In this episode of www.smallbusinessadvice.tv presenter Sean Walsh has encouraging news for small businesses that are looking to expand into new markets over the next 12 months. With the pound at its lowest level for years, highly attractive opportunities are opening up for companies who want to develop their business overseas.

Joining Sean in the studio to analyse these opportunities, will be Ian Campbell OBE, Consulting Editor of International Trade Today and entrepreneur Rob Law, founder of independent design studio Magmatic.

Some of us will remember Rob from his appearance on Dragon’s Den. Rob had spent 11 years and £17,000 of his own money developing his Trunki range of ride-on children’s luggage. But when he pitched it to the Dragons, they gave him a scathingly rough ride. They flatly refused to invest in Trunki, going so far as to tell him his company was “worthless”. Suffice it to say, they’re probably regretting it now. Just two years later Trunki is a runaway international success, with 150,000 units sold and distribution secured in more than 40 countries.

Rob will be discussing how best to prepare your company for any planned venture into the overseas marketplace. Complementary to that, Ian will be offering his expert advice on how best to manage your plans for exporting operations in 2009.

And as always, we will have our regular round up of all the latest small business news from the British Chambers of Commerce.

If you have any questions for Sean, Ian or Rob, please use the form to send them in early and we will do our best to answer them live during the show.

Join Sean, Ian and Rob live online to discuss opportunities for small businesses looking to expand overseas in the next 12 months.

For more information visit www.smallbusinessadvice.tv

H: Host, Sean Walsh
I: Ian Campbell, OBE, Consultant Editor of International Trade
R: Rob Law
S: Sara Beirne

H: Well hello and welcome to Smallbusinessadvice.tv, brought to you by the British Chambers of Commerce and Dell in collaboration with Intel. I’m Sean Walsh and in today’s program we’re looking at exporting, offering advice on how small businesses can best sell their products in markets beyond the UK. Well with news this week that the UK’s trade deficit fell sharply in December, mainly due to rising exports based on the weakened pound, this topic couldn’t be more timely. Well I’m delighted to be joined today live in the studio by Ian Campbell OBE. Ian is the Consultant Editor of International Trade and was the director general of the Institute of Export. Ian, thanks very much indeed for taking the time to be here

I: Thank you

H: Well our second guest, Rob Law, couldn’t make it in today but we caught up with him earlier by phone. Now first of all Ian I’d like to start the program by asking you, getting back to fundamentals, now if I’m a fledgling company and I really want to start taking the first steps towards selling my goods abroad or I’m already having a go at doing this, then how do I develop that system – you know what are the first key elements that I need to be looking at?

I: The most critical thing Sean is to do your research. There’s often a temptation with a weakness in sterling or a slowdown in the home market to say hey, I’ll go and look overseas, there must be business there. There probably is business, but go and research the market properly first. To do that you’ve got the Internet, you have people like the Chambers of Commerce, you have government support, you have your bank, you have all kinds of professional bodies there to assist you. Go and find out first of all if there is a market, before you jump in and invest money, and lose it

H: Is the time right now? After all we are in the middle of a recession. It was very interesting that we had Michael Dell on the program a couple of weeks back, and what he said was that now was a great opportunity for companies to actually experiment a little bit, maybe make one or two little mistakes, but learn from them, but certainly have a go at trying to develop and grow your business

I: I think that’s very true. Clearly the whole world is suffering from a downturn. The very fact that your UK market is poor doesn’t mean that all the other markets are burgeoning and being extremely strong – they are also experiencing problems. But we do have a competitive pound, we are able to sell much more effectively against customers, against competitors who are dealing in the Dollar or in the Euro, and let’s face it, unless the whole world is going to go into a global meltdown, people are still going to have to buy things – goods and services. So yes now is the time if you are reasonably financially strong, and I stress that, you shouldn’t go and risk your entire savings on an overseas venture, but if you’re reasonably strong as a business, go and look at what those opportunities may be.

H: In some respects it’s getting beyond the sort of bunker mentality at the moment. We had Martha Lane Fox on the program a couple of weeks back as well, and she was saying that while 20% of firms will be hit very badly by the recession, the other 80% still have to do business, so really it’s a question of being forward thinking in some respects.

