Exporting Challenges and Opportunities for Micro Buinesses

In the current economic context, we are led to believe that our country’s recovery should and will be Export-driven, with SME’s as the pulling engine of this process.

Omitting the fact that the crisis is global and that most target export markets may have a similar reasoning for their own salvation, this notion would, at first sight, seem quite rational especially given the important weight of SME’s in our economy.

According to official data, in 2012 there were 4.8 million businesses, over 99% of these small or medium size, and – coming to my point: a staggering and possibly un-suspected 4.6 million or 96% of all these being micro-businesses.

While most people know the definition of an SME, ie those employing up to 250 people and reaching a turnover up to 50 million GBP, the notion of micro-business, perhaps a relatively new terminology, seems to be at best hazy, at worst simply unknown.

More to the point, tackling similar export development issues is bound to be vastly different for a business employing 250 staff than one employing 10, yet they are placed in the same group with indiscriminate support solutions.

WHAT IS A MICRO-BUSINESS?

Micro-businesses- (remember- those 4.6 million mentioned earlier)- employ up to 9 people and have a turnover up to GBP 2 million.

As such, they represent 32% of the employment and 20% of the total turnover of all UK businesses. (data from House of Common Library)
By anybody’s standard, this has to be very impressive.

Given their number and impact on the economy, it seems not only essential to recognise them as  backbones of our economy, but also to know their features.

Yet in my research for this article, I soon reached a stumbling point: beyond the basic data found from various reliable official sources, there seems to be very little, apart from data published by the FSB (Federation of Small Businesses) about what micro-businesses do, and even less about their involvement in Exports.
I admit, this left me rather perplexed, wondering: if, as a country we don’t know the features and needs of such an important group, how can we possibly find the necessary solutions to help it play its critical role in our export driven recovery?

How many export? What do they export? Where do they export to? Why don’t they export?
So far I have not found much meaningful statistical information specifically related to micro-businesses so I must continue on the basis of my knowledge and experience of this segment.

Micro-businesses are indeed active and dynamic with global development and perhaps there have never been better opportunities for their further development and success.

CHALLENGES

The challenges they face are overall the same as for any business, but because of micro-businesses small structures, these can be exacerbated to such an extent that returns may not be deemed worth the risks.

From my perception and experience, micro-businesses approach the usual export development challenges in a different order than larger businesses.

Where to start and go for advice is often the initial consideration for them whereas larger organisations would have skilled staff to undertake research.

The ability to deal with strange regulations and red tape is also a legitimate source of concern.

How to find customers or partners is a major worry, given the lack of experience, cultural understanding, and linguistically competent staff.

Financing export development, along with tackling financial matters linked to foreign payments, are  important aspects known to dissuade micro-businesses, often un-necessarily if they engage into a dialogue with their bank.

But perhaps one unfairly punishing difficulty faced by micro-businesses is about the financial burden and impact on margins that comes from dealing with large clients.

Through a mix of enthusiasm and inexperience, I have seen the best of deals leaving small suppliers bereft of margin by the time they have been subjected to non-negotiable T&C imposed by large clients, such as extended payments terms, discounts, pay-backs and various creative devices that will eat away the margin of an honestly quoted price.

In my opinion this is one of the greatest and most damaging of challenges for small businesses, placing them on an uneven position when engaging with large clients.
I always consider the best tactics to avoid such situations.

Ultimately, lack of time, along with anxiety of the un-known form a major hurdle.
Micro-businesses owners/managers are so busy being MD, Production Manager, Sales Director, Chief Accountant and Warehouse Manager that they have little time juggling everything - perhaps this will sound familiar to some of you?-

Yet, because of this, they demonstrate extraordinarily resourceful abilities to tackle such challenges on a daily basis to secure their business growth and survival.

The internet which provides so many sources of solutions can also be a barrier to cross border e-commerce development, given the constantly evolving regulations and lack clear, and consistent global legislation in this sector.

Again a very small business may be at a disadvantage here through lack of resources to keep up with fast changing technology.
However, dynamic micro-businesses ready to keep up with the evolution are quick to take advantage of new global trade opportunities open to them.
We all know examples of very small companies shipping their goods, ordered online, to far flung places. It is also worth mentioning here that, based on research carried out by the FSB, a high proportion of micro-businesses indicate that they don’t export because they feel they don’t have suitable products or services, which is fair enough, yet, many small businesses have become “accidental exporters” and progressed very well from then on.

Given appropriate support, training and incentives, these challenges can be overcome, and in many cases, micro-businesses, whether in manufacturing or services sectors will find opportunities to grow through export development. By endorsing such an approach they will secure their survival, creating revenue, employment and stimulating growth around them.

OPPORTUNITIES

Unsurprisingly, the internet provides enormous opportunities to micro-businesses for export development success.

By this I don’t mean just e-commerce platforms for B2B and B2C trade.

But, considering the challenges mentioned earlier, many solutions can be found by maximising the use of the Wonderful World of Web.

For example it is entirely possible, and strongly advisable, to carry out at least some of your export market research online, without leaving your office. I am still surprised to see how many businesses, mature and novice, under-use such an easy, very low cost resource.
If you don’t have time, somebody else can undertake such tasks on your behalf in a cost effective way.

Equally, you will find answers to many of the worrying questions about cultural aspects, rules and regulations, and opportunities if you know where to look, and have the time to do so.

In addition, most companies now have a website, giving them global presence, 24/7, for a relatively small investment.

This is in fact how many micro-businesses start as “accidental exporters”, and continue to be become seasoned exporters, gaining knowledge and competence in the process.

While nothing replaces face-to-face dialogue, it has never been easier and cheaper to communicate with clients effectively, organise web conferences and webinars anywhere in the world, from a desktop computer at the office.

My exporting career started some years ago, when communication was by telex- I hate to admit it!-, the invention of the fax, mobile phone and internet yet to come!

Export development meant serious investments, planning long and expensive travel, leaving a brave Export Manager on his/her own for many weeks (no mobile phone of course), and where the Export department was “that door at the end of the corridor where people speak strange languages, make complicated deals with foreign people, and raise invoices in exotic sounding currencies”.

In this respect, exporting, once considered the preserve of large businesses, has become equally open to very small organisations, provided that they are committed and do their “homework” correctly.

Another route open to micro-businesses involved with unique creative or scientific work, in my opinion too often under-explored, is the opportunity to export goods and services under licensing agreements, thus removing many of the risks and costs attached to exporting.
This requires careful approach and very competent guidance, but it is possible without “breaking the bank’, thus providing substantial growth opportunities.

The list of opportunities could go on, but at this point my recommendation to micro-businesses is to explore all possibilities, get appropriate support, and most importantly do what feel right!

Written on 17th January 2013 by Florecen C Denial, S&H LLP Associate

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