Finding the right country for international expansion takes research and plenty of planning
With the UK domestic market at an unprecedented low, tapping international potential presents small business owners with an attractive means to claw back profits. But, of course, going global is no small step. International expansion is a subject too large for this modest column, but we do have space to discuss the most important topic of all: how to find the right country for your first international venture.
International inexperience is the biggest obstacle to your commercial success. There are so many places to go wrong: new international business laws, new cultural norms, and much else. Acquainting yourself with all this new information will take time, and lots of it, so don't overstretch your company and staff.
Starting initially in a single country will give you the opportunity to test whether your product has international appeal, and whether there is scope to continue expanding. The UK's Trade and Investment website provides information on the major opportunities in specific countries, on the best opportunities for specific sectors, as well as an overview of the different international trade laws.
Make sure you are well acquainted with law, especially whether you are allowed to price your product differently to your home market. I often see entrepreneurs making the costly mistake of thinking they can price products at their whim, and are startled to find they are left out of pocket when the margins are much lower than expected, or even negative. Review all market papers available. Most national governments supply reams of market research papers, freely available to potential importers. You'll want to record the current import numbers, as well as the consumer demand. The best route to all these resources is to hit the government's website, or to call the country's local embassy.
Use Web search profiling. Remarkably, every time someone searches worldwide, that search is recorded in a comprehensive database. These statistics are freely available from Google Export Advisor. This means, for example, you can compare how many people search 'buy bike' in Australia versus India, which will give you a rough guide to the relative consumer demand. Pairing this up with the export data will give an approximate picture of the business opportunity. You have to remember that all data has a particular skew; for example, the internet data is skewed towards 20-30 year-olds.
I often see entrepreneurs follow their data with complete and utter devotion, even in the wake of poor sales figures. The bottom line is that sales give your business its true value. Forget about potential.
Don't fall into the horrid trick of thinking that regardless of the country chosen, delivery and administration will cost roughly the same. Prices swing from pennies to three-digit pounds. Thankfully Royal Mail can give you a rough estimate quickly and easily using its online Price Finder. The most pernicious of costing calculations is the processing fee. This is the percentage the lending/receiving institution charges to receive the consumers' money, which covers the cost of communication between you and the bank (letters, telephone calls).
Currency conversion adds another level of complexity to costing. You do not want to have every sale directed straight to your UK account, as you would be paying a variable currency conversion decided on the whim of the market that day. Set up an international account that can start trading in the parent country's currency. Once you have collected significant funds you can convert the cash when the conversion rate is high. There is no definite way of knowing the best time to convert the currencies, either: watch the conversion rates keenly, or hire a conversion expert.
More than anything, you must test the market before you dedicate to the enterprise. Get a reasonably cheap translation and product design, and then get the product into a number of small retailers. Track your figures, and consumer response. This is a perfect time to find out whether the product sells as well as your research predicted, and whether you have committed any overlooked faux pas.
Start with one product only. Devote this time to learning from your mistakes. Your first launch is about building up a cultural foundation of knowledge that will help you launch further projects efficiently and more successfully.
James Caan, CEO Hamilton Bradshaw, is supporting the iawards, www.iawards.org.uk
Posted 16 September 2009 : Director.co.uk