I: Yes it is and I go back to the point of research. Find out what other markets are doing. Go and visit them, go and have a look at what’s going on in different places, go on a trade mission, go and visit an overseas trade fair, contact the embassies to get information about the market, and then see if you have a product that fits into that niche

H: Right, well let’s pause things there because we were going to have another guest with us, Rob Law, but earlier on I caught up with him, he wasn’t able to make it into the studio but I had a chat with him on the phone. Now he’s the entrepreneur who famously appeared on Dragon’s Den with his Trunki luggage product. You may have seen them at the airports, young children dragging them along behind them. Well I spoke to him about marketing and developing distribution networks abroad, but before he outlined that he gave us an inkling into how he took his idea to the marketplace

Telephone interview

R: “Well there are a couple of organisations out there that are set up to help young people and people starting off in business. I was very fortunate when the Prince’s Trust were able to help me out and they gave us some incredibly valuable mentoring and also a little bit of cash – I think I got a £4000 loan and a £500 grant to really start-up the business, but it was really the mentoring that really helped

H: So tell me in terms of marketing and international distribution networks, how do you go about setting all that up?

R: Well we had a very interesting route to market internationally with the power of the Internet, and blogs the way they are. Basically as previously a professional designer I was an avid reader of a couple of American design blogs, so I submitted the idea, my idea of the Trunki and photography of the product to them, and to my surprise they were up by the end of the day on these blogs, and that was really the start of the international craze we went through, so we had enquiries from the Museum of Modern Art stocking the product. We had enquiries as far as Japan. Because we subscribed to a really useful tool called Google Alerts, where you can be alerted of anyone using a particular name, in our case Trunki, we just saw blogs all over the world just starting to pick our images up and explaining what the concept was. So that was the catalyst for us to go international. We’ve now got 17 distributors covering 40 countries and we’re creating a whole wealth of marketing material to enable all our distributors to be able to market the product more effectively in their territories, more of a marketing bible of examples that we’ve been using in the UK to really help them push the marketing and then sales should follow on from that. I don’t think you can expect some companies, some countries even just to kick-start a new product of sales very quickly without real strong marketing support.

H: Well Rob Law speaking there, and we’ll be hearing a little bit more from him a little bit later on. Now Ian he made some interesting points about – for example in his case getting support from the Prince’s Trust – if I’m a small business now, where could I go for some advice and direction? You mentioned the government, you mentioned the British Chambers – what can they do for me?

I: Ok the government, through a body called UK Trade and Investment offers all companies, but particularly small and medium-sized companies access initially to an international trade advisor who operates in the area, in the region in which the company’s based. They can give advice on setting up, they can give advice on potential markets overseas, they can suggest directions that the company can take, and they can offer access to overseas posts, to commercial officers in our embassies and in our consulates and our high commissioners overseas. There is a small amount of charge for this but it’s not excessive. The other area, the [British] Chamber of Commerce, BCC runs a scheme called the Export Marketing Research Scheme, where once a company has decided let’s say, for example, we think there are opportunities for us in Australia and New Zealand, but we need to know a bit more detailed research, there is a government subsidy, there is government support through the Export Market Research scheme to go out and have some professional market research undertaken to see whether before launching into that market there is really a market for your products.

H: Indeed. Let me just pause you there because we’ve just had a question in from Jonathan here, he says “I know that your brand and product name needs careful consideration when selling abroad, are there any other cultural issues I should be aware of when starting out? Currently my customer base is through a UK-based catalogue, but I know when I start selling on the net I will need to be prepared.” So cultural issues, cultural sensitivity, those are some of the elements you need to be taking into consideration

I: You certainly do, I mean he touches, Jonathan touches on language and language is key. There are a myriad of stories out there of companies in the past that have named their product something that then means something extremely rude in market. So you need to take professional advice there using a professional interpreter, translator, and having names and words checked by somebody whose a native of the country, not just somebody who learned French at school, but somebody who is French and lives in France. But over and above that yes, you go further afield if you look at, for example the Middle East or other Muslim countries, if you look at China, if you look at India, there are far, far more cultural issues you need to be aware of. Simple things like colours and shapes and numbers. Certain numbers carry connotations of good luck, certain numbers carry connotations of bad luck, certain colours are acceptable. White is the colour of death in China for example. So you have to be aware of these things. There is help there, there are websites and there are professional advisors you can turn to

H: Indeed, you touched on websites, we’ve been talking about marketing as well now clearly the Internet is an important if not key tool in getting your message out globally isn’t it?

I: Absolutely. When I started 30, 40 years ago the internet didn’t exist. Nowadays you have the opportunity to use it to get your product, as Rob mentioned, he put his product up onto a couple of blogs and he found he was getting enquiries from all over the place. The web is also invaluable for doing that research, going out without spending the amount of money it will cost you to fly to Hydrabad for 3 weeks to find out what was going on there, you can now find out an awful lot on the web. But when it then comes to marketing your product, again I would suggest you get professional help. There are web design companies, there are people who understand international marketing and can help you make sure that what you put on the web is going to sell your product or market your product in the best possible light.

