Business Planning People and Management >

Introduction - Putting your Export Plan in Place

Selling overseas is a key opportunity for many Irish businesses to scale. For companies to achieve their global ambition, it is critical that they put a business plan in place. Preparation is key if you are to achieve sustained success in export markets.

Your business plan should be built on an understanding of your target markets and underpinned by market research.

The business planning process will involve you identifying your unique value proposition - what differentiates you clearly from your competitors.

Successful business planning involves assessing your strengths and weaknesses under 6 business pillars and determining where you need to enhance your capability to compete in international markets.

Are you clear what your offering is, who you are offering it to and how you will generate sustainable export revenues?

Managing Risk

Critical to any Business Plan is the identification and management of risk. Understanding uncertainties that could impact on your business should form part of your export planning. This is particularly important in times of uncertainty and change.

Country and political risk are important to consider, as companies now turn to more challenging territories, their risk management strategies should be adapted accordingly.

People and Management Sales and Marketing >

Introduction – Putting in place the right mix of resources

Companies which anticipate their organisational structure, leadership and resources are better placed to develop and deliver export growth.

Aligning your organisational structure, management and skills will support you in delivering on your export growth ambition. It is critical that you identify the key skills required to successfully win and sustain export.

You will need to define the main stages, tasks and resources required to implement your market-entry strategy.

In terms of the execution of your export growth plan, all senior managers should know what the plan is and understand their own role in achieving deliverables against that plan.

Recruitment

Your new recruit is your business card in the market so, to find the right person, it helps to build a profile of the ideal candidate. Knowledge of your customer base is valuable in this regard.

Keep in mind your job specification may be different in the new country to the home market. If you’re recruiting in a different culture, language, salary, and education zone, you must take all the new factors into consideration. In the recruitment process, you are selling your company.

Hiring Overseas

As your export opportunities grow, you may want to recruit someone on the ground to develop your new market. The approach you take should be driven by, and integrated within, your overall business plan.

Having employees overseas will mean tax and social insurance obligations in that country. Expert advice should be taken from the start to minimise challenges and to allow you to concentrate on selling and growing the business. Access Guides

Board and Management Considerations

The Board should be tasked with challenging the senior management team and with taking a strategic approach in terms of company growth.  It is important to consider who will join the Board and have you aligned the Board configuration to your growth ambition. You may consider appointing board members with experience and seniority in your target industry.

Sales and Marketing Innovation >

Introduction – Understanding your offer

Your unique value proposition is a clear statement of what differentiates you from your competitors.

On-the-ground insight and research about your export market is by far the most valuable information you can have to give you a competitive advantage.

Research consistently indicates the correct choice of local partner is one of the most critical success factors for SMEs in overseas markets. Setting and agreeing expectations is key to establishing a strong relationship with a distributor or reseller from the outset.

Targeting customers not markets

Markets can look attractive on paper, but the critical question is not where the best market is but where you have the best chance of succeeding. You will need to be sensitive to specific market requirements. This means doing market research and deciding where and how to invest your resources.

If you feel you have the right product, but no track record in the market, your marketing and sales efforts will need to deliver key messages about the quality of your product and the level at which it has been verified.

Above all, you will need to stress the Unique Selling Points (USPs) of your product or service. While a first reference sale is hugely important, it doesn’t mean rushing into the first deal possible. Focusing on a high-calibre client who is known to demonstrate the values your sector admires may take more effort but promise far greater rewards in the long run.

Value Proposition

Your value proposition is an expression of your unique value-add. Simply put your value proposition is what you offer and why a company/customer would be interested in dealing with you.

Bear in mind it is more than an assembly of words and not just marketing ‘fluff’. Your value proposition should be honed and refined through continuous research and contact with customers. As a statement, it is at the very heart of your push for sales if not, in fact, your company’s blueprint for growth.

When developing your proposition remember it can take time to build a really strong value proposition and you are unlikely to figure out overnight where your core strengths lie, what niche you can best serve and who your customers should be. However, new learnings should be incorporated with care as your proposition needs to be razor clear to your market at all times.

A value proposition is developed by finding answers to five core questions:

1. Company vision: What do you want to be famous for?
2. Customers: Who are your most valuable customers?
3. Value: Where is your measurable value?
4. Competition: Why should your customers choose you rather than your competitors?
5. Channels: How will you get your product to market?

These interrelated questions can be seen as tools in a virtuous circle, producing a value proposition that paves the way for sales growth.

