In today's market more and more businesses are looking to expand into international markets in order to increase their profits. There has been a shift from big business domination to small business prominence on the global stage. This trend can be attributed to factors such as pricing advantages, service levels and the increasingly innovative nature of evolving small businesses.
There is no doubt that with erratic and unstable market conditions - coupled with the inherent challenges of starting and growing any business - circumstances can and do get tough for the most avid of entrepreneurs! It's therefore understandable that most small business owners will be seeking fresh avenues of revenue. As a natural progression, and with a 'shrinking' global market, SMMEs are realising that global customers are not off the table. Also the explosion of digital marketing allows SMMEs easier and more affordable access to the global marketplace.
So, as a small- or medium-size business, what are some of the factors to consider when pursuing international customers?
1. Do your research
Small business owners should conduct research to determine which countries to do business in, and how trade is handled there. Aspects that have to be analysed include shipping rules, different business practices, the local culture and currency – to name just a few. Also be aware of the fact that some differences between countries can be quite significant. For example, tariffs or regulations in some parts may either prohibit or greatly diminish the feasibility of doing business there. You also need a fundamental understanding of the supply and demand for your product in each country you are targeting, in order to accurately forecast sales and profitability.
2. Navigate customs
Make sure you know how customs regulations differ from country to country. In Indonesia, for example, there are no customs for mailed goods below or equal to $50. Romania has very strict customs regulations, especially for shipped goods (from anywhere outside the European Union), but goods up to €10 in price are tax-free.
3. Know your costs and financial risks
Unless your business is completely digital, trading internationally also introduces another round of tangible and hidden 'start-up costs'. A border typically imposes additional costs such as tariffs, "time costs" due to border delays, and possible costs associated with country differences such as language, the legal system, and culture. Make working capital available to cover these extra costs, whether geared or not. It is recommended that your borrowing should never be excessive, and a threshold of not more than 40% debt to equity, for instance, can help to regulate your financial position while tapping into global markets.
4. Pay attention to packaging and labelling
Make sure proper packaging procedures are in place, which in return will ensure that products reach their destinations safely. Packaging needs to be multifaceted in order to protect, differentiate, and still market the product, while using materials that comply with regulations.
5. Decide how to structure your expansion into foreign markets by establishing a strong domestic foundation
Ensure that adequate capital and technical expertise are in place to support your venture. Also make sure that the administrative and support systems at your local base are well-prepared and responsive. See to it that your business bank account and financial department are set up to handle foreign transactions and currency conversions. It is also very important that there is always someone available to answer telephone calls from across the world – and this may mean adopting a "shift" system to cater for time differentials. Your IT department may also have to be equipped to deal with foreign "information operating systems".
If the theoretical as well as practical implications of the above-mentioned aspects are dissected in view of your small or medium-size business, then you should be ready to take on the challenge of international trading. The list is not exhaustive though, but hopes to encourage you to consider the critical success factors that will influence your ability to successfully service foreign clients. If you have indeed done your homework, then taking advantage of international markets can broaden your horizon and stretch your business in the right direction!