The decision to export can open up many new opportunities, but there are some serious questions that need to be answered first how to enter an export market
Your company has developed a product or service that you know has international appeal. Or maybe your company has performed well in the domestic market, but further growth prospects at home are limited. Either way, all the signs are pointing to overseas markets, but are you ready to export? Where would you start?
"We encourage our clients to attend the First Flight Enterprise Ireland programme for export and offer financial assistance to participate in trade events overseas," explains Eibhlin Curley, assistant chief executive with Dublin City Enterprise Board (DCEB).
'Why export?' is probably an even more important question to ask yourself than 'how can you export?', according to Stephen Hughes, director of Northern Europe for Enterprise Ireland.
"This is the key question to ask yourself at the outset," says Hughes.
Whether it is because the small domestic market may not provide you with the opportunity for growth that your company needs, or because you have a specialised product and find there are not enough customers in Ireland, or you are just looking for the increased security your company can achieve by spreading its risks over a variety of markets, you have to be clear in your mind why you want to export, he says.
The decision to export has major implications for the future of any business, according to Hughes. It is a decision which you should make with care, as not all companies have the resources, capabilities or commitment required at the time for export success, he says.
"There is the management capacity and there is the management capability," explains Hughes. "Do you have the bandwidth to give it the amount of time it requires - and the second thing is, do you or does the team in place have the capability to take that further? Underpinning all that, do you have the resource - and the resource could either be other people, or the money or time you might need - to be able to develop that market opportunity? There is always a time lag - the more complex the market, the greater the time lag is from market entry to market win to market penetration to market expansion."
Unless you can meet some basic requirements, the success of your export project is unlikely. According to Hughes, these requirements are: an exportable product; a competitive advantage; the finance to take it to the chosen marketplace; and a deep commitment to making it work.
"Do you have a competitive or differential advantage? The further you move from home, the more important it is to have a competitive or differential advantage. And a competitive advantage does not necessarily have to be a unique product - it might be a way in which you service the market."
Many problems of exporting are obvious: conventional trade barriers, transport, currency and credit-rating success. In some new markets, technical standards or regulations on such things as packaging, competence and expectation may be different from those encountered in your existing markets, with the consequent need to rethink servicing requirements. Cultural conventions and language may also present their own challenges.
When considering target markets, there are a host of factors to be taken into account, such as population size, demographics and the social and economic factors of target markets, as well as issues such as political stability. Don't tackle a whole market at once, but rather a segment or segments of it, advises Hughes.
Once target markets have been chosen, the next step is to conduct and evaluate market research into the sector - a process which can be time-consuming and costly.
"A lot of research can be easily done from a desk," says Hughes. Enterprise Ireland's knowledge-services department is the largest reservoir of export trade information in Ireland and is linked by computer to databanks overseas, according to Hughes. It contains market statistics and major research which, aided by Enterprise Ireland staff, can indicate the saleability of a new product in a given market, identify potential outlets, outline special regulations and offer an analysis of the competition.
Field research can be expensive, so it should be reserved for the markets that offer the best prospects for your product. However, county enterprise boards offer an Export Marketing Initiative Fund to help with market research.
"The fund can part-fund the cost of travel and subsistence, trade fair attendance and exhibiting, and the creation of marketing material specifically for overseas markets," says DCEB's Eibhlin Curley. The grant covers 50 per cent of eligible costs subject to a maximum of €5,000 per company in any one calendar year.
Trade fairs should be used for market research rather than as a first step to marketing a product, says Hughes, while ministerial trade missions are usually reserved for well-established rather than first-time exporters.
As part of your initial market research, you will need to establish that your product is basically suitable for the export market you have chosen, but most likely you will need to adapt it or make variations to suit the new market. "There is generally some sort of variance in the way you would handle the offer even in a market like the UK rather than in Ireland," Hughes says, "and a lot of people don't take that on board.