Question 5 also highlights the need to take into account the way your offering gets to market. If you sell through a distributor, your value proposition should be framed to reflect their importance as a consumer.

Once you have refined your value proposition, your marketing activities must communicate it. Your website is the first port of call for most potential buyers so it is vital to ensure it ‘front loads’ your value proposition.

You may want to express your proposition in clear and absolute terms, cultural differences need to be factored in. Local customisation may be required if your proposition is to resonate with potential customers in different markets.

Ways to Enter a New Market

The choice of your channel to market is a critical aspect of any export business plan. Your channel is not an add-on to the business model; it is a fundamental part of it. You can change your price with a phone call, but changing your channel could take years.

Agents and Distributors

Companies eager to expand abroad want to hit the ground running and the cost of using a distributor is generally far less than operating a direct sales force. However, the payoff is ceding control of your brand to someone else and sharing some of your profits. Your distributor selection, contract negotiation, and management of your on-going relationship will be critical to how it performs in the market. In our experience, companies should sell directly to one or two customers before they engage a sales and marketing partner and they can then use those customers to guide them to the right partner.

In most markets, there comes a tipping point: if you want to grow sales beyond a certain level, you need someone on the ground to look after that market. There are three different types of structures that can be used to set up abroad:

• A representative/sales office
• A branch
• A subsidiary

The type you choose will depend on your commercial requirements and the taxation treatment of the different structures. More fundamentally, it should be informed by your company’s business plan, answering the question ‘what do I need to build share in this market?’

Innovation Operations >

Introduction – Innovating for competitive advantage

Product, service and process development can be cornerstones of your commercial success.

Innovation is a critical step in the process of developing your competitive advantage. The application of research and innovation to business challenges is critical to the success of Irish SMEs in export markets.

It is important for companies to focus on developing high quality products and services. This will ensure that companies are leading the response to rapid customer change.

These companies benefit from developing and participating in innovation networks and research groups to gain access to technology and new routes to market. Working with other like-minded companies or exploring what knowledge exists in research institutes is one way to embrace Innovation.

Developing Innovation in your business

By undertaking innovation, you can respond to new market opportunities and maximise your business performance. You will need to examine your innovation readiness and put in place structures and resources to embed innovation in the business.

Competitive Advantage

Determining your competitive advantage is a key part of the strategic planning process. True competitive advantage is achieved when you can offer your customers greater value – either by providing them with greater benefits and service to justify higher prices or by offering them lower prices. You need to understand what’s innovative about your product or service and what differentiates it from others in the international marketplace, allowing you to charge a premium price while giving your customers clear reasons for choosing your product over your competitors.

Protecting your Innovation and Intellectual Property

Exporters need to plan appropriately in relation to IP, both to protect their own IP and to avoid running foul of the IP rights of others. In addition to the obvious security benefits of having a robust IP policy, managing it carefully can bring a number of positives to your business:

• Reviewing the IP of competitors can provide competitive intelligence; for example, early identification of a competitor’s next move.
• Reviewing the patents of others can avoid time being wasted re-inventing the wheel.
• Potential collaborators can be identified through IP searching. Licensees or technological solutions to problems may be identified.
• A good IP strategy can be crucial in attracting investment.
• A ‘qualifying patent’ may attract tax relief.

Major IP pitfalls to avoid include:

• Not registering trademarks.
• Assuming that a .com domain name or Companies Registration Office (CRO) registration number gives protection equal to that provided by trade mark protection.
• Failing to appreciate the extent to which international business depends on IP.
• Trying to patent protect a product after it has been launched on the market.
• Not registering designs.
• Not planning for IP creation and, thus, encountering disputed ownership of IP from employees or outside developers asked to make a specific contribution to a project.
• Running blindly into problems with the IP of others.
• Not budgeting for registration of IP.

Operations Finance >

Introduction – Productivity and Competitiveness

Any company engaged in selling products and/or services must use resources to do so. Operations and process improvement is important to underpin export success and revenue growth.

Refining operations and addressing capacity issues is a critical part of preparing for export. You may have a strong well established domestic company with streamlined operations or you may be in business planning mode without a fully deployed staff in place.

Either way it will benefit you to examine your capability to respond to demand generated by exporting.

Examining the design, delivery and improvement of systems to deliver your products and services will be a key part of responding to customer needs.

Developing Key Performance Indicators (KPI’s) in your business

Many successful businesses rely on well designed and efficient systems to drive the business and respond to customer needs. Key Performance Indicators are a set of measures designed to quantify performance and measure the achievement of strategic goals.

