EXPORT is top of the agenda for a lot of companies seeking to thrive in difficult times - and if it isn’t it should be, The Star’s Round Table discussion heard.
Bosses with decades of experience in international trade lifted the lid on the risks and benefits of travelling abroad to do business.
The Hill Dickinson-sponsored event heard some companies conduct extensive research on foreign markets, pay several visits to a country and go through several rounds of negotiations before striking a deal. Sometimes they have the assistance of Brits based in the local consulate or embassy, or they go through a trustworthy agent with a network of contacts in country.
But more and more, said Giles Searby of Hill Dickinson, the internet was creating a new breed of ‘accidental exporter’ - firms who receive a surprise email order and have no idea what to do with it.
Fortunately several trade and public bodies offer the complete export package, a service which chimes with a Government drive to encourage exporting.
The Round Table heard it paid to do your homework about the process, the terms, the timescales and the costs involved. ‘Trust no one’ was a rule fundamental to getting paid.
Having some language skills and visiting the country usually went down well, said Peter Hoy, of Macalloy. But Mick Burton, of Anchor Magnets, said that employing a foreign speaker and going on business trips to their home country - Poland in this case - had seen them hit the ground running.
The galloping economies of the BRIC countries - Brazil, India, Russia and China - offer potentially huge rewards. But the consensus was they aren’t for the first timer or the fainthearted. Alien methods, language barriers, red tape, lack of infrastructure and corruption should make even the most experienced exporters cautious.
But, when stripped down to the bare bones, exporting is just selling, said Peter Skinner. And the Brits still have a reputation for honesty and quality products which opens doors.
Richard Wright, executive director of Sheffield Chamber said: “Exporting can be hard, but it’s a lot less hard than not making any money.”
ROUND TABLE DISCUSSION:
Don’t get frightened off, there is help. However, if you are going to do it seriously you are going to need some planning and you need to research markets.
Richard Wright: “Different sectors think very differently, different companies think differently. The Chamber is giving export a big push, we believe it’s what the region needs.
“We have advisers going into companies recognising products that could be exported. One of our core objectives is to get up to 30 companies into export a year for the next five years.
“We aim to get the information out there that export is worth doing and recognising that sometimes the first time might not go well but you’ll learn lessons and be better for it.
“We’ve gone past a recession in some ways and this is the new normal. And the way to deal with it is by exporting. Domestically markets are flat, but India has just had a bad quarter with growth only at eight per cent.”
Mick Burton: “Anchor Magnets started in 1984. I joined in 1987. I’d learned French and was starting to learn German. We started exporting then and it is sobering to think of all the different currencies in existence at that time. We took the complexity in our stride.
“We targeted countries with a good payment record, such as Scandinavia. We were cherry picking, in many cases we got paid before the goods arrived. That underpinned our ability to move to the next country, and now we’re in 26. Last year we had our first client in China, this year we had our first in India.”
Arkote manufactures industrial knives predominantly for the tobacco industry and has 85 per cent of the world market, MD Peter Skinner said.
He added: “For a lot of companies starting out it’s a matter of lack of confidence. It’s easy for seasoned exporters to say there’s no substitute. But strip it down to the bones and there’s no difference to domestic selling.
“You have to do the research but sometimes you just have to get on the plane and do it.
“I’m always amazed when countries say they don’t export. Why? The answer is going to be pretty weak. Ask for help. I would like to think we at SYITF make it easy. Most people are quite willing to give advice.
“On payment I’d say: don’t trust anyone. Arkote has an incredibly strong credit control situation. We use letters of credit when we need to. Fundamentally we get the money in our bank before the goods leave the factory.”
Peter Hoy said Macalloy exported to 50 countries and they had found UKTI’s OMIS service useful.
“We have visited several overseas firms accompanied by someone from the consulate. It helps to do research before you go out.
“You’ve got to go there three or four times, you’ve got to be consistent. Overseas customers expect you to have a presence, they want you to be around for the long term and build a relationship.
“A key market is Saudi Arabia. We couldn’t have gotten into the market without the help of the British consulate. They opened doors and helped us find our way around.”
Peter Skinner: “Market research is critical and only you can do that because you know what your business needs.”
Peter Hoy: “Unlike some companies we do offer credit terms to countries like Portugal, Spain, Italy and France, these are countries that traditionally take a long time to pay. You need to offer extended credit terms or you don’t get the business.
“We do get credit insurance. There are costs associated with that, but it’s two per cent for the insurance compared to 40 per cent for the sale. It will not stop transactions taking a long time, but if they do go bust you will get your money. We are doing a lot of business with Russia and we ask for cash up front. India likes letters of credit at the moment.”
Richard Wright: “I would rarely advise a company to export if they are selling on price. You can spend a long time getting the order and you can have exchange rate movements between your first visit and your fifth.
“Understanding the cash flow of your business can be a big thing. It might be good in the long term but you have to get through the initial hard phase.”
Giles Searby: “Increasingly we are seeing the ‘accidental exporter’. Businesses finding themselves asked to export early in their lifecycle and they wonder what to do.
“You need to understand the exchange rate and your cash flow to work out how much to charge. Don’t expect to make a profit on your first order and it’s very rare to get the money up front.
“Get in touch with SYITC and SYITF but don’t do nothing. I’ve known bosses say, “I can’t work out why they want our stuff.”
Michelle Daniel: “We receive calls from accidental exporters once or twice a week. And we see three or four new exporters every month. The key thing is to have your website translated into one or two other languages.”
Richard Wright: “It’s critical to understand the markets your customers are selling to. The assembler can be a good route to market for SMEs. But some of the contracts can become very complicated.”