H: Indeed. We just had a question in from John Christian, John writes “Are there any good websites for the potential exporter?” Well clearly smallbusinessadvice.tv should really be your first port of call, there’s a lot of information on the site there to help you with exporting and a whole range of business issues tackled, so please do have a look at the website. But your own website – you’ve got a wealth of information there that can be a good pointer for sourcing other ideas and suggestions

I: We do indeed and one always come on a program to plug, we are at www.internationaltrade.co.uk. There is a lot of information there, there’s information on how to export, there’s a whole raft of country information and there’s news stories, telling you what’s happening in the news today, exchange rates – a whole wealth of information, yes. Excellent

H: Right well look we’re going to pause things there for a moment. Before we continue I’d like to cross over now to the news room and Sara Beirne for the latest business news headlines

S: Thank you Sean, here are the latest headlines. With unemployment figures hitting a 10 year high this week, the BCC is urging the government to cut business rates, freeze the national minimum wage and scrap plans to increase national insurance. Government figures show the jobless number climbed 146,000 in the last quarter and now stand at just under two million. The BCC has praised the Bank of England’s recent decision to cut the base rate to 1%, but has urged them to consider going even further. Chief Economist David Cairns said the bank should be prepared to cut to almost zero in order to avoid the risk of deflation. And finally, businesses across England could face an eye-watering £3.4 billion bill for simply using their own car parking spaces. The BCC is urging the government not to impose its controversial new workplace parking levy. That’s all for now, back to you Sean

H: Sara thanks very much indeed. Now just picking up on some of the points we raised slightly earlier Ian. Now we’re talking about the credit crunch. Lines of credit are tight – is that hampering the opportunity for small and medium-sized businesses now to both get into the export market and exploit the opportunities do you think?

I: I think Bankers generally take the view that if a company has got a sound business proposition, and has thought it through properly and has costed it properly, the support will be there. I was in fact with a major bank yesterday who made the point that they’re commercial lending is actually up 10% compared to last year, but they stressed that they are looking far more closely at risk, and if you haven’t got a good story to tell and you haven’t researched it properly and you haven’t done your pricing and your costings, and projected your cashflows and looked at your profitability, they may not be prepared to lend. If you’ve done all of those things and you are presenting a sensible market strategy you should be able to get the funding.

H: So really is the bank your first port of call or are there other sources of funding do you think that might be available?

I: I think for small and medium-sized companies the bank is normally the first port of call. There are a few grants out there from government, from the EU and elsewhere, but they tend to be fairly difficult to source and to access. Your own bank is the best starting point. Once you get beyond that and once you get into trade you can look at perhaps slightly more complex mechanisms, there are factoring, there are discounting mechanisms and so on. The other thing also is if you’re going into a particularly risky market, your bank will probably advise you to look for some sort of payment guarantee up front. That may be either cash in advance or a thing called a Letter of Credit which means that once you’ve shipped the goods you get paid immediately by the bank. But the bank can advise – your bank can advise on all of those matters.

H: So it can be really a question of spreading the risk in a sense?

I: Yes, very much so. Particularly if you’re dealing in a number of different currencies. Certainly if you’re buying and selling in Dollars for example you can then spread that risk between the two accounts. If, if you’ve got to go out and buy materials in advance then you need to make sure the cost of financing that purchase is built into your final purchase price.

H: Indeed, so maybe charging upfront a portion of the project cost is a smart idea?

I: Yes. You find this more and more with service industries that if you’re in the design business, architects, other services, you’re possibly in a position where you can charge an upfront or a percentage of the contract upfront. Rather as your builder does. If he comes round to do some work for you, he wants 10% upfront, another 20% when he’s built this bit and you have a series of stage payments

H: Yes stage payments actually make real sense doesn’t it?

I: Yes.

H: Well clearly the exchange rates give some opportunities now, puts us in a relatively advantageous position, if we’re dealing in Sterling, and that’s a subject we talked to – I spoke to Rob Law slightly earlier about, and the question of exchange rates. Let’s have a little listen to what he had to say

Telephone interview

R: Sure, with the exchange rate the way it is, obviously the pound’s quite weak under-inflated at the moment, and if you’re manufacturing locally in the UK, then that can put you in a very strong position to create very competitively priced products for export. In our particular case our products are made out in the Far East as so many products are, and we pay for our products in Dollars, so obviously that has a very negative effect. However, on the flip side half our business is exporting from China to other countries, and that is all in Dollars so it kind of cancels out for us at the moment, where although we’re losing money importing ourselves, we’re actually making more money exporting in dollars to other countries when you transfer those Dollars back to sterling.

H: Rob Law there speaking slightly earlier. Now Ian he makes some interesting points about the opportunities. Clearly there are opportunities to be exploited now because of the exchange rate?