Companies with well defined KPI’s in place regularly capture measures on operational performance, conduct reviews and adapt based on customer feedback. KPI’s are always formed by the strategic direction of the company. In addition, these companies will have Quality standards in place – high quality products and services are a source of keen competitive advantage.

Finance Business Planning <

Introduction – Finance

Ensuring you have adequate and appropriate funding is critical to achieving your global ambition. Planning your export finance generally revolves around two issues – the costs involved in setting up and running an export operation and the approach needed to manage payment risk.

Funding the Export Journey

Export running costs

The actual cost of funding an export strategy and an overseas operation will, naturally, depend on the market itself, the route to market and the scope of your operations. Costs can generally be divided between those that are more fixed, rent, transport and travel, exhibition space, printing and website costs, and those which are more variable, such as sales personnel and currency fluctuations.

A budgeting process should aim to be as exhaustive as possible in assessing these, e.g.: sales person on the road (€150,000); translation services (€2,000); five trips to market (€10,000).

However, until you become familiar with the market, a simple rule of thumb in budgeting is to allow for twice as much as anticipated. Once familiarity with local costs develops, the process becomes similar to financing any project and to working out whether the return on investment makes it worthwhile. The costs of market research should also be considered and not underestimated. It is recommended to speak with companies that have operated in the market before or those close to market.

Pricing

While you need to be price-competitive, your product or service should not compete solely on price. In setting your prices, you will need to consider your competitors’ prices, the level of existing competition in the market, your customers’ perception of the price/quality relationship, production and distribution costs and overheads and the extent to which your customers can afford the price.

Managing payment

Weak cash flow is the single greatest challenge to all businesses and those entering the export market may expose themselves to a higher risk of delayed repayment and bad debt. Extending credit to the wrong customers could jeopardise your financial security and calling in debts in a foreign jurisdiction may be far from simple. In addition to credit, exporters also need to be wary of suffering losses through deterioration in foreign exchange rates.

Credit management

The first thing any company needs to do to minimise these risks is get their own house in order. Your credit terms and contractual conditions are the primary tools to rely on for good cash flow management. You may need to review your internal procedures to ensure that issues are flagged early on and that you can ‘turn the heat up’ before they become critical.

Export credit insurance

Export credit insurance is an option for larger contracts. The cost typically ranges from 0.2-0.4% of turnover. Risk factors that affect the premium include the political and economic climate of the country you are trading into; the enforceability of legal judgments there; the financial standing of your customer and your terms of payment.

Letter of credit

Next to advance payment, the safest payment option is a letter of credit, where the bank pays the exporter and then collects the payment from the buyer's bank at a later stage. These are covered by international law rather than the law of the destination country. Terms and conditions are generally very strict and it is important to have a role in compiling them to ensure they can be followed and payment will not be delayed. An alternative is for the exporter to obtain payment (or a commitment to pay) through the buyer’s bank, with your bank acting as intermediary.

Invoice discounting

In this model, a bank provides cash advances of up to 90% against invoices raised to trade customers. Cost depends largely on the amount discounted. Service providers argue it is better value and more easily available than an overdraft and grows organically with your business. It is important to look beyond your business bank and benchmark costs for services from non-banking providers.

Factoring

Factoring is similar to invoice discounting except that the factoring company is responsible for the sales ledger administration as well as chasing the debts and collecting the payments.

Duties and Taxes

As an exporter you may be liable for duties and taxes when you trade with countries outside the European Union (EU). The terms of sale you agree will determine where liability for these costs will fall.

To determine what these liabilities are, Harmonised System (HS) codes are used to identify goods. For a legally binding decision on the appropriate code for a product, as applied in Ireland, consult the Revenue office on Binding Tariff Information (BTI). Enter the code into the Applied Tariffs portion of the Market Access Database or the EU Taric database for tariff and documentation details.

The EU operates a number of preferential trade agreements that allow qualifying goods to claim lower or nil duty rates e.g. Euro-Mediterranean Partnership. See details of agreements on the Revenue website.

Goods exported from Ireland are zero rated for Irish Value Added Tax (VAT). Note though that, if you use an export service, your VAT position may be affected because it is dependent upon the place of supply. Your local office of the Revenue Commissioners will advise you on how the rules apply in specific circumstances.

Tax law is complex. It is strongly recommended that you take advice from experienced tax specialists on all aspects of the tax treatment of online activity. Check the Revenue web site for their VAT Guides.