Small business guide to exporting from the UK
Updated 03 September 2020
Becoming an exporter can open up many more business opportunities. Besides creating additional revenue streams, exporting can also enable you to branch out into new markets, expand overseas and potentially go international. It is however a big leap to make. Besides being an expensive step and a significant risk, entering the export market brings further challenges such as foreign exchange rates, regulation and logistics.
Are you ready to export?
Deciding to export is a major step, and any big step is also a risk. To see if it’s worthwhile, you should ask yourself the following questions.
Is there overseas demand for my products?
Your goods may be popular in England or elsewhere in the UK, but that doesn’t necessarily mean they will be abroad. Research markets and check whether there’s demand and/or fierce competition. This could save you a lot of stress and money.
Is my business successful at home?
Unless your business is running smoothly and driving strong profits at home, it’s unlikely to hit the ground running with exports. Only consider exporting if you’re enjoying continual increases in sales or feel that you’re ‘coasting’.
Do you have the capacity?
Everything from invoicing to packaging and product development becomes more complex when you begin to export. Consider whether you have the money to invest in the extra pairs of hands, software and equipment you may need.
Is it part of your business plan?
You should already have a working business plan in place, especially if you want to grow your company. Check if exporting will help you reach your goals and if so, build it into your new plan. Check that there are compelling reasons behind your decision.
Your 4 options for exporting to other countries
There are four main ways of getting your products to overseas markets.
- Sell direct – This exporting option cuts out the go-between, as you sell your products or services directly to your customer. Assuming you can attract enough interest it can be a cost-effective option, but you’ll need to handle all the logistics that go with it.
- Use a distributor – A distributor’s job is to trade in overseas markets. They’ll buy products from you and add their profit margin before selling it on to the customer. They’ll also take ownership of your product, which means you won’t be in control it of how it’s sold and distributed.
- Use a sales agent – This agent will represent you and your products, usually in return for commission. They’ll secure buyers for you and take care some of the admin, but you’ll still have the titles over your goods and will have to do some of the logistics work.
- Set up a joint venture – You may be able to work with another company to sell what you offer abroad. You’ll remain distinct companies but will work in partnership in this side of your business. This is a significant agreement to arrange and a major investment, so do plenty of research first and take both legal and financial advice.
The challenges of exporting – is it worth it?
Now think about how you’ll overcome the main challenges of trading in overseas markets.
- Logistics and supply chains – The physical process of selling items abroad involves a lot of variables and just as much effort. You’ll need to work out how you’ll produce the goods for audiences abroad and physically get them to the buyer quickly and safely, whether that’s by sea, air or rail. At this stage, you need to check there is enough breathing space in your profit margins for your exports to be cost-effective.
- Customs – This is part of the logistics process. You’ll need to know the customs regulations of the country you’re exporting to and make sure you’re always compliant. There are fees for selling items to some countries, so do check the tariffs. And if the UK leaves the EU customs union, there may some tariffs to trade with European member states in the near future, along with increased administration and delays in distribution.
- Product standards – Each country has its own standards for products, so check these and make sure your product meets the guidelines. It is very common for food, electrical and construction products to have standards, and you may need to get your product certified to ensure it is safe to use. Again, if the UK leaves the EU single market, it will still be necessary to comply with its rules if you wish to export there.
- Licences – Some products need a license before they are allowed to be sold abroad. These include military items, medicines, chemicals, artworks, plants and animals and some technology that could be used for more than one purpose. Check whether you need to get one and work this into your logistics planning.
- Exchange rates – These rates fluctuate all the time and can really affect your margins – especially when you’re selling large quantities of goods. This can work to your benefit too, but think about ways you can mitigate this impact, such as setting up overseas supply chains and bank accounts to reduce the need to keep switching currencies.
- Competition – Keep track of what your competitors are doing. They pose a twofold risk: not only can they take your customers, but they may also upset your logistics by offering better deals to your suppliers.
- Marketing abroad – Adapt your marketing techniques to the local culture and behaviours. You may even need an entirely new strategy as your audience may have different buying habits, views towards your product and social media use. For this reason you’ll want to conduct extensive market research well in advance.
Do you need to insure your products for exports?
It’s not essential to get insurance for items you send abroad, but it is a good idea. You can get insurance to cover any damage during transportation. It’s called marine insurance, but it covers for a number of transport means, including road, rail, air and sea. There’s also an insurance to protect you financially should commercial and political matters cause you to miss out on payments, and cover for late or no payments on your export invoices. This insurance could save you losing large sums of money further down the line, and you should be able to account for this in your exporting budget.
Support for exporters
There are various government programmes set up to support UK small businesses that wish to pursue an export strategy. You can find out more about these via the UK Trade & Investment (UKTI) links below.
Is there financial help for exporting?
The government encourages businesses to export where it’s likely to bring more money into the UK economy. You can sign up for seminars and webinars on how to export and use the gov.uk website’s country guides to learn about the regulations, economies and general considerations for exporting to various nations. There’s also a guide that helps you decide if you’re ready to export and to help you find opportunities abroad.
To help you get started with exporting, the government offers UK Export Finance (UKEF). It provides financial backing from the UK’s export credit agency to help you meet the terms of contracts, cover the costs of exports and get insurance against non-payment in international markets.
Before launching exports, it’s important that you get financial and legal advice first. Your accountant especially will help you decide if it’s the right move for your business and to get fully prepared to meet the demands of the complicated process.
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