Featuring • GrowthAccelerator • UKTI • FD Solutions • Advantage Business Partnerships • Supreme Creations • MARK/GIUSTI • Smart Currency Business • Sterling Trade Finance • Interface Financial Group
BUSINESS GROWTH ISSUE 3
04 Accelerating business growth Interview with GrowthAccelerator’s Karl Eddy
Provided by UKTI London’s Parveen Thornhill
18 Passport to Export
Smart Currency Business Editorial
Editor Yi Ling Huang Designer Tom Cocks Media Enquiries Rachael Kinsella
Contributors
MARK/GIUSTI share their success story
CEO Charles Purdy Director Carl Hasty
Karl Eddy, Mark Farhat & Tiziano Giusti, Carl Hasty, Howard Jackson, James King, Steven Pleace, Smruti Sriram, Parveen Thornhill, Daryl Woodhouse
Guidance from Howard Jackson
020 3773 6135 insights@smartcurrencybusiness.com smartcurrencybusiness.com Smart Currency Business, 1 Lyric Square, London W6 0NB Smart Currency Business @SmartCBusiness
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In the spotlight
International growth strategy
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Reaching milestones
Article images courtesy of Advantage Business Partnerships, FD Solutions, GrowthAccelerator, Interface Financial Group, MARK/GIUSTI, Smart Currency Business, Sterling Trade Finance Supreme Creations & UKTI.
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Top tips for exporters
Contact us
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Insights: Business Growth is produced by Smart Currency Business, part of Smart Currency Exchange Ltd. Smart Currency |Exchange Ltd. is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009 (FRN 504509) for the provision of payment services. Registered in England Company No. 5282305. ©Copyright 2015 Smart Currency Business.
Carl Hasty on surpassing ten years of growth
10 Tips for expanding abroad
Daryl Woodhouse on how to plan for overseas growth
20 Trade finance Steven Pleace on how to fund international trade
22 Smruti Sriram on growing a sustainable business
Single invoice finance As explained by James King
The secret to growing your business …is that there is no secret. It is easy to promise one solution to growing your company, but the reality is that expanding your business involves a collection of different operations, opportunities and possibilities working in perfect synchronisation. That is not to say that business growth should be difficult or unattainable. Businesses require a wealth of guidance on different aspects of business growth, from the obvious (e.g. having a strategy in place) to niche points (e.g. saving on currency costs to fund international growth). This issue of Insights features guidance from experts in a number of areas. Karl Eddy from Government-backed GrowthAccelerator discusses UK business growth, while Howard Jackson from FD Solutions and Daryl Woodhouse from Advantage Business Partnerships look at different aspects involved in international expansion. Exporting is a key avenue of business growth for many companies. Parveen Thornhill, Director of UKTI London, shares her top tips for UK exporters, while Mark Farhat and Tiziano Giusti from accessories label MARK/GIUSTI share the story behind the success that they have achieved following a UKTI programme. On the funding front, Steve Pleace from Sterling Trade Finance navigates businesses through the complex but crucial waters of trade finance, while James King from the Interface Financial Group explains how single invoice finance works.
As our contributors reiterate time and time again, expanding your business requires careful planning. Business growth is about having a strong appetite for more success, and having the right sort of conversations to bring this about.
Business owners also demonstrate how to stay true to their values, as well as to their clients. Smruti Sriram discusses how ethical eco-friendly bag and packaging company Supreme Creations has built its business upon foundations of sustainability, and I share how paramount customer service has been to Smart Currency Business’s growth.
I welcome any questions, comments and feedback from readers, to help this publication grow to its full potential.
From a practical standpoint, growing your business is about more than ticking off boxes from a checklist. It’s about speaking to the experts who will help you to identify your goals and stay on track, or who know how to recalibrate when obstacles get in the way.
Wishing you every success in growing your business,
Carl Hasty, Director Smart Currency Business
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Accelerate your business growth Government-backed GrowthAccelerator’s Karl Eddy discusses UK business growth. Please tell our readers what GrowthAccelerator does in a nutshell. By delivering uniquely tailored advice to ambitious businesses, GrowthAccelerator helps businesses to grow, and in doing so is adding considerable value to the UK economy. Based on our Year 2 results, the service has delivered £1.5 billion in economic growth and 36,000 jobs.
“Growth – and particularly sustainable growth – is a huge challenge that small and medium sized businesses face.”
