As businesses in the UK increasingly look to international markets for growth, the potential for success is clear. New data published by the United Nations Conference on Trade and Development (UNCTAD) highlights the UK’s impressive leap to become the fourth largest exporter in the world, surpassing France, the Netherlands, and Japan. This underscores the resilience and adaptability of UK businesses when exporting internationally, particularly during challenging economic times.
Furthermore, the UK has become a powerhouse in service exports, particularly in professional services, which make up a significant portion of the country’s export economy. This high ranking in service exports demonstrates the UK’s capability to compete globally, providing a robust foundation for businesses looking to expand internationally.
We spoke with Peter Thomas, UK Sales Director at Accelerated Payments, who shares his expert advice on how businesses can expand their global reach and thrive in economically challenging times.
Peter, What Got You Excited About Helping Businesses That are Exporting Internationally?
From my first days in Invoice Finance, I have been working with businesses that made the daring but exciting decision to explore international markets to sell their products or services. The determination and creativity I see inspire me every day. Their ability to adapt their products and services to suit diverse cultures and markets is truly remarkable.
As the UNCTAD report demonstrates, the UK is a leader in the professional services sector, contributing significantly to its high ranking in service exports. What excites me the most is seeing how these businesses thrive on the global stage. Accelerated Payments has crafted a unique export finance solution to assist SMEs and mid-to-large corporates aiming to export their services globally.
Over the past 12 months, we have structured over £20 million in facilities for businesses exporting their services and can fund overseas subsidiaries of established UK companies. This support gives our clients the confidence to take on new contracts, knowing they have the working capital support from day one when entering new markets.
What Tips Would You Provide to Businesses Looking to Export Internationally for the First Time?
Here are my top exporting tips:
- Be Strategic: Developing a clear export strategy is crucial for success in new markets. Start by conducting a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to understand your internal capabilities and external environment. Align your export strategy with your overall business goals, ensuring it complements your domestic operations. Identify target markets by analysing demand, market size, competition, regulatory environment, and cultural differences. Create a detailed market entry plan with tailored marketing strategies, distribution channels, pricing models, and customer service approaches. Regularly review and adjust your strategy based on market feedback and performance metrics.
- Do Your Research: Thorough market research is essential for understanding the nuances of each target market. Begin with secondary research using resources like government trade databases, industry reports, and market studies. Complement this with primary research, such as surveys, focus groups, and interviews with potential customers and local business partners. Analyse consumer behaviour, preferences, and buying patterns to tailor your product offerings. Understand legal and regulatory requirements, including import duties, tariffs, and local standards. Competitive analysis is also crucial—identify your main competitors and their strengths and weaknesses to position your product effectively in the market you are entering.
- Know Your Debtors: Understanding the financial stability and payment habits of your potential debtors can help mitigate risks associated with international transactions. Use credit rating agencies and trade references to assess their track record and creditworthiness. Establish clear payment terms and conditions and consider requiring advance payments or letters of credit for new customers. Regularly monitor your debtors’ financial health and be proactive in managing accounts receivable to avoid payment delays and defaults.
- Explore Financial Assistance and Protection Options: Financial assistance and protection tools can help de-risk international trade transactions. Trade finance solutions, such as letters of credit and export credit, provide payment guarantees and facilitate cash flow. Invoice finance options, like those offered by Accelerated Payments, allow you to release the cash tied up in your invoices, providing immediate cash flow without waiting for your debtors to pay. Accelerated Payments offers flexible invoice financing solutions tailored to your business needs, enabling you to manage cash flow effectively and focus on growth. Credit insurance protects against the risk of non-payment by international buyers, ensuring you get paid even if the debtor defaults—this comes complimentary as part of our solution. There are also government schemes designed to support exporters, such as the UK Export Finance (UKEF) and Export-Import Bank of the United States (EXIM).
What Advice Would You Give to Businesses That Have Concerns About Exporting?
Many businesses have concerns about trading overseas, particularly if it is their first time. My advice, in addition to the above, would be to speak to someone with knowledge or experience of trading overseas. This could include your bank or finance provider such as Accelerated Payments, any relevant export association such as the UK Export Finance (UKEF) or Export-Import Bank of the United States (EXIM), or even another exporting business known to you.
This will allow you to discuss your concerns and see what measures you need to put in place to ensure a successful outcome. We work closely with our customers and their advisors to help them export with confidence – our team is based around the world and are experts when it comes to supporting those trading internationally.
What Are the Benefits of Exporting to New Markets?
- Increased Revenue and Growth Opportunities: Exporting allows businesses to reach a broader customer base, leading to higher revenue and substantial growth beyond their domestic market.
- Diversification of Market Risk: By spreading their operations across multiple markets, businesses can offset economic downturns or political instability in one market with stable or growing demand in another.
- Enhanced Innovation and Competitiveness: Exposure to international markets drives businesses to innovate and adapt their products, improving competitiveness both domestically and internationally.
- Economies of Scale: Expanding internationally enables businesses to achieve larger production runs and streamlined logistics, reducing per-unit costs and improving profit margins.
- Strengthened Brand and Reputation: Operating globally enhances a business’s brand reputation, signalling robustness and adaptability, and building trust with a global customer base.
What Are the Risks of Exporting Internationally?
Trading overseas can come with its own risks such as late or non-payment of invoices, which can severely impact cash flow. Many businesses encounter issues with late payments or long payment terms which can be attributed to geographical distance, the country your debtors operate in, or the size of your debtor. These risks can be mitigated with credit insurance or trade and invoice finance, like the solutions offered by Accelerated Payments, providing additional security and confidence.
Foreign exchange fluctuations are another risk, potentially reducing the profits from international sales. It’s crucial to explore options for invoicing in foreign currencies to avoid losses. Accelerated Payments collaborates with top FX providers to assist exporting businesses in making informed currency decisions and providing financing in multiple currencies.
In Summary
Exporting internationally presents businesses with numerous benefits, including increased revenue, market diversification, enhanced innovation, and a stronger brand reputation. The UK’s high ranking in service exports further highlights the significant opportunities available in this sector. However, it also introduces risks such as late payments and foreign exchange fluctuations. By leveraging tools like invoice finance, trade finance, and government support, businesses can mitigate these risks and export with confidence.
Strategic planning paves the way for international success, while careful cash flow management opens new doors to global opportunities.