I: Yes, the dramatic weakening of Sterling against all the principal currencies over the last few months does create opportunities. Particularly in those areas where price is sensitive. If you’re selling commodities for example, I mean you may not believe it, but we still do sell things like steel for example, from this country. Now steel prices are on a global basis. They’re a commodity item. If you have a product now that is perhaps 20% cheaper in Dollar terms than it was 10 or 12 months ago, you’ve got a competitive edge. Rob made a very interesting point however about balancing and about making sure that you offset the risk. He’s buying in Dollars, and in certain markets he’s selling in Dollars, therefore he has no currency risk there. Equally, in those markets where you are buying in one currency and selling in another you can hedge these risks.

H: Hedging is always a dangerous word – hedging and hedge funds

I: Yes – hedge funds are a different matter. Hedging is something that a lot of companies do do and should do, and as a very small company you can do. You say ok I’ve got a contract, I’ve got $50,000 that’s going to come in at the end of next month, I fix my price now in which I’m going to sell those dollars for pounds to the bank, and they will do that deal for you. You’re covering yourself against an exchange rate loss in the process.

H: So effectively you’re buying your currency ahead of time?

I: Or selling your currency ahead, you can do it either way. Yes

H: So you’re into currency speculation there almost –

I: No that’s the very different – you’re not speculating, you’re making a firm choice today as to what that currency is worth rather –

H: Indeed so you’re fixing your price

I: Rather than taking the risk

H: We’ve had a question in from Simon Johnson. Simon says “Are there any tax implications of customers receiving goods in other countries from the UK?” A very broad question there.

I: Essentially the tax liability falls on the customer. If you sell goods to a company or to a customer overseas and there is a tax levied, whether it’s a value added tax, a sales tax or import duty by the country overseas, it is the importer’s responsibility to pay for it. The one situation where it wouldn’t be, there is a term of payment – I don’t want to get too technical but if you sell on a basis of DDP which is Delivered Duty Paid, in other words if you sell to your customers and say I will pay the duties up to the point of it reaching your front door, then clearly you’re responsible for that. That’s a fairly complex operation and you’d need to have a freight forwarder involved and probably again your banks involved to deal with it, but essentially it’s down to the customer to pay the duty. If you order something on the Internet from America and it arrives here and there’s duty payable to customer, revenue and customs, it’s down to you Sean to pay it.

H: Right. Now we’ve heard a lot about trade missions and exhibitions and groups of MP’s going abroad to try and sell you know ‘GB inc.’, is that something that the eyes of a small business could get involved with?

I: Yes, you go back to what I said earlier about UK trade and investment- they sponsor a number of trade missions and a number of companies to go and participate in particular trade fairs overseas. Again go back to your professional help, go back to the [British] Chamber of Commerce, go back to your trade association if you’re a member of a particular industry and you have a trade body, find their website, they may well be running events at major exhibitions. You don’t get it all paid for, you have to invest, but there are certain shows and certain missions where the government will make a contribution as well. Plus you get the back-up and support of the local embassy people overseas

H: Now we’re running out of time but there’s one point I just wanted to touch on, and that really was protecting your intellectual property rights. I’ve got a great idea, I want to market that abroad, I want to sell it into overseas markets but I’m concerned about other people stealing my ideas. What can you say to somebody in that situation?

I: You are absolutely right to be worried, there have been numerous horror stories of people exhibiting a product or selling a sample overseas, particularly I have to say to China. There’s been a lot of problems in the past with Chinese manufacturers, they then go to a trade show in Hong Kong in a year’s time and they find their product has been ripped off and copied. Again professional advice. Go and talk – there is an intellectual property office which is part of government – www.ipo.gov.uk – and that will direct you towards people like patent lawyers and professional advisors who can tell you what you need to do, and you can get advice, and it has to be done, regrettably, pretty much country by country. There are common rules within the European Union once you get further afield you may have to have specific intellectual property and patent rights in the case of the country concerned

H: Right well in our last 30 seconds or so, what are the two or three key words of advice that you’d have for someone whose either thinking about exporting or is now just started that exporting journey?

I: Well the first word is research. Research the markets, research what the opportunities may be for your product. The second is make sure that your product is the best possible quality, that you can be certain that it will stand up against all the others. And the third is get your price right and get your partners right. Find people to deal with overseas who you can work with and who are going to work with you and help your product succeed.

H: Well that’s all we have time for today, I hope you’ve enjoyed this edition, and if you’d like help on any of the issues faced by your business, do make our website your first port of call, that’s smallbusinessadvice.tv. Thanks very much indeed for watching and we hope to see you again soon

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