SMEs should start exporting
In June, SME Insider brought to you a study from Clydesdale and Yorkshire Bank which revealed that over 350,000 small businesses will start exporting their goods internationally over the next year.
In 2013 the British Chamber of Commerce found that the number of member businesses that are actively exporting has risen from 32 per cent in 2012 to 39 per cent in 2013, and that the EU is still the most popular market.
Small and microbusinesses that are willing to export are getting help from financial institutions. Recently it was announced that Clydesdale and Yorkshire building societies have partnered with the British Business Bank under its ENABLE guarantees scheme, putting aside £125m worth of new funding for SMEs that need help in getting their businesses into foreign territories.
The government has a long history of helping small businesses find foreign investment. Founded in 1997, the UK Trade and Investment (UKTI) department was set up by the government to assist home-grown businesses in cracking the international market, as well as helping overseas investors looking to the UK as an investment destination.
SME Insider investigates
In order to find out more about exporting, we met with UKTI ambassadors Lara Morgan and Gabriele Albarosa during the Academy for Chief Executives’ Exporting for growth seminar.
Lara Morgan personifies what UKTI is trying to achieve with small business owners. In 1991 a 23-year-old Morgan started her first business, Pacific Direct Ltd, a company which manufactures and sells licensed toiletries and amenities to the hotel industry. Morgan enjoyed successful partnerships with hotel chains all over the world, and in 2008 sold her business for £20m.
During the seminar, Morgan told a powerful story of her own success as an exporter and shared some key lessons with the audience.
Morgan emphasised the power of persistence in business.
Her Motto in life is ‘if you don’t ask you don’t get’, so she advised small businesses owners to ‘‘not give up at the first ‘No.’ ’’
Morgan then presented the audience with some intriguing facts about exporters, claiming that exporting companies have greater resilience in any down turn and are better placed to retain their staff.
One of the key issues for small business owners in the UK is late payments, but the UKTI ambassador revealed that overseas clients recognise the need to pay in advance, helping SME owners avoid the legal headache of retrieving payments.
Since making her millions, Morgan set up CompanyShortcuts.com, an advice centre for business leaders. Morgan highlighted that export markets are growth markets; ‘‘if the UK is growing at only 1%-2% then why compete for a small share of the UK market when exporting companies are growing two or three times as fast.’’
Morgan then sang the praises of UKTI, hailing it as a ‘fantastic partner’, as it allows you do things that you can only dream of. Morgan cited an example of when she ran a business event in the house of the UK Ambassador to Dubai.
UKTI is ‘a fantastic opportunity’ for SMEs
To gain more information on UKTI and whether small businesses can successfully trade abroad, I spoke to Gabriele Albarosa, an ambassador for UKTI who has represented UK SMEs during trade missions to Boston, New York, Hong Kong and Macau.
Albarosa runs Krescendo, a London-based financial technology (FinTech) group, providing data management solutions for investment banks.
Exporting is largely responsible for Krescendo’s success, with over half its revenue stream coming from abroad. I began asking him how his association with the UKTI came about.
‘‘So in 2014 everyone at Krescendo was focusing their efforts on promoting our new products, so we needed all the help we could get in telling the world about it,’’ said Albarosa.
‘‘We got in touch with the UKTI as they are of the resources that can really help companies in the FinTech sector. UKTI has a great global presence so it was great to get their help.’’
With the UK recently being ranked as the sixth easiest place in the world to do business, it makes it a lot simpler for UK SMEs to export, a sentiment which Albarosa echoed when I asked him why small businesses should trade abroad.
‘‘Because we can! The sector I specialise in is information technology and over the last 30 years (and thanks to the internet), it is increasingly competitive. Even before we started working with the UKTI, 60 per cent of our revenues came from outside the UK, so there is a great opportunity for other SMEs to do the same.’’
The UKTI uses every resource it can get its hands on to help promote British entrepreneurship in foreign lands, including a certain blonde-haired Major of London.
On his first trade mission with the UKTI, Albarosa travelled to the United States with Boris Johnson, and it was clear from the beginning of the trip that he was the star attraction. Fortunately, Boris didn’t rugby tackle any small children to the ground during the trip.
‘‘He was a crowd magnet. He was the star attraction for the whole trip and dedicated a lot of his time connecting with the people who came to see him.’’
Having someone of Boris’ stature travelling with you was definitely a positive for Albarosa, but the ability to experience a different business culture was what Albaraosa has enjoyed the most.
‘‘My experience is that it’s a fantastic opportunity to get a week’s worth of experience in a different country,’’ explained the SME owner.
‘‘When you travel with the UKTI, you receive great advice from experts coming from the relevant sectors who tell you how to do business in certain countries. You learn about many different things, including the legal system, accounting procedures and many different aspects of trading in another country.’’
Despite UKTI offering great experiences for small business owners, the effectiveness of the initiative has been called into question by government officials.
Iain Wright MP, chairman of the department for business innovation and skills (BIS) committee, has launched an enquiry into the role of UKTI, calling into question George Osborne’s claim that by 2020 the UK will be generating £1 trillion worth of exports and have 100,000 more companies exporting.
‘‘The Government has committed itself to a target of a £1 trillion exports by 2020 but few expect this to be achieved. The Secretary of State himself appears to believe the target is pie in the sky and unachievable,’’ stated Wright.
‘‘As a Committee, we will want to explore whether UKTI is indeed fit for purpose and whether it is proactive in helping British businesses identify and navigate foreign markets and whether UKTI is making the maximum possible impact in increasing exports.’’
This announcement came just hours before speaking with Albarosa, but he believes the investigation could improve how UKTI is managed.
‘‘It feels like ‘under investigation’ is a very loaded term,’’ said Albarosa.
‘‘Every organisation needs to be held accountable for what they do, but the UKTI’s role hangs on a fine balance. They are not wholly responsible for SME success – they are not our sales people, so I find it very difficult to imagine exactly how the government came up with this £1 trillion figure in the first place.’’
‘‘It sounds like the consequent investigation is harsh, but it should be welcomed if it’s in an investigation to how well the UKTI’s funds are managed,’’ added Albarosa.
So what do you need to do to become a successful exporter?
Despite the pending investigation into UKTI, Albarosa is convinced that it’s a great time for SMEs to export, and gave aspiring small business owners three pieces of advice for trading abroad:
1. You need to be clear about what you’re selling.
‘‘Make sure that you know your product inside-out. The more you understand what you’re selling, the easier it will be for investors to jump on board.’’
2. People are not going to sell it for you.
‘‘Like I said before – UKTI are not your sales team. You need to have a good workforce behind you who are determined to build ties abroad.’’
3. Be open minded
‘‘Get out there. There is so much that happens because of serendipity – because you’re putting yourself out there. The UKTI makes you feel at home, they are very supportive and it enables situations that usually take a long time to materialise.’’
This guest blog was written by Fraser Simpson, Editor, SMEInsider.