Backed by the Government, the service is led by Grant Thornton UK LLP and delivered by a consortium of the country's leading business growth specialists. We are currently working with over 16,000 small and mediums sized businesses across England. You’re doing exciting work with Hyper Growth businesses. Can you elaborate? Hyper Growth businesses are GrowthAccelerator clients that have grown at a remarkable rate, far beyond what would be commonly considered 'high growth'. On average, these Hyper Growth businesses have seen growth in excess of 120% over a single year, while the average SME will have seen growth of around 7%. When we identified these businesses we wanted to know more about them, and particularly about the leaders who have presided over and driven this period of exceptional growth. Our Hyper Growth study does just that as it looks at the characteristics, culture, nature and approach of the businesses and their leaders. The findings were fascinating and ranged from the importance of setting ambitious targets for growth, to the challenges of recruitment and retention, to the positive attitude these leaders have towards taking calculated risks, responding to mistakes and taking on board advice.
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GrowthAccelerator success stories
Rosa's Thai Café In one year: • Up from 30 to 52 people • Turnover up from £1.4 million to £2.8 million • Ambition to expand and open seven new restaurants After returning from living in Thailand, Alex Moore and his wife Saiphin set up a Thai restaurant in the East End of London. After enjoying rapid growth and opening another site, the business was approached by several opportunistic investors, but Alex wanted to keep growth managed. He turned to GrowthAccelerator for support. Says Alex: “Our coaches helped us to streamline our operation and merge our businesses together to form one legal entity. We moved from being a family-owned business to a professional organisation. They helped us with leadership and management training, as well as implementing an appraisal system for all members of staff. Also – crucially – they put us in touch with a Thai language company who translated all our health and safety laws, as all of our chefs are from Thailand. At the end of the process we were actually sad to see the coaches leave the company, as they had been so instrumental in helping us to grow and manage how the business was run. We felt that the business had really come out of a tunnel and was starting to do very well. We had opened up our fourth site and had a new structure, so we put together a ‘friends and family’ round of investment of around £100,000 and invited both of our GrowthAccelerator coaches to participate in that. It was ironic – in the beginning we wanted their help because they didn’t want to take anything from us, but we were delighted that they took us up on our offer and both now sit as advisers on the board. We’re in good shape right now. We have four restaurants, all of which are making money. They are under one company and are smashing targets from last year. We have plans to open several new restaurants over the next few years. Our goal is to get up to ten restaurants and then sell the business, either exiting the company or perhaps staying on and helping Rosa’s get to the next level.”
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“I think that growth doesn't happen by accident; businesses need to be intentional about wanting to grow and put in place the right plans and strategies to achieve this.” How important is trading internationally to business? It is certainly an important part of the mix of activities required for growth. Research shows that when done well, exporting and international trade can not only lead to growth but also to improvements in productivity. It is for this reason that GrowthAccelerator works very closely with United Kingdom Trade & Investment (UKTI) to support those businesses we work with to think and act globally. What do you see as the key risk to be managed when trading internationally? The risks will obviously vary according to the individual business but in my experience they tend to be in one of three areas: the costs involved, be they the need to set up new distribution networks, modifications to product ranges, or simply market research; the competition within a particular international market which will be new and possibly unknown; or general confusion from operating in a different language, a new market or a different regulatory environment.
Do you have any tips for UK businesses looking to expand their operations and grow? I think that growth doesn't happen by accident; businesses need to be intentional about wanting to grow and put in place the right plans and strategies to achieve this. They also need to have the right teams in place, and that may mean recruiting new team members with particular skills sets, or recruiting in the anticipation of growth. But it will also require an investment in these people, making sure they have the right skills to drive the business forward. The leaders of these businesses need to be willing to listen and learn, both from their teams around them, but also from others external to their businesses. I am a big believer in the value of peer networks and support. And of course, they should engage with GrowthAccelerator!
What do you see in the foreseeable future for UK businesses? Growth – and particularly sustainable growth – is a huge challenge that small and medium sized businesses face. Of all the small and medium sized businesses that started-up in 2009 only 4.1% grew to achieve at least £1 million in turnover by 2012. I see this challenge remaining for the foreseeable future. The UK's growth problem will not disappear overnight and that is one of the reasons why services like GrowthAccelerator and the Manufacturing Advisory Service are so important.
