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In this presentation, learn key strategies for when you want to grow your business through exporting.
Key learning outcomes include:
Dianne Brown: Good morning and welcome to today's learning module, Export 101 master class. Today, we'll be giving you some tips on how to ensure your business is export ready.
My name's Dianne Brown and I'm a chartered accountant and business advisor with SRJ Walker Wayland. So my passion is education and educating business owners, such as yourselves on the importance of planning for success and working with you to ensure you achieve your growth and profitability goals.
In today's learning module, we'll be giving you the tips on how to ensure your businesses best place for export success.
To do that, I have with me today, Ross Tilly. Ross is Trade and Investment Queensland and Austrade advisor for our area including Moreton Bay Region. Ross would you like to introduce yourself and give us a little bit of your background, and some tips on how you can assist businesses in our region to be best placed for export success.
Ross Tilly: Absolutely, Dianne thank you for that. It's really good to be here today and talk a little bit about exporting 101. To give you some background on myself. I’ve been doing this role with Trade and Investment Queensland and Australia for 10 years now. But looking further behind that I've come from an agricultural background.
I've had my own manufacturing business based in Toowoomba, and I've been doing business advisory roles for the last 15 years. But my interest here I guess, is in helping you understanding what's involved in getting ready for export. Understanding what the process, what the steps for success can be, and how you might best approach getting your business ready for exporting.
Dianne Brown: Thanks Ross. So what are we going to cover today? So today we're going to cover a couple of key topics. We'll talk about:
We'll also give you some links in the PowerPoint (download below) that are available through Business Moreton Bay Region, to various resources for further support. We’ll also wrap it up with some tips to ensure you're ready for your export journey.
Ross Tilly: I think one of the things initially people consider where they're exporting is the opportunity for growth in your business. You're looking at increasing your sales. Increasing your customer base. Which also then brings opportunity for greater profits as your business grows. Another important element around exporting is that you tend to reduce your dependence on the domestic market only. And that can be important for a couple of things.
If the Australian market is a little bit slow for your product or service you're providing, there may be other markets that you could be servicing that may be in a stronger period of growth or development as well. So you're spreading your risk a little bit around that as well.
Another important part about the exporting is you're really getting exposure to the globe best in your products and services and international competition. You may be a little bit sheltered here in Australia in terms of some of the major players, but by entering those international markets, you're getting to see what the best of the best is doing, and that can be a great opportunity to inspire you, to grow and develop your products and services to be able to meet that.
And in some respects that gives you resilience as well, because if you are operating at that level, when those organisations may come to Australia, you're ready to fight that battle and protect your market space here.
Another interesting element about growing your business, is you get the economies of scale. That is as your sales grow, your cost per unit or resources required to produce a unit are spread over a much larger volume. So you can actually make your business more resilient domestically.
Dianne Brown: Thanks, Ross. So what do you think would be the things that businesses should consider when determining if the export model is right for them?
Ross Tilly: I think one of the things I often look at when I first when businesses come to me is really seeing how are they going domestically? And what is their domestic base operations?
What is the success of the business domestically? Because it's really important to have that foundation to grow your business to an international base. So that's very important starting point.
It's also important that the business has the ability to grow. That it's scalable in terms of its manufacturing base or its employment base or the people that they may engage in developing the business, and even their supply chain as well.
So having that ability to grow as the market grows internationally and take your business with you on that journey. They do have to have the staff resources, or be able to employ them, and the expertise, and the management of the operation have to look at their production.
The production for the overseas market might be slightly different from their own. So you might have some parallel lines of production as you've modified your product or changed your service delivery for those markets. And, of course, the financial resources to carry the business through as well.
Dianne Brown: Absolutely. And speaking of financial resources, one of the key export risks, I guess, are for businesses to manage their cash flow throughout this process.
What would you say are some of the other risks that are associated with export?
Ross Tilly: The financial one is certainly there in terms of the cash flow cycle, which is generally somewhat longer in the export journey from when you produced to when you’re finally paid.
But there are also additional elements relating to cost. There are additional logistics of getting a product to market. There's exchange rates. There's other elements of doing your business internationally as well. Your products and your packaging need to be may need modification and will need to be more resilient - be able to survive the journey and arrive in the market in pristine condition. So there's additional costs there.
Obviously the logistics and the documentation involved around new business. So very important elements to get right so there isn't any holdups as your products or service get into the market.
Your business development activities will need to be a lot more involved as well, because you're now talking to consumers in multiple markets with different messaging, different collateral and aspects of my appeal to them as well.
There are some legal elements as well with your business operating in international markets. Both from your business operations, but also your product or service being delivered and used and consumed in that market. So some additional costs and risks associated with the business.