Peter Skinner: “In a lot of small companies I suspect all exporting falls to one person. But you need two, three or four to buy into it. The financial director to handle the credit control, an expert to handle the paperwork. I don’t get involved in that, I go out and break the ground. Go on the training course and learn it, all the people you are buying from know it already.”
Richard Wright: “SYITC business advisers can help understand INCO terms. How you transfer title of the property of the goods, on the ship or when it arrives. Who pays for the insurance, freight costs and export documents.”
Mick Burton said Anchor Magnets employed French, Polish and German native speakers.
“We visited several Polish cities this year, he knew them really well. I was just there for technical assistance and he helped bring in £200,000 of business this year.”
Peter Skinner: “We have a network of agents and distributors. You have got to choose the right people “
Mick Burton: “It’s a lot quicker if you have languages and it’s good customer service too. Especially if something goes wrong.”
Giles Searby: “It’s less language and more cultural, making an effort.”
What are the pros and cons of targeting BRIC or emerging economies in light of the ongoing crisis in the Eurozone?
The Round Table heard that in May about £100m of goods were exported from South Yorkshire. Some £80m went to the EU and US, and £19m to the rest of the world, up from £17m the month previously.
The UAE is the top non-EU/US country. Russia, India and China are in the top 10.
SYITC figures show there were 51 shipments to China in the first two months of this year, 60 to Russia and 91 to India.
Peter Skinner: “Brazil is a very expensive place to visit. Russia is a very difficult market outside Moscow and St Petersburg. There are payment issues and the language barrier. India is relatively straightforward.”
Peter Hoy: “China is without doubt the most difficult market ever. Forget all you know about exporting and relearn it. Russia is a difficult place to travel in.
“It’s a good idea to understand exporting before you take on the BRIC countries. It’s important to have the right people on the ground in these places. There are a lot of other markets which are less hassle with better margins.
“We pitched for work on a 140-storey office block in Shanghai. We found ourselves a Chinese partner. The order was worth £4m and it would have been a perfect foothold, but it went to a local firm.
“There are wheels within wheels. Denationalised companies still have close links with government. We have found it almost impossible. It’s advanced exporting that’s not for the faint hearted.”
Mick Burton: “There is so much to go at in France. For geographic and cost reasons we don’t need to go further now.”
Giles Searby: “Corruption is an issue in BRIC markets. As well as knowing how to deal with it, companies need to be aware of responsibilities further down the line.
“The fact that we have a Bribery Act in the UK now means that if distributors or agents are involved in anything suspicious that can affect you. There is an offence of not having proper procedures in place to prevent bribery. We are waiting to see what the SFO does with it.
“It’s a laudable if all British businesses are saying the same thing, then corruption will die.
”Also watch out for strange requests, like, ‘can we just have a few?’ Be a bit suspicious, it may be six months later your product is coming back at you at half the price.
“It’s like anything in business, BRIC countries are potentially more risk but offer more rewards. When do you take that on? Do you need to be in China? The UK exports a lot more to Ireland than China.”
Richard Wright: “BRIC are big markets. Brazil has a bigger economy than us now. We have got to learn to do business with them. It’s hard but it’s a lot less hard than not making any money.”
Is there enough Government support for exporters?
The Government’s Targeted Export Scheme - which paid for introductions, visits, expenses and market research - has long since been axed and grants are few and far between. But if a company relies on grants to export it has to be careful not to fool itself into thinking it is more successful than it really is.
Peter Hoy: “We used TES to set up agents in Spain, the Czech Republic and India. It took the risk out of going out there when developing new markets. It worked very well for us. It’s a pity they decided to pull it.”
Peter Skinner: “One disadvantage with grant funding is there are a lot of hoops to jump through. And sometimes they want you to guarantee you will employ more people. I can’t do that.”
Richard Wright: “Some grants pay for business advisers to sit with a company and develop a plan based on no help at all. If a business relies on a grant it shouldn’t be going into that market. A grant should be seen as a bonus.”
Giles Searby: “There’s been a consistent message from David Cameron which is to ‘export or die,’ since the beginning of the year.
But since then there’s been the crisis in the Eurozone, so some are assuming they aren’t going to get any more out of them.”
Richard Wright: “I was exporting now I’d be worried about our energy prices relative to the rest of the world. We have no idea what’s going to happen and carbon trading is coming along.
We could be at a massive disadvantage compared to the rest of the world. That’s where the Government can help. If we weren’t in recession now we would be starting to run out of energy now.”
Mick Burton: “The Government is inconsistent. We have just installed £80,000 of solar panels and only by good fortune we qualified for the Feed In Tariff.”
Peter Hoy: “The only way many SMEs can increase turnover is by exporting.”
Richard Wright: “If half of the SMEs took on one person we wouldn’t have an unemployment problem in Sheffield. The most profitable companies export. AESSeals have just released some good results.
Gripple spends five per cent of sales on R&D - it’s no coincidence.”
Michelle Daniel: “Companies are waiting up to eight weeks for an export licence. The Government has got to speed up the process.”
Peter Hoy: “The Government’s export guarantee scheme has been relaunched. It is available but no one knows about it.”
Richard Wright: “We have a positive balance of payments from services but a negative one from manufactured goods. As a region we never talk about money going out. We need people here to spend money within the region. It would make it a lot easier for exporters to grow the wealth of the region.”
Peter Hoy: “People like to deal with Brits. They consider we are honest, nice people who sell quality products. We are seen as trustworthy wherever I’ve gone. The Saudis are very respectful that we have taken the trouble to go there. Just go, you will get a warm welcome.”