Even jetting off to an overseas customer won’t guarantee you’ll understand new markets. But keeping this simple checklist prevents common exporting pitfalls
The bigger the market the more you can sell. That’s the simple logic underlying why you should export and evidence shows companies are keener than ever to do so, even during a time of economic instability. Businesses understand that exporting can help extend the life of their products, minimise spare capacity, reduce reliance on the domestic market and simply enable them to sell more and grow faster. But how do you go about taking your business in such an exciting and lucrative direction without putting your livelihood at risk?
Of course, with every potential reward comes a potential risk. Getting goods to different countries, communicating with distant customers and securing timely payments can prove much more difficult than dealing with domestic consumers. So while exporting is a proven way to grow, many companies are understandably wary. But so long as they stick to this to-do list, there’s no need to be.
Study the nation
When starting to trade in a new place your very first task is to learn as much as possible about it. However, a visit to the country isn’t always feasible and even if you do travel to meet prospective customers, you won’t discover all you need to in a short trip – especially if you don’t speak the language. Instead, reflect on these crucial questions: 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? And finally, will the local legal system operate effectively in the event of a commercial dispute?
To get answers you need a source you can trust and that’s well-versed in these kind of assessments. Coface economists, for example, produce regular reports evaluating economic, political and corporate risks 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 the British Exporters Association.
Discover who your customer really is
Exporters can start out not knowing basic information about their prospective clients. Are the claims they make about themselves true? What's their ability to pay and record of doing so? Are their premises even real? This becomes difficult to gauge with overseas customers, when it’s not always possible or affordable to visit them in person.
In these instances it’s tempting to rely on websites, directories or references but these make the guise of a reputable business very easy to craft. After all, if a company’s ever received a negative reference from a bank or trading partner, you can bet they won’t let you or anyone else see it.
Instead, before agreeing deals find out if the business' nation has officially registered them. A respected credit insurance provider is a fountain of knowledge in this respect. Coface, for example, maintains a database of 80 million companies throughout the world, letting you to check anyone’s solvency before doing business with them.
Have a solid back-up plan
You’ve done everything by the book with market research and carried out due diligence on an overseas customer. However, non-payment still occurs, blowing a gap in your cash flow. What’s the solution?
Well, some exporters rely on letters of credit but they can be costly and cumbersome to administer. Moreover, they’re limited in scope as a separate letter is needed for each customer. By contrast, a credit insurance policy lets you cover either all your customers or a cross-section of them, making it the simplest, most reliable and cost-effective way to replace lost cash from non-payment or insolvency.
Underpin your credit management
Exporting can put additional pressure on any business’ existing credit management. Committing to foreign delivery timeframes, setting payment terms, agreeing credit levels and facing language barriers are just some of the considerations.
However, credit insurers can fill you in on the typical trading terms for particular markets, while their country reports can advise on a nations’ transport infrastructure and hubs. Additionally, 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.
Above all, the key to hassle-free exporting is accurate and up-to-date information about firms, countries and sectors around the world. Quite simply, the more you know about your trading partners, the lower the risk in dealing with them.This article comes courtesy of Coface, a world-leading credit insurance provider