But, just to wrap up, another important risk is ensuring that your domestic businesses continues to remain strong. It's easily to get distracted in the excitement of exporting, but it's important that you keep your domestic customers in your domestic business travelling along and growing strong at the same time.
Dianne Brown: Absolutely because you don't want to jeopardise your initial customer base at all.
Moving on to the 5C’s of exporting, what would you say are some of the key issues that the company itself should consider when getting ready to start the export process?
Ross Tilly: Yeah, absolutely. So the first C of our five CS is certainly about the company.
And that is about looking inwards to your business and deciding if you are really ready for exporting.
Is this an appropriate strategy to grow your business at this time? It's a timing thing, but also an analysis element as well. What's really driving this agenda for you to take on exporting for your business?
Some things that you might want to review in terms of your capability and capacity is looking at the export requirements and the effort that may be required for your business to grow.
How your domestic competitive advantage, you may be operating here within Australia, does that translate into the international market that you wish to go to? You might have to have a quick look over some of your products and services and see if they really are able to compete at a world-class level, or are you succeeding here because you're not really exposed to the international competition around your products or services?
Your approach to international markets may be quite different in terms of how you take your message about your product or service to the consumers in that market. How they like to receive that information, how they interpret the information through a translation process. Or customise or what we call localising to that particular market.
Ask, does the business itself, in terms of management, have the sustained commitment to make success in the export market? Because it is a longer journey, just like it took him many years to grow your business domestically. It's unrealistic to think you'll be an instant overnight success in exporting. You have to have that longer strategy view to developing your export business and your export markets as well.
Dianne Brown: Thanks Ross. So in terms of choosing which country you actually export to, are there any key things or key issues that businesses should be aware of, or looking towards, when determining which country may be best for them to go into from an export perspective?
Ross Tilly: By all means, yes.
When talking about Country, identifying potential markets is probably one of the earliest challenges for businesses when they're considering exporting. Which markets should I go to? And you're probably better off having a quick cut across the markets that you think have some potential, but are relatively less difficult to enter. And trying to rationalise that down to two or three markets as a priority.
So you've done that initial first cut from there. You want to jump down to the next level and work out how much is involved in getting involved in a business?
This is a new market. There is a large population of similar customers in that market ready to purchase my product. What are the regulatory constraints of dealing in that market? Are there barriers to doing business in that market?
So you're starting to look at some of the characteristics of a system civic market that could be favorable to your business.
We're also seeing if you have some advantages dealing with Australia as one country to that country as well in terms of how our trading relationship, and things like free trade agreements (which we'll cover a little bit later) give you some comparative advantages to a third country operating in that market.
Dianne Brown: Is there any particular countries that you would recommend first-time exporters target.
Ross Tilly: There probably are easier markets and markets for early stage exporters to, I guess, learn the ropes. Markets like New Zealand ,across the ditch for us, it's very close and a very similar market in terms of our rules and regulations, our customs, our legal elements and the consumers in those markets. So New Zealand for some companies is a great starting point because it does have a lot of parallels with our Australian customers.
From there, if you were going to consider markets like Asia, you might consider markets like Singapore and Hong Kong, because they're so willing to accept Australian products into that market and barriers to entry are much lower.
There is an opportunity with large ex-pat markets. Population in those markets means that the products are well understood right from the start. And from the United Kingdom, once it departs out of the Brexit process and early in the new year, there could be greater opportunity to go into the UK market as well, because of that shared language that's shared commercial and business understanding.
It could be some great opportunities around as well. So there would be some easy ones to start off with.
Dianne Brown: It's going to be really important that Australian businesses have a good understanding of what the customer needs, wants and requirements are in their export market.
So what would you say are some of the key characteristics of potential clients that exporters should be looking for in that export market?
Ross Tilly: Now we're talking about our customers. The customers in those markets. Like your customers here domestically, you're providing a solution to a need or a want that those customers find it's the best opportunity or option for them.
When you're looking at these customers in the new markets that you've now narrowed it down to two or three, and looking for customers that are somewhat similar to what you are (perhaps) servicing here in Australia. Try and define if that group is represented in that market and do they have a similar need or problem or a solution that they require to what is currently being done. If they're getting along just fine without your product currently, you have to change their behavior, and their purchasing activity for them to begin interested in your product.
So you're looking for what are the same sort of issues or opportunities in those markets?
When you're looking at these customers, I'd encourage you to look beyond the high level. We talk quite often about very large markets of China or America. Do you think that's going to be a great market for you? But you need to go below that and find those similar customers that have the similar demographic or the similar issue that perhaps you're servicing here in Australia. And those markets looking for those early adopters who maybe are willing to take up your product, become brand ambassadors for you in that market as well.
Dianne Brown: I imagine it would be really important to engage experts in this area early. Is there any advice you could give first time exporters, in particular, to ensure that they’re best placed for export success in that area?
Ross Tilly: Yes, absolutely. The market research element, and getting an understanding about the customer, a lot of that can be done from your computer at home or in the office. You can do that research (as we call desktop research) and find out what's happening in those markets, and particularly in your particular sector.
Let's say you're in food and beverage or you're in cosmetic products. You can find out an incredible amount of information and reports that are available for free, and can access and get understanding about the customers in those markets.
But one of the benefits of working with an agency like Trade and Investment Queensland is that they have Australian staff overseas in these markets, and they have a great understanding of the dynamics of their particular market, the customers, and the process around exporting into those markets.
Also, depending on how you're entering those markets, you may have agents or distributors that you're looking to set up in those markets. And they of course understand their market very well and they understand their customer needs and what appeals to customers in that particular market. So I would encourage people to do a lot of research. Work with the advisors, agents and distributors and people in the market with what your product may be.
Dianne Brown: So once our businesses here have determined which market they're actually going into and who their key customer targets will be in that particular market, what would you say are the key issues that businesses should consider when determining their market entry approach, or the relevant distribution channel?
Ross Tilly: All right, so we're up to number four. Now we call this Channel, or someone might understand as their distribution network.
I think it's a good idea to put you’re a hat on your head as if you were the customer in that market. And where would they expect to find your product or service? Is it likely to be in a retail outlet? Is it likely to be in a wholesale arrangement? Is it something that most likely would buy online? Once you put understand that mindset, it gives you then the direction of where would be the most suitable way to approach that market and position your product at the appropriate outlet or distribution channel to meet their needs and they can easily purchase the product.
Dianne Brown: And what would be some of the ways that businesses can enter their chosen market?
Ross Tilly: There are a variation of models, and it’s an evolutionary process as well. I guess I would say then that you can stop sending the product directly to market.
With e-commerce, essentially people are buying from you in Australia. So you're very much directly involved in a relationship with a customer. And straight to them in terms of the supply chain to them.
You may choose to be in a more indirect model where you're selling to an importer, a wholesaler subsequently to a retailer, and represented in a normal channel in that market. That consumer may have very little understanding who is the original exporter, and certainly no relationship with you as a business. So quite distant from the actual start of the process, and the nature of your product.
If it's quite bulky or has a very short shelf life, you might consider getting some manufacturing done under license in the market. This is where someone in that market - with your approval and knowledge and how-to-do your business on product and process - manufactures the product and supplies to consumers in that market. But it's marketed under your brand and with your formulation or with your secret herbs and spices related to your product.
You might even decide to form a joint venture in that market. So a business partner in that market who gets involved in developing the business for that market, but you're very much related in terms of your business here and their business there.
The furthest extent of that is you actually establish a copycat of your business or a wholly owned subsidiary in that market and start trading there as a new business. Just like you're here in Australia, but servicing the customers in the market. There are lots of variations in between, but that just gives you some large chunks to analyse the best way how you may approach the market.
Dianne Brown: What would you say are some of the key ways that businesses can access their preferred distribution channels?
Ross Tilly: I go back to my earlier comment on this one about understanding the market and understanding the professionals that are in the market. Be it through Austrade or Trade Investment Queensland, or even some of the international chambers or other bodies that represent your industry or sector and finding out how best to approach that market.
Who are some of the people that you might want to be involved with? You might consider going to a trade show. You might consider going to an industry event and finding out how people conduct business in that market and starting to build those connections and relationships.
Dianne Brown: How would Australian businesses go about evaluating the level of competition that they would face in their chosen market?
Ross Tilly: I guess like anyone, when you're looking at another market, you do your research and find out who's currently present in the market in terms of competition.
They may be quite a large domestic competitor for that market or well-established in their market. They may already be the no.1 and major brand for that market. You might have to compete for consumers in that market that know and trust that brand, and have a good relationship with them. You’ve got to work out how to differentiate from them.
There may be other international competitors. Is it a product or service similar to yours who are even operating in a range of markets, including the market you intend to go to as well, and you'll just become another international brand potentially going into that market.
Once again, they may have customers who already understand their product and brand. So you're going to have to understand how your product or service compares or competes in that market.
You really have to do that research initially about the competitors, understanding who they are and really reflect with a critical mind upon your product or service from the consumer's perspective. What would they value or understand about your product? Would they see it as something different, new, novel, or more appealing to them than what they're currently using to solve their problem or opportunity?
Dianne Brown: For those of you who are already exporting, you would be familiar with the Export Market Development Grant. This is effectively a reimbursement of your eligible export expenditure that you incur each relevant grant year, which is the same as our financial year.
So applications for self-lodges closed for Export Market Development Grant closed on the 30th November, unless you use a quality incentive export market development consultant. In which case you will be entitled to an extension to submit your grant applications up until March.
What I do want to point out is that the scheme is actually changing next year. So on the 1st of July, 2021, we're moving from a reimbursement scheme through short, upfront grant agreement. What I do want to preface this with though is saying that we've only just seen the draft legislation released around these significant grant changes. So it's yet to be finalized. What I can tell you is that it is expected that there will be three different tier levels of grants going forward.
So tier 1 will be for participants that are new to export and they could potentially access up to $80,000 upfront to help fund their eligible grant expenses over two year period. Tier two is for existing exporters looking to expand their export markets. You could potentially access up to $240,000 grant funds over a three-year period. Tier three is for those that are looking to make a strategic shift and enter completely new markets in their export journey. You could potentially access up to $450,000, grant funds over a three-year period.
So there are some significant changes coming next year. One thing to add is for those of you that are already incurring eligible export grant expenditure. You can still lodge your 2021 grant application under the old system. If it's your first year, you combine two years worth of eligible expenditure in that 2021 application. But next year we'll see a transition year.
We could potentially be looking at two export grant applications and two lots of grant funds. One under the old scheme, which is the reimbursement of your 2021 expenditure and then your upfront grant in relation to the new scheme. Please watch this space in terms of export market development grants, because there are a lot of changes that we're expecting to see come out in the next couple of months.
So in terms of today, just to wrap things up, Ross, would you like to give us some of the key tips for people to take away, to ensure their best placed for export success?
Ross Tilly: Absolutely. I think in wrapping up today's coverage of the five C’s, I'd just like to give some high level tips for success that might give you the motivation and hopefully the next steps that you might want it to do.
The first tip is to critically review your business internally and really make a strong decision. Is this the right time for you to enter into exporting? And how does it fit with your business strategy and your plans domestically and how are you going to define it?
I'd encourage you to research your intended markets very carefully. Unfortunately, sometimes we find people going into new markets based on a couple of inquiries they've had from those markets. I encourage you to be a little bit more robust when you research those markets and find out what are the opportunities in those markets using those criteria that we mentioned earlier on today. A lot of it can be done from your desktop, and a lot of it is available to you through the services of Trade and Investment Queensland and Australia to do that research.
Although limited at the moment, I'm very much an advocate for getting people to personally go to a trade show. Visit the market. Have a walk around the type of outlets and stores where your product would most likely go. Sit and have a look at the competition. Look at the environment that shoppers are consuming that product including how and when they purchase. Really get yourself familiar with the market and how the consumer interprets and works with products and market.
Obviously under COVID at the moment, there's restrictions around travel. But the reason I suggest that is you don't do all this work here in Australia - getting a product ready, your branding ready, your marketing messaging ready, and go to the market and find it just doesn't fit. So you're better off getting it to the market earlier.
Critically have a look at your competitors in that market and determine what is different about your product or service that you're taking to the market. And understanding those competitors are probably going to respond in some respects to how you introduced to the market as well.
Remember, they're in a dynamic arrangement as well. As they see competitors come into the market they will respond just like you would if someone was competing with you here domestically. They're offering is possibly going to change.
Any market partnerships that you form when going into a new market, choose that relationship very carefully in terms of the agents or distributors or manufacturing under licensed partners that you may have in that market. Put the due diligence in place, do the research and ensure that you're happy for a long-term marriage.
These relationships are great at the start. They're exciting and fun, but they can be difficult and problematic at the end of the relationship if it's not going well. So pick carefully.
Manage your exposure to the risks of your business domestically. It's great to be looking at exporting, but just don't stretch the resources or disappoint the customers that you have domestically in your business.
Make sure you can still sustain your domestic operations and you manage your exposure to international exporting. It doesn't always go to plan and you don't want to put your business at risk due to lack of planning, or just not managing unforeseen risks that could come across your business.
The last point is about managing your IP. This is the special things relating to your brand, your product or your design. Make sure you seek protection by registering that intellectual property appropriately in that market before you go into that market. You need to be able to enforce that protection if the need arises in that market, because you don't really want to create another competitor for yourself.
You can download for full presentation for this modules below. In this you'll find links to various support pages that are available through Tradestart and Austrade. Also through Trade and Investment Queensland, and also further information and support that is available through the Export Council of Australia.