Exporting: where to begin?

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For first time exporters, the thought of selling their products overseas can be daunting, but fortunately help is at hand, and it’s free. Alan Johnson reports.

LIKE most activities, the first step is always the hardest. And it’s the same with exporting. But what most SME manufacturers don’t realise is that there is government help at hand, and at no cost.

The TradeStart network, an extension to Austrade’s own offices, is delivered in partnership with State, Territory and local governments, and industry associations, who’s prime objective is to assist SME exporters.

Craig Malcolm, a TradeStart advisor with the Australian Industry Group, says the network is a great resource for Australian manufacturers.

“It offers face to face assistance to manufacturers to export their products and services.

“Basically we are a resource for companies to use; to provide market research, assist in deciding which markets to go to, which countries. We assess a company’s capability, and whether they are ready to export,” Malcolm told Manufacturers’ Monthly.

He says most SMEs have an idea where they want to export to, often judging by the hits they are getting on their website or from the enquires they are getting, but says many have a blinkered approach.

“I normally conduct some broader market research that hopefully validates or verifies their thoughts.”

Malcolm explained that the organisation has a research team in Sydney who have access to a number of databases, media reports and trade databases, maps and statistics.

“It’s a fairly comprehensive mix of information that we can provide to the companies we work with.

“I will forward the research on to them to read, then visit their facilities and work through it with them.”

He says they generally pick the top three markets, mainly because most SMEs don’t have the resources to target more.

“But some companies just want to target one, which at the moment is China. Years ago, everyone wanted 1% of the US market, now it’s China, especially the manufacturers I work with, which are in the food and cosmetic industries.

“However, many don’t realise that it’s such a large country, with so many different regions and markets.

“Sometimes China might be the end game, but I will provide research that the company might be better starting with smaller markets, lower hanging fruit, such as Hong Kong, Singapore and New Zealand, which would be good for them to cut their teeth in.”

Malcolm says to export to China, companies really need to have their policies and processes in place.

The process

Companies initially start with the TradeStart network, then once they are ready to go to market, the advisers provide introductions into the Austrade network of offices, who can do more in-depth research, and help them find agents or distributors in the chosen market.

Malcolm explained that up until that stage, there is no cost to the company.

“But when these Austrade offshore offices have to do work for companies, that’s when they charge, which is presently $275 an hour.”

The TradeStart advisers arrange a brief, then the Austrade team prepares a service proposal covering what the client wants, what they are going to do, how many hours it will take and how much it will all cost. Then it’s up to the client to say yes or no.

Malcolm says he normally recommends a phased approach.

“Phase One would be the market research. If nothing comes of it, we stop it there; no cost. If all positive, we go to Phase Two and might look at appointing distributors.

“Then in Phase Three we might set up an appointment program with leaders in the market.

However, Malcolm says a company’s first request is often to find a distributor, which, he says, is like asking how long is a piece of string, and is why he spends a lot of time with companies preparing the brief.

“I try to flesh as much as I can out of them so the Austrade team can focus better and have a more direct understanding of what the client’s requirements are. That’s where we add the value here in Australia.”

Malcolm explained that there is no time limit to Tradestart meetings and advice.

“The support is ongoing. I have companies I have been working with for 14 years. “

He admits it does drop off once they have been successful in one market.

“But when they want to target another, we will go down the same path. We know they are up to speed with their finance, freight and logistics, and marketing, but we can advise them if they need to change their marketing or labelling for example, and maybe what colours of their products would work, and go through the different regulatory requirements there are for the different markets.

“We then introduce them into the Austrade network and act as a single point of contact.”

He said most companies get in touch with TradeStart via Austrade’s website, industry bodies, and other government departments such as AusIndustry.

“Or they are referred to us by other companies who are exporting, especially SMEs.”

Exporting advice

Remarkably, Malcolm says the most common mistake SMEs make is passion.

“Where we are dealing with the owner or the inventor of the product, they are often so passionate about their product that they can’t see the competition and don’t know how to market product beyond their passion. To them it’s the best product on the market as it’s high quality Australian product.”

He says that while they have the passion and the drive, they don’t have the vision.

“By that I mean, taking the blinkers off and looking around. It’s great to have that passion, but it can turn into a negative when they are blinkered in their marketing.”

Interestingly, Malcolm says Australians don’t sell themselves well, especially compared with the Americans.

“We are too laid back and subtle which often doesn’t work well in overseas markets.”

However, his most important advice to new exporters is research, research and research.

“I equate exporting to managing risk. It is important for companies to assess the risk and the impact of exporting to their bottom line, as most things have a cost.

“Companies should factor in all the charges, levies and fees involved with exporting, as they all come straight off the bottom line.”

On the positive side, Malcolm says most companies that contact TradeStart, are successful, with very few failures. However, he warns that it does take time.

“Depending on a company’s readiness, it can take a year or two.”

Once out there, Malcolm says Australian products generally have a very good name overseas, especially in the consumer and food sectors.

“Here I’m talking about high value, low volume food or consumer products.”

Industrial wise, he says we have a reputation of being fairly advanced with new technology and devices, but are a little bit expensive.

When it comes to choosing an overseas partner, Malcolm’s advice is not to rush in and believes the first opportunity is not always the best opportunity.

He says while companies might be getting a lot of interest on their websites, they should still do their due diligence on their potential overseas partner.

“It’s worrying to see companies spending more time and effort verifying their 18-year old receptionist than selecting their overseas distributor.”

He says the organisation sees it time and time again, but usually the damage is done.

“They have sent all this product over, paid for it, then nothing.

“There are people out there who taking advantage of them. They need to do their due diligence,” Malcolm said.

Export finance

Another issue first time exporters will probably face is how to finance the project, because not all banks will share your optimism.

But again, help is at hand through EFIC, Australia’s export credit agency.

EFIC provides financial support to Australian based companies which are exporting, in the global supply chain or seeking to grow internationally

Its primary purpose is to facilitate and encourage Australian export trade on a commercial basis.

Specifically, it can provide financial support in circumstances where companies have been unable to source adequate finance from the private sector.

Earlier this year, EFIC launched the Small Business Export Loan, which is designed to meet the needs of small businesses seeking export finance, with a focus on convenience and speed throughout the online application and approval process.

The loan product enables small businesses with an annual revenue between $250,000 and $5m to access up to $250,000 to support an export contract. The loan is available to small exporters when their main bank is unable to help.

Subhead: Exporting services

Austrade provides a range of services and assistance to Australian exporters including general market briefings on what to expect in international markets, cultural tips on doing business overseas, information about local commercial practices and requirements as well as local industry insights and contexts.

Austrade can guide companies through the process of selecting suitable export markets for their product or service, advise them on upcoming overseas promotions for Australian organisations such as trade missions, and alert them to the potential financial assistance and government grants available for Australian exporters.

By accessing Austrade insights gathered from around the world, Austrade can help companies cut the costs, time and risks of engaging in offshore markets.

Once international leads or ‘opportunities’ are identified, specific requirements are gathered and, using Austrade’s database and Australian industry and government networks, relevant Australian suppliers are invited to submit an expression of interest to Austrade.

Organisations that match the required specifications are then submitted to the foreign customer and if interest is shown, a formal introduction is made by Austrade. As needed, assistance and advice are provided to shortlisted Australian businesses to help win the business.

Austrade can also help foreign buyers visiting Australia meet with potential suppliers by setting up appointments and showcasing opportunities for exporters in Australia.

 

Austrade

13 28 78

www.austrade.gov.au

 

EFIC

1800 093 724

www.efic.gov.au