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Karl Eddy is a Partner at Grant Thornton and the head of the National Government Infrastructure Advisory Team. He is also the head of business growth services organisation, GrowthAccelerator, which is part of the Business Growth Service. ga.businessgrowthservice.greatbusiness.gov.uk
GrowthAccelerator success stories
NCI Group In one year: • Jobs up from 52 to 71 • Turnover up from £4.4 million to £6.6 million • Ambition to reach £50m turnover in next three years According to Neil Richards-Smith, Managing Director of the NCI Group: “My business partner Craig Duwell and I founded NCI in 2000 to offer breakdown cover for motorcycles. Since then, we’ve experienced rapid expansion and growth and now provide a range of products including roadside vehicle rescue, car and pet insurance, and fund management. We also run a call management business that supports both NCI and its white label customers. As our growth continued, I recognised that the senior leadership team needed to challenge its embedded ways of working, and change our style to fit with the changes in the business. Our directors have been running this business for a long time and had always done things a certain way so we needed to bring someone in from outside and help us identify where change was required. The great advantage of GrowthAccelerator was that we could choose our Growth Coach. We knew everything we needed to know about our industry, but we didn’t have that outside opinion about what could work well in our business. We looked at several coaches before unanimously selecting Jayne Reid, whose expertise and personality we felt best fit our requirements. With Jayne’s support, we identified a key barrier to growth in our lack of marketing strategy around how to upsell or cross-sell to our database of 100,000 customers. Jayne worked with us to develop and introduce a campaign which saw a complete change in culture, encouraging the directors and the wider team to work in a much more integrated way and think more proactively about sales. A big part of this was training for our customer service team, which helped them to cross-sell and learn about the range of products.” To encourage our directors to challenge and adapt their ways of working, we also took advantage of the match-funding offered by GrowthAccelerator for Leadership and Management training. The directors found this training so invaluable that we’re now rolling it out for our managers. In the last two years NCI has grown from 52 people to over 100. Turnover has followed the same pattern and is now up to around £23 million this year. However, we plan to continue expanding in the next financial year and have a goal to reach a turnover of £50 million within the next three years. This isn’t a target we’ve plucked out of the air. It’s something we’ve planned for and are confident we can achieve.”
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Surpassing 10 years of currency consultancy for business growth Smart Currency began with two entrepreneurs, Charles Purdy and Carl Hasty, who, after 30 years in the international money transfer industry, had witnessed the damaging effects that adverse currency exchange movements can have on businesses’ profits. The company now employs over 80 people and has helped thousands of clients minimise losses and mitigate risk on currency exchange. Carl Hasty, Director of Smart Currency Business, shares the company’s story. How far has Smart Currency come since its inception? We started out helping individuals with their foreign exchange requirements, but quickly realised that there was a demand for high-quality, personal service for companies that they weren’t getting from banks. We started Smart Currency Business to address this need and diversify our services. The corporate arm has been growing steadily – the team grew by over 80% in the past year alone, in order to meet demand and provide more added value to our clients and partners. Smart Currency now employs over 80 staff, each playing an important role in transferring over £1 billion for our clients to destinations all over the world.
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We’ve had an interesting trajectory. For instance, we started working with Government-backed
GrowthAccelerator around two years ago on growing our business. We reached the point where we could start supporting other growing businesses, and we did – by sponsoring the Globetrotter category at the ‘Brave and the Bold’, GrowthAccelerator’s inaugural awards ceremony, held in June 2014. What has been key to your business growth? There are a lot of factors, but one thing that we’ve found adds value both to our clients and to our business has been our engagement in dynamic partnerships. We help a wide range of partners add value to their clients with the services that we offer. Our business is not just about offering competitive rates. We also offer our clients high-quality, informative currency, industry and business-related content.
