SMEs have been quick to seize export opportunities offered by Brexit. But successfully setting out your stall in a new market requires research.
Business owners see huge potential to build their revenues on the back of Brexit because a weak pound means UK exports are more price-competitive.
Overseas buyers are also keen to snap up high-quality British goods. As a result, new markets are opening up and, while some SMEs have avoided exporting because of the cost of opening international operations, today’s digitally savvy companies can easily enter a market without a physical presence.
Simply translating your existing website into the target country’s language, and accepting payment in the local currency, is a great way to test the waters in a location. You can follow up by employing a salesperson on the ground, or setting up an overseas branch or limited company.
Finding the right market isn’t about trial and error, it’s about homework – and the Department for International Trade and local Chambers of Commerce are a great place to start. However, it’s also important to understand the tax and legal implications of trading overseas, Andrew emphasises.
HMRC will want to check whether you are moving profits away from the UK into a country with a lower tax rate. This ‘transfer pricing’ is a complex area and you’ll need expert advice.
Setting up your overseas entity to pay VAT, or the local equivalent, and producing year-end accounts in a different language, is where it’s useful to have access to local accounting, law and consulting firms, such as those which belong to the Geneva Group International (GGI) network.
This makes sure you know about any cultural expectations or sensitivities, which is particularly important in markets like the Middle East.
Never plain sailing
Doing business in new regions is a risk – but that’s precisely why it appeals to SME owners, as they know that with risk comes opportunity.
And, if a UK exporter gains overseas customers while the pound is weak, those customers will not necessarily drop away as soon as the pound strengthens again.
If you get your export strategy right, you’ll have an opportunity to keep new customers on-board, regardless of currency fluctuations or tariff changes. Even if the tide turns two or three years down the line, you’ll still make additional profits in the meantime.
Software firm’s answer to a hard Brexit
So how can businesses prepare for what lies beyond a ‘hard Brexit’? One software company has taken the strategic, yet low-cost, step of setting up a subsidiary in Ireland.
A departure from the EU could mean this company’s customers in markets like Germany will face additional barriers during the purchasing process. There are plenty of competitors out there, so a frictionless sale process is all-important.
The subsidiary might only be a temporary measure, but Ireland offers a shared language as well as similar tax and legislative regimes, and it’s a move that buys the firm more time to decide where it is best to base its operations in future.
For the moment, this company – which has a global annual turnover of about $30 million and around 30 staff – uses this subsidiary to service its Irish business, but it can be quickly and easily expanded. It is an important part of their longer-term planning.
Top 5 exporting tips
1. Get your market right. Demand for your product will vary from country to country.
2. Don’t cut corners. Poor quality or service, even when sold cheaply, is not a sustainable business model.
3. Find a reliable logistics partner. If your goods arrive broken or damaged, they’re no good to anyone. Your reputation relies on top-notch logistics.
4. Don’t overstretch yourself. Start small. Try a digital presence first. Then get a reliable local workforce and infrastructure in place as you start to grow.
5. Get expert advice. Avoid false moves – let local tax and legal experts do the hard work for you.
Andrew Jones is a Certified Accountant and has been a partner at Haines Watts since 2005