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?
Preparing to Export
- Do you have a business plan?
- Do you have a Sales and Marketing plan for export?
- Have you set out how you will achieve competitive advantage in your export markets?
- Have you assessed your strengths and weaknesses?
- Have you agreed which products/services will deliver growth in the business? Have you agreed which markets will deliver growth?
- Have you assessed and considered the risks in achieving your plans?
- What would be the effect of the collapse of a major customer or supplier?
- Do you have backup plans if key personnel exit your company?
- What are your contingency plans regarding internet, data storage or power grids in the cases of fire or flood?
- Have you considered the impact of Brexit on your business? More Info
- What is coming down the line in terms of currency movements and how can you prepare for them?
- Could changes in energy prices, government policy or import duties radically impact on your competitiveness or viability?
- Does the management team understand and support your strategic growth ambition?
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
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.
Preparing to Export
- Do you have the capability and resources to win business overseas?
- Do you have the required skills, knowledge and experience in the company to implement your export strategy?
- Are you selling into an emerging sector or a mature market? Will you need new skills to win these sales?
- Is technical knowledge essential or are good contacts more important?
- Will you need to consider training existing staff and/or employing new staff with the required skills and experience to win business overseas?
- Will your new in-market hire need to have led a team before? Do they need to know your product? Do they need to have pre-existing contacts in the customer base?
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.
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
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.
Preparing to Export
- Is your business model transportable?
- Have you established what is similar and different in the new market compared to Ireland?
- Are the conditions that allowed you to win before present in your export market?
- Are you assessing the market correctly? Is your product/service market ready?
- If your product is a consumer offering, will it be affordable in the new market? If you offer a business-to-business product or service, will you be pitching at the same level as your competitors?
- In the biggest, fastest growing markets, the competition is likely to be strong. Is your offering strong enough to win out?
- If the market for your product or service is not yet mature, do you have the resources to get in early and educate the market? If you target an existing market, can you persuade customers to switch to you later?
- Does your offer need to be adapted for the market?
- Are you guided by accurate market information? The potential of a market will decide whether you concentrate resources in it.
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.
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:
- Company vision: What do you want to be famous for?
- Customers: Who are your most valuable customers?
- Value: Where is your measurable value?
- Competition: Why should your customers choose you rather than your competitors?
- 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.
Finding the right distributor – a checklist
- How should you research potential distributors and agents? The simple answer is very thoroughly. Consider getting 30 agents’ names in your sector, and have a list of questions that allows you to narrow them down to five.
- Are you looking in the right place? In some categories, such as software or engineering, a systems integrator may be the effective distributor in your chosen market.
- Use your contacts – is there a company you know or have worked with that is successful in this market? Ask them who they do business with and who they find reputable.
- Understand what your offer is – what value do you bring to an agent? Do you need to localise your product or service? How much margin can you afford to give away?
- Is there agreement on credit – are your terms acceptable to the agent? Will a letter of credit be required and accepted by the agent and for what percentage? What credit insurance should you look for and is it available?
- Understand what they offer – how will the agent promote your products? Who will be working directly with your products in the market? How much they will sell your products for, and what margin they are going to take?
- Who are you sharing the shelf with? Establish what competing products your distributor sells. How will they position your product – as the best in class or the cheapest in stock?
- Are you ready to collaborate? What resources will you need to give to support your product technically and commercially? What resources will the agent commit?
- Do you need to be realistic? Being the product of second choice isn’t necessarily a deal breaker. It may be better than being the first choice of another distributor. What is important is clarity as you enter a relationship.
- Can you talk? It is important you share a common language with the distributor, not just at the top but at other key points, for example, in accounts and technical support.
- Have you taken legal and professional advice? What happens if the agreement needs to be renegotiated or terminated? Very strong legislation in Europe protects the interests of commercial agents, meaning you should be professionally advised and fully aware of the implications of signing a contract. Check out Enterprise Ireland series of Country Guides on our website.
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?’
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.
Preparing to Export
- Have you considered the value of sustained investment in Innovation?
- Have you identified what adaptations need to be made to your products/services overseas markets?
- Do you have agreement from the board and management team to carry out research and innovation?
- Would you consider improving your product/service by undertaking one or more Research and Development Projects?
- Do you wish to commercialise an idea or concept you have been developing?
- Do you have a dedicated Innovation function in your company?
- Have you considered the impact of customs regulations on your operations? More Info
- Have you protected your Intellectual Property?
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.
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.
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.
Preparing to Export
- Do you have a standardised approach to operations?
- Do you have management and operational systems in place to ensure efficiency?
- Do you have a standardised approach to managing supply chain partners?
- Do you fully understand your customer requirements and how to respond?
- Do you produce everything in-house or do you outsource and how are those processes managed?
- Do you have an Operational Manager and if so, how does this manager drive efficiencies in the business?
- Have you developed Key Performance Indicators (KPI’s) for the business and how do you ensure quality of processes and services?
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.
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.
Preparing to Export
- Do you have the finances to back your export plans? Have you consulted with your financial adviser, your bank or considered alternative sources of funding?
- Are there any funding risks that you should be aware of? Are the credit lines you need available?
- If you are a Brexit exposed company have you considered the Brexit Loan Scheme? More Info
- Have you a contract drawn up for the market you are exporting to? Have you obtained legal advice from specialists in that market before signing?
- Have you a process in place to proactively manage your collection process to minimise delays and disputes and to quickly identify bad debt risk?
- Have you carried out background credit checks, preferably before the salesperson/representative meets the buyer? An export insurer should be able to advise you on this.
- Can you not get insurance and feel the payment terms are insecure? If so you have three options: ask for cash up front, restructure the deal or simply walk away. If you cannot secure the full payment up front, it is reasonable to request a certain amount in advance, until the relationship develops.
- Have you considered offering your customers incentives such as early payment discounts.
- Have you offered incentives to your sales team? If so, consider paying them when the cash is collected rather than when the sale is made. This may bring a further element of due diligence into the selling process.
- When negotiating international contracts have you considered including provisions for arbitration and for specifying which jurisdiction any potential conflicts are to be addressed in?
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.
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.
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.
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.
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 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.
Helpful Excel Calculators
Knowledge of the competitive environment Irish companies operate in is the key to successful export growth. Enterprise Ireland has purchased, on behalf of its clients, world class market research reports. The publishers we subscribe to all have web based databases which you can search from your desk to find relevant titles. You are then welcome to view these reports at the Market Research Centre in our Dublin office or at one of our regional locations. You may call into our Dublin office anytime to view research material. Please contact us to arrange a visit to a regional location.
You can also read our market access guides which provide you with key information on specific markets that are of significant importance to Irish exporters.