Publications like the Insights series focus on being professional, informative and relatable, shying away from typical ‘sales speak’. This makes us unique in the currency market, as we engage with existing and prospective clients by offering them useful information, not just in terms of currency, but in other relevant fields. We also organise events that allow our clients and partners valuable networking opportunities. Has sector segmentation been useful? It’s been extremely effective. As we’ve grown, we’ve grown increasingly convinced of the importance of tailoring our services so that they are industryspecific. We don’t just say that we tailor our services according to sectors, we have teams specialising in specific industries, who understand our clients’ business challenges and requirements. Our most recent successes have come from our detailed work in the fashion and aviation industries. What changes have you seen in the currency markets in the last ten years? Market volatility has multiplied in the past ten years, partly due to the financial meltdown in 2008. Additionally, currency markets have moved from transactional – with clients seeking exchange rates on the spot – to consultative, with clients seeking strategies in order to save money, minimise losses and mitigate risk on currency exchange. How is Smart Currency Business different from other currency exchange providers? Rather than offering our employees commission on transactions – an industry standard – we incentivise them based on customer retention, that is, keeping clients happy. This eliminates the risk of our clients being cajoled into transactions they don’t need. Each client has a dedicated trader who is always on the lookout for the best rates and ways to mitigate risk on their currency exchange transactions. I think that it is precisely this sort of conscientiousness that has helped Smart Currency Business to grow. We pride ourselves on excellent customer service. At the heart of it, we understand that our clients are (a) busy and (b) looking to grow their businesses. We provide fast, secure and reliable transfers, which involve quick and easy sign-up processes. What do you foresee for the future of currency markets? Global uncertainties are always shadowing currency markets, but as the pace of international business advances, so too do changes to economic circumstances and, consequentially, currency exchange rates. The landscape of the currency world can change quite abruptly, increasing the likelihood of movements in currency exchange rates. Businesses need to have robust strategies in place to minimise currency costs and mitigate risks – now more than ever.
Carl Hasty’s tips for minimising costs and mitigating risk when making international payments 1.
Know your budget rate.
2. Understand the consequences of currency fluctuations. 3. Ensure that you are not paying too much on each currency transfer through loose rates and additional charges. 4. Stem slow payments, as they could mean losing out on a deal. 5. Have a trader monitor the rates during invoice periods to help you try and buy/book at the ‘right’ time (although this can never be guaranteed, which is why risk needs to be mitigated). 6. Ensure your provider keeps you updated on market movements and provides you with the knowledge needed to benefit from market movements. 7. Be aware of the currency transfer products and services available to you and implement the best-fit strategy.
And what is in the future for Smart Currency Business? I’m focused on Smart Currency Business being the primary provider of currency exchange for UK SMEs. This includes continuing our work in the industries that we are currently involved in, and expanding into other sectors, in order to provide our clients with the best possible solutions.
Carl Hasty is the Director of Smart Currency Business. He has over 14 years of experience in foreign currency risk management, gained from working as a trader for the industry’s key players. He is passionate about educating businesses to avoid these pitfalls to enable them to protect their profits and thrive. smartcurrencybusiness.com
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Tips for expanding your business abroad
Growing a business internationally can be rewarding, but requires a lot of work right from the start. Howard Jackson from FD Solutions offers some guidance for businesses looking to expand overseas. International business expansion can be profitable and rewarding, but whatever the size of your company and however much you research the market, it does not happen without a degree of risk. Businesses like Tesco, M&S, and Sainsbury, for example, all expanded in America, made substantial losses and then retrenched. However, the rewards can be lucrative if you get it right. Expanding overseas may just help you grow your business, as long as you take proactive and preventive measures to mitigate the potential risks involved. Here are a few key things that you need to know when expanding overseas.
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Think it through Firstly, identify the commercial reasons for growing your business abroad. These can include anything from lower production costs to production line staff who are better skilled. Only when you are convinced that this makes sense from a general business perspective should you assess the financial side of the plan. Perhaps you are seeking access to new sales markets, or maybe you are compelled to have a subsidiary in a foreign territory in order to trade in that overseas market. Whatever your reasons, operating overseas can involve significant investment in terms of money and management time, carrying with it reputational and operational risk. Economic cycles regularly change, so be wary. Costs can change significantly very quickly overseas, and currency fluctuations can invalidate the original reasons for expansion.
Case study We worked with a company who set up a factory in China. The business was hit by wage inflation, meaning that production is now cheaper elsewhere, including in the UK. Remember to think long-term when making your overseas expansion plans.
Structure Identify the best corporate structure for what you are proposing. Whether it’s a company, partnership or other structure, your options will vary in terms of suitability and risk. Contact as many experts as you can, both at home and abroad. Find similar-sized businesses from the UK and ask their advice. Quantify fees early on, including figures for initial and ongoing advice. In different parts of the world, lawyers and accountants take on different roles, so what may work in one country might work differently elsewhere.
Protect the downside Have a clear exit strategy if it goes wrong, in order to protect your UK company.
Case study A UK leisure services company entered the Japanese market via an exclusive sales agent. They did not incorporate a local company to trade through, thinking that this would save money. When the business started to take off, the business found that it faced barriers to expansion, and had to negotiate its way out of the agency agreement. Start out assuming you will be successful, as cutting corners early can have costly ramifications later.
Sending staff abroad It may be appropriate for you to send seconded UK finance staff abroad – the advantages may outweigh the resultant resettlement costs. Local staff may not be able to communicate what is happening on-site in to you in a way that is effective, and it is important for you to have eyes and ears on the ground. Controlling your proxy’s purse strings will ensure that you spend wisely while getting an insight into what is happening at your overseas base. Starting up a company is relatively easy, but getting rid of unsuitable staff can be a problem. It is also vital that you understand the local employment laws in the country that you are trading in, especially payroll and redundancy laws.
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Show me the money Heed the case of a UK company with a Venezuelan subsidiary: repatriation of the latter’s profits were reduced due to exchange controls and devaluation over the ten years it took to extract the cash.
Be patient Everything may seem to take longer than you expect, but be patient. Crucial basics like setting up a company or bank account – or other regulatory matters – can take significantly longer overseas than in the UK. For example, setting up a company in Holland requires several visits to the country including a trip to a public notary, while getting work visas for Russia can be complex, expensive and a drawn-out process. It’s important to get it right to protect your business from potential risks.
Case study A US subsidiary of a company that we worked with was facing closure. Given its structure, it was confronted with issues: inter-company loans, trademarks and patents, and other matters – all in favour of the US company, not the UK parent. A complex exit strategy was required to move assets prior to closure in order to avoid potential legal issues.
Business ethics – it’s not ‘one size fits all’ Business practices vary from one country to another; in a large country, there can be regional differences. What we consider normal in the UK is not always the case overseas, so be sure to protect yourself from any hidden agendas. Depending on the country that you are trading in, common problems can include corruption, bribes, unfavourable tax laws, general laws against foreigners, and protection money. It is vital that you carry out a risk assessment and have antibribery procedures in place.
Making profits is of limited value if you can’t repatriate the money back to the UK, so get good advice from the start. Issues to consider include double tax treaties, currency hedging, withholding taxes and transfer pricing agreements.
Things to consider •
Equality issues in Europe and the USA
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Annual wage supplements (known as the 13th month payment) in Singapore
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Redundancy expenditure in Holland, which is usually higher than in the UK
The language barrier Attracting local staff can be a challenge. In some countries, working for an overseas company is an honour, in other countries it is considered a loss of face. Knowledge of the local language or languages is an advantage. Seconded staff who speak in the local tongue or who try to learn it show commitment by doing so. It also helps them to fit in and communicate better with local staff and contacts. A final tip… A finance director can help with your expansion plans. An experienced FD can advise you on financial issues related to sourcing new funding, handling foreign exchange issues and opening offices. They can also work on the financial implications of your strategy, in order to help you expand your business proactively and profitably.
Howard Jackson is Managing Director of FD Solutions, and has a wealth of experience in helping businesses grow. fdsolutions.uk.com 12 |
International growth strategy Advantage Business Partnership’s Daryl Woodhouse on how to plan for overseas growth.
There will be fewer stages in the development of your company that are more interesting and invigorating than the reviewing of its potential to expand overseas. Although this may be daunting, the process of that expansion can be quantified, simplified and optimised by engaging in some straightforward, prudent steps. For many businesses, a one-off order, defined contract or maturing client relationship will open the lines of communication with overseas contacts and allow your firm to see first-hand the potential opportunities that exist. With your appetite suitably wheted by a progressive and profitable chunk of early revenue, how you approach investigating an opportunity to expand into your target market can have a material effect on your success in the medium and long term. Methods of entry into new markets There are several ways to enter foreign markets, but almost all are a subset of the following: •
The ‘Light Touch’ or Agency model: In which a presence is established locally in the new market but core activities are maintained domestically
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The ‘Big Bang’ or Fully-scaled model: In which a full presence is established locally in the new market that complements the domestic activity
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The Hybrid model: Which contains component elements of both
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Companies will often look to transition from a light touch model to a fully scaled one when milestones that have been agreed upon have been reached – and exceeded. In the early stages, prudence dictates that many of the operational costs will be kept as variable as possible at first. These will then firm up over time to match revenues. If your business involves manufacturing, this inflection point can occur when the combination of domestic costs of production and the logistical costs to transport the product outstrip the costs to produce in the target market. Simply put, there is usually a natural juncture where it may be less beneficial to source supplies from the UK. On the other hand, it is also possible that the scale of expansion in the new territory can help to accentuate efficiencies in domestic production. Strategic review In all cases, the shrewdest path forward is to invest the requisite time, effort and energy to define the macro environment and sector market opportunities as early as possible in your decision-making cycle. The macro environment can be defined using a PESTEL analysis. This illustrates the Political, Economic, Social, Technological, Environmental and Legal frameworks for your intended country of operation. There are a few key points to keep in mind when conducting a PESTEL analysis: •
Many countries have incentives to open operations within their borders – United Kingdom Trade & Investment (UKTI) can assist with this.
