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Read time: 13 mins Added: 26/05/2023
Exporting can bring great benefits to your business, such as increasing your revenue and diversifying your risk. In this guide, we’ll explain why you should consider exporting, how to get started and the pitfalls to watch out for.
The increasing globalisation of markets and the opportunities of digitisation have made it more attractive to export goods and services. As well as increased revenue and profitability, exporting can be an opportunity to:
To identify the best overseas market for your business, you’ll need to do some research. So, what do you need to consider?
Your product
Is there a demand for your product or service in that country? Perhaps you'll need to modify your product to suit local requirements, regulations and standards. If so, remember to adapt your marketing and advertising accordingly.
Demographics
If you are selling consumer products or services, consider the demographic makeup of a potential export country. Start with questions like:
The competition
You need to know if you already have competitors in that country. If so, would this market still be viable for you? You should consider:
Ease of trade
Trade is easier in markets with minimal trade barriers or tariffs and manageable logistics. Many exporters start by identifying a few nearby key markets with low entry barriers. Here are some questions to consider:
Political and social environment
Research the political system and social customs of the country and how they could influence trading there.
Culture
Research the cultural considerations of your target export countries. Cultural preferences will matter, especially if you’re exporting consumer goods. Also, consider what languages are spoken in the country and the religious and ethical landscape. How might this affect the way you present and market your product? Visiting your target country is a good idea. You can experience the local cultural environment and see first-hand how business is done there.
Legislation
What legislation will affect your manufacturing, trading or performance? For example, what are the laws around trading methods or company structure? Are advertising and promotions restricted?
Export market research
You can get the background knowledge to plan with confidence, plus practical resources, from targeting the right market to making your first shipment when you sign-up to our International Trade Portal.
Market visits are an excellent way to personally experience the local cultural environment and help you understand how to conduct business in a particular area.
You have two important considerations before deciding whether or not to export: your business and your industry.
Ask yourself the following about your business:
Ask yourself the following about your industry:
Our customers can also use the Lloyds Bank International Trade Portal which provides a gateway to explore international trade opportunities and detailed market information.
The Department for International Trade (DIT) provides a range of helpful diagnostic tools plus a wealth of information.
Create an effective export strategy that complements your overall business plan.
It can be helpful, especially if your expansion will need external financing. Investors like to see a commitment to exporting and an international perspective.
There are several ways you can get into new markets. Determining the right method for your company will depend on your products, the markets you are entering and your own circumstances.
Some of the most common options include:
Exporting from your UK base
Manufacturing your products in the UK and then shipping them overseas. This approach is scalable and can work well if you want to trade with multiple markets.
Using an overseas sales base
If sales are strong in a particular location, consider establishing a base there. It could reduce costs, increase market penetration and help you comply with local regulations. Most countries have government-backed economic development organisations that can help with this.
Using licence agreements
A local business would produce and sell your product under licence and on your behalf. Licence agreements are often used when there appears to be no other way of making profitable returns from an area. For instance, many developing countries insist on the highest possible level of local manufacturing as this represents the best long-term commitment to the region.
Using overseas agents or distributors
When you use a retail or distribution specialist in your product or service area, they often do a lot of the overseas legwork. So, it can be a good way of testing the market before making a greater commitment, such as setting up an overseas base.
However, it’s important to draw up pre-agreed contracts. These should set out who does what and how you will communicate. The success of a distributor often depends on their commitment to their product.
Be aware of your agent or distributor’s other commitments and take the time to ensure they understand the benefits of your product or service.
Understanding potential exporting risks will help you mitigate them.
Product risk
Your product must comply with the regulations and standards of the countries you export to.
Exporting may lead to changes in how you manufacture and supply your product. If manufacturing overseas, keep a close eye on standards. You must also protect your intellectual property (IP) rights overseas, which can be complex as IP rights are territorial.
See guidance for protecting your rights abroad and country-specific guidance
When exporting to countries with different languages, take care to redesign your:
You may also need to review your marketing materials for cultural differences, even in other English-speaking countries. For example, if your advertising relies on a very British sense of humour, the American market may not always respond in the same way.
Credit risk
A major risk, as an exporter, is that a customer will fail to pay promptly (or at all). Protect yourself against this possibility by: