Should you consider Expanding your Small Business Overseas? - by Florence Hampton-Fitzpatrick

Friday, 30 September 2016
After initially wavering in the wake of the June 23rd referendum, the level of confidence among small businesses in the UK has rebounded recently. Following a third quarter survey of up to 4,500 small and medium-sized businesses nationwide, just 13% suggested that the current economic climate is a barrier to success.

Similarly, just 10% of respondents considered the ongoing political uncertainty surrounding Brexit as a major barrier at present, confirming that after much soul-searching the UK economy and SME landscape have begun to gradually recover. While this may change upon the implementation of Article 50, of course, many SMEs are now asking themselves if they have a window of opportunity to grow and develop their venture.

Is now the time to consider expanding your SME?

With this in mind, one of the key questions that SMEs may ask themselves is whether or not now represents the ideal time to consider expanding overseas. This is a large-scale operation, but one that can offer huge rewards while we remain in a unified European state. Before you make such a decision, here are some of the key considerations:

Do you have a Viable International Product or Service?

This is perhaps the most important consideration, as while it may be tempting to expand overseas and target a larger, international audience, you must first determine whether or not this is commercially viable. More specifically, there must be a strong and proven demand for your product or service overseas, while you should also have a clearly defined and well-researched target market. Otherwise, investments in the international expansion of your company will be unable to deliver a suitable return.

So, pay careful attention to the nature of what you are selling and perform in-depth market research in targeted areas before making a financial commitment.

Do you have the Infrastructure and Resources to Expand?

A strong infrastructure is crucial if you intend to expand abroad, as operating in multiple markets places a huge demand on your distribution, sales and marketing teams. After all, different strategies and tactics will be required for each unique marketplace, and the way in which you execute these relies heavily on infrastructure, organisation and the company’s capacity to distribute its workload.

The same principle can be applied to cash-flow, as you must put strategies and coping mechanisms in place in a bid to optimise your working capital and deal with fluctuating currency rates. Business solution experts Ebury and similar firms can help in this respect, particularly when it comes to accessing your receivables quickly and effectively in unfamiliar, international markets.

Do you have the right Pricing Strategy?

While most product-driven businesses dream of selling internationally and competing in mainstream retail markets, there are several financial consequences associated with this. Firstly, higher volumes must be produced to meet demand, which drives higher costs and overheads. Additionally, SMEs often find that their margins are squeezed when they enter an international or competitive marketplace, which can actually lead to initial losses if they have not managed to minimise their production and distribution costs.

This is why a carefully considered pricing strategy is crucial in the international market, as it can be tailored to each market and optimises the sales potential that exists across the globe. It also offers you an opportunity to increases prices and margins where the demand is highest, while enabling you to sell for lower price points elsewhere. Just remembers to account for currency rate changes when you set your pricing plan, as sudden, unexpected shifts can have a huge impact on your margins if you sell in volume.

Florence Hampton-Fitzpatrick is a freelance writer focused on covering the latest business and political news for a UK audience. Having worked for a number of UK based SMEs and businesses Florence has a wide understanding of the business world and is currently working on her own startup whilst also following her passion for writing. Outside of work she is a keen baker and skiing fanatic!