationally encourages a business to be more efficient internally. Interestingly, this is the opposite of how some people perceive exporting for their business.

Richard Harris and Qian Cher Li’s influential work, Firm Level Empirical Study of the Contribution of Exporting to UK Productivity Growth, shows that exporting firms became more productive than their non-exporting counterparts. Companies that began exporting reported an increase in productivity of 34 per cent and, tellingly, companies that exported were 11.4 per cent more likely to stay in business.

With these potential benefits, it’s tempting to dive right in to seeking clients or buyers in markets all around the world. However, as any successful business person will tell you, you’ll get a far greater return if you focus your efforts, working out the ideal market for your business and the best way to approach them in advance.

You’ll also benefit from exploring some of the services and supports that UKTI can offer would-be exporters. Export for Prosperity explores some of the most exciting emerging markets, teasing out the issues of doing business in each one, and identifying some key opportunities. It also outlines some of the ways that UKTI can help you succeed internationally. Obviously, you’ll need to do extensive research before you even dip your toes into international waters. However, absorbing the information within this publication is an ideal first step.