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Legal and regulatory environments can vary greatly from country to country, especially in relation to employment law.
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Eurozone expansion would help limit currency exposure across various potential markets as you will be dealing with euros, rather than a variety of currencies.
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Economies that are experiencing high inflation or hyperinflation will typically have currencies that are devaluing and tend towards instability in the medium to long term.
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Territories have varying views and tolerance levels towards intellectual property and copyright infringement.
“In all cases, the shrewdest path forward is to invest the requisite time, effort and energy to define the macro environment and sector market opportunities as early as possible in your decision-making cycle.”
It is also worth consulting the ‘Doing Business’ economy ratings that are produced by the World Bank. These compare countries based on the ease of access to the key components required for businesses to operate effectively. The specific sector that your company operates in should be extensively reviewed within the target market. You will need to use the latent experience within your own company – as well as the industry expertise both within your network and available online – in order to form significant input that can be used in your decision-making process.
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Business plan A detailed business plan should also be prepared during the course of reviewing any potential investment. The plan should outline the reasonable case for revenue and cost progression when trading in your chosen country. Most businesses will do this by employing a net present value (NPV) methodology, where planned revenues are discounted back to today in order to derive today’s valuation. It is important to review plans for entering your proposed overseas market. Clarity and certainty of the value and range of your currency requirements are a cornerstone of this valuation and enables the decision-making process. Currency exposure suggestions Some firms have been known to operate a strict policy of invoicing and collecting in their own currency – effectively outsourcing the currency exposure to their clients and suppliers. Others also ‘lead’ by paying their suppliers early when rates are moving unfavourably, or ‘lag’ payments to wait for implied discounts when rates are improving. However, these methods are fraught with supplier risk and may impinge on the stability of longterm relationships with suppliers. Other companies engage in payment ‘netting’ to ensure that all invoices are netted locally, while others have been known to match costs and revenues in the same currency as a matter of policy. On a transactional basis, the use of financial derivatives to mitigate currency exposure is a crucial element to ensure the viability and profitability of your transactions and contracts. Summary International expansion can have exciting and rewarding effects on all parts of your business. It can also expose your company to new types of clients, as well as to market opportunities that will have enriching effects on your team and your business, far beyond the top and bottom line.
“International expansion can have exciting and rewarding effects on all parts of your business. It can also expose your company to new types of clients, as well as to market opportunities that will have enriching effects on your team and your business, far beyond the top and bottom line.”
If you are planning on expanding your business overseas, it is important to employ rigour and the right processes at an early stage, when engaging in strategic assessment of potential growth. This is the key to ensuring that the journey is both enjoyable and rewarding in equal measure.
Daryl is the Founder and CEO of Advantage Business Partnerships (ABP), a nationwide group of professional business growth advisors who help businesses of all sizes improve their growth strategy and develop the capability of their staff. ABP’s Strategic Performance Assessment (SPA) tool provides SMEs with the opportunity to see both their strengths and weaknesses in order to grow successfully. advantagebusinessltd.com
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UKTI top tips for exporters Director for UK Trade & Investment (UKTI) London, Parveen Thornhill, on why exporting needn’t be the reserve of the big guns.