"They spend a lot of time trying to do something with an existing product in an existing way rather than understanding what the market wants and what it is saying and adjusting themselves accordingly."
How to enter an export market
Direct sales
Direct sales involves supplying overseas customers direct from your factory, with all contact looked after by you/your company or by your own resident sales personnel based in the market. You must ensure that your overseas sales personnel have the support of an office and possibly an administrative assistant. Very few companies will be able to set up their own office immediately with resident personnel.
Commission agent
The commission agent represents you in the overseas market. He or she sells your product and feeds orders back to Ireland. You ship the goods and invoice the customer directly. When the customer pays for the goods, you pay the agent commission on the sale. This varies from 2 per cent to 15 per cent depending on the type of goods being handled. Commission should be included in the price quoted to the customer.
Importer/distributor
Here, the importer/ distributor actually buys the goods from you, stores them in a warehouse and sells them on to a third party. The mark-up is usually around 33 per cent .
Joint venture/partnering
This involves choosing an overseas partner or entering into a joint venture because a local company already has a sales presence in the country who know the regulations.
"A lot of our guys would be too small to deal directly with the end customer, so they have to find partners of some description or other," says Stephen Hughes.
BUSINESS ANGEL CASE STUDY
FLUIRSE
Kerry-based e-learning company Fluirse's legal agreement with Enterprise Ireland and finalising the Business Expansion Scheme is taking longer than expected, according to Fluirse director Kristian O'Donovan.
"It really surprised us that finalising the shareholders' agreement and investment agreements would take this long. However, we are persisting as the benefits far outweigh the time delays involved."
Fluirse's recently-purchased Pitman Training centres in Tralee and Cork are now up and running. The initial interest in business, office and IT training in Cork is excellent, according to O'Donovan, and the company has teamed up with Hopkins Communications to plan the marketing campaign for the centres.
However, telecommunications glitches have caused problems for the company, he says.
"Eircom seem to have been the greatest problem this month," he says. " seemed to complicate everything. For example it took over eight days just to move our number and we had to organise a temporary line. We are also struggling to get broadband from them for the new Cork offices. However, we were lucky that our neighbours, Amocom, gave us wireless broadband within 15 minutes."
During the month, O'Donovan and fellow director Tomas Finneran met with Enterprise Ireland to plan out the company's activities for the year.
"The company has been set milestones for the next nine months and if they are achieved we could be ready for a further, more substantial round of funding by December," explains O'Donovan. "This would allow us to move aggressively into the UK market quite quickly."
The company has also managed to finalise its programme of summer courses for teachers and attended the Computer Education Society of Ireland's annual conference last month. "The number of courses we are offering has significantly increased and we are just waiting on approval from the Department of Education," he says.
OPENPLAIN
Dublin-based start-up Openplain, the company behind the JournalLive online monitoring software service, recently added a new member to the team. Serial entrepreneur Paul FitzGerald, founding director of Calculus UK, has joined as an investor, board member and channel manager.
"Paul's role is to drive revenue through indirect sales channels, European and US resellers and distributors. His initial focus is developing relationships with Irish and UK-based Microsoft value-added resellers," explains Openplain's managing director, Jonathan Mulligan (pictured above).
JournalLive's ability to automatically create employee timesheets and decrease the time employees spend on personal browsing, email and instant messaging is proving quite popular with their partner's client base, he says.
"Our recurring revenue split is proving quite popular with our partners," says Mulligan. "Our technical guys having been working on making JournalLive easier to use and deploy. The latest addition has been to integrate with Microsoft's Active Directory. Effectively this means large groups can be automatically enrolled in seconds and because we use Single Sign On, users don't have to remember any more usernames or passwords."
The company was also be on the panel at the IntertradeIreland private equity conference in Belfast at the start of the month.
We continue our series on companies seeking to raise cash through the Business Angel Partnership. This month, we revisit Openplain and Fluirse to see how they are progressing
