Unprecedented economic uncertainty, global trade wars and potential Brexit threats are distractions that businesses looking to grow can overcome, writes Arbinder Chatwal, Southampton-based partner at accountants and business adviser BDO. Now is the time to seize the initiative, he urges, but not before doing your research.
I wouldn’t say expanding overseas has got any easier, but nor is it any harder. Businesses need to take calculated risks, put feet on the ground, go in with their eyes wide open, and crucially ensure they have a long-term exit strategy.
Our latest research shows there is plenty of international activity among mid-market businesses in BDO’s Central South area, which stretches from Weymouth to Chichester and north to Salisbury and Andover.
In the past three years, overseas turnover (where it is reported) by businesses in the area has grown 45.5%. Despite geopolitical uncertainties, we have seen 8% growth in turnover over the past 12 months and in the same period profits of businesses that operate overseas was up by 18%.
BDO is about to publish its annual listing of the top 20 performing companies in the region that operate internationally. What’s really exciting is that about half of the largest companies in terms of overseas turnover growth are new in the 2019 listing. That demonstrates more businesses in the region are successfully tackling the challenge of international expansion. However, feedback is that trade bodies are not joining forces but competing with generic programmes and delegations that are not sector or industry specific.
It’s not rocket science
The key ingredients for success overseas are straightforward and don’t change greatly. Previous winners of BDO’s Mid Market Company of the Year are testimony to this.
Electrical distributer R&M Electrical embrace challenging markets, so it can take advantage of being a ‘first mover’ there.
We found that R&M definitely benefited from taking calculated risks and having trusted advisers and partners in local markets.
Another previous winner is BOFA, the Poole-based dust and fume extraction equipment manufacturer. It is one of the region’s major overseas successes, operating in over 100 countries and with exports accounting for 90% of its sales. BOFA is now parented by a large US conglomerate enabling it to extend its international reach and technology offering. BOFA took early steps to be Brexit-proof by expanding its operation in Germany and using its group resources to increase its warehousing in the EU.
Current title holder, Just Develop It has concentrated on cracking the US market. It has exited investments successfully in the US, focusing on building customer relationships, and is working to remove cultural barriers in its new markets. JDI’s approach was ‘don’t spread yourself too thinly’.
Do your homework
Here are five tried and trusted ways to target new international markets:
• Research and repeat – Do your homework, then do it again. One technique is to start with a scattergun approach then focus on specific regions or countries.
• Getting the right person in local markets – Bring on board someone in the country who you can trust to manage relationships with your distributers and customers, and make sure you give them a vested interest in your success.
• Know your exit strategy – This is an area many companies overlook. Know how your products will be distributed, how you’ll get income back to the UK, and how you’ll extract yourself from a market if you need to.
• Fools rush in – Many businesses falter or fail overseas by rushing in too quickly and not being flexible enough to respond to changing situations.
• Don’t underestimate cultural fit – One of the commonest reasons for failure overseas is not getting to grips with local cultures. Try and find out first hand and don’t ‘copy and paste’ your approach from one country to another.
To help local businesses prepare for overseas growth, BDO and HSBC are holding the region’s first International Day on November 26 in Southampton. Activity includes a workshop hosted by specialists sharing real-life examples will cover South East Asia, Australia, India, the US and continental Europe.
We expect some delegates will come away deciding international expansion is not for them at the moment. That’s a good sign. But we hope most will leave with a clear understanding of their next steps and practical ideas to help them make progress.
Unpacking the Central South
International Day is part of BDO’s wider focus on the region’s mid-market. Now entering its fifth year, we asked ourselves the question: What would you put in a suitcase to showcase the very best of the Central South Mid-Market? So over the coming months we will be taking a look inside the Central South suitcase to reveal our top performers and share insights and information.