When you think of exporting, it’s easy to be put off. Mental images of crates stacked on cargo ships shuttling their way across the oceans is enough to give anyone the impression that exporting is for the big guns – a distant dream for the future, perhaps, but certainly not something for a business to consider. Indeed, some people may already be exporting and not realise it. The fact is, as soon as you sell overseas, you’re exporting. Perhaps this misconception is why only 32% of SMEs in Britain are exporting, with the rest missing out on the bounty of demand for British goods and services out there. In my capacity as Director of UK Trade & Investment London, I’d like to reverse this trend so that small and medium sized companies can tap into global demand, boost their revenues and take their business to the world. I’m always keen to remind businesses that exporting is accessible and an option for businesses of any size – from the smallest micros to wellknown brands. With developments in e-commerce, access to UKTI’s armoury of advice, funds and support and a good bit of old fashioned business instinct, the world really is your oyster (and, if you sell oysters, the world could soon be buying them). I want businesses to know that exporting not only boosts their revenues, it can help them become more resilient, more efficient and more profitable. Research shows that 59% of companies who began exporting also saw it lead to a wave of innovation and fresh new ideas, which enhanced their goods and services.
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That’s why I’m setting out five top tips for businesses – to show how they could soon be taking their business to the world.
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Get help We have found that after just 18 months of working with UKTI, firms earn on average a massive £100,000 in additional sales. By speaking with one of our International Trade Advisers (ITAs), you can build a bespoke export plan suited to your business needs. UKTI also runs a dedicated series of events and workshops designed to get companies exporting.
2. Take things one step at a time It will be tempting to pursue multiple markets at once, but it’s often best to focus on one or two markets at first. Although it might be the case that you encounter lots of potential business opportunities at the same time, by focusing on one or two markets you can really get a foothold and focus your energies on getting it right. 3. Show me the money! Once you’ve found your ideal market, it’s important to get to know the currency you will be dealing with. Consult foreign exchange providers, as they have a wealth of experience and knowledge. Speak to your bank as well as your International Trade Adviser about letters of credit and export finance. 4. It’s the little things that make a big difference
About UKTI UK Trade & Investment (UKTI) is the Government department that helps UK-based companies succeed in the global economy. They also help overseas companies bring their high quality investment to the UK’s economy – acknowledged as Europe’s best place from which to succeed in global business. UKTI offers expertise and contacts through its extensive network of specialists in the UK, and in British embassies and other diplomatic offices around the world. They provide companies with the tools they require to be competitive on the world stage.
Failure to take account of different cultures may lead to damaging or costly mistakes. This could range from causing For more information on UKTI, visit gov.uk/ukti offence by not observing or telephone +44 (0)20 7215 5000 protocol, to using inappropriate packaging or marketing. In Japan, for instance, never put someone’s business card in your back pocket as it’s considered rude. It’s best to take it in your hand and acknowledge it with a slight bow. Cultural faux pas are numerous, but with research and some gentle advice from your trade adviser, it’s a minefield you can easily navigate! 5. Good things come to those who wait Setting up overseas may not move as quickly as you expected; local customs and legislation can often slow things down. But, if you remain patient, the rewards will very soon make themselves known to you.
Parveen Thornhill is the Director for UK Trade & Investment London. UKTI’s London regional team is dedicated to increasing the competitiveness of SMEs in the capital through international sales development. A team of International Trade Advisers, part-financed by the European Union, delivers tailored help to businesses who are either exporting for the first time or looking to enter new markets. | 17
Passport to Export
MARK/GIUSTI started in 2009, the brainchild of accessories designers and entrepreneurs Mark Farhat and Tiziano Giusti. Dedicated to the production of luxury bags and leather accessories, with a focus on Italian craftsmanship, the brand started trading in the United Kingdom in 2010, and is now exporting to seventeen countries. How did MARK/GIUSTI achieve international expansion and success so quickly? Passport to Export We started trading solely in the UK, then branched out to Paris. About a year after we set up, we applied to take part in Passport to Export, a programme set up by UK Trade and Investment (UKTI). The UKTI website has a lot of resources, but we needed specialist advice that was targeted to our business. We were assigned an International Trade Adviser (ITA) who helped us through the stages of exporting. Being able to pick up the phone and ask someone for specific advice has saved us a lot of time.
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Besides helping us to plan a 12-month export strategy, our advisor also forwarded our business details on to other UKTI offices abroad, just in case they heard of anyone looking to source bags and other leather goods from the UK. Mission: International Our ITA also referred us to a UKTI trade ‘mission’. Once accepted, we travelled with other UK companies to Japan for a three-day showcase for fashion businesses. Held at the British Embassy in Japan, the event was attended by high-profile buyers as well as the press. UKTI helped us to present our collection, and we signed up as suppliers to United Arrows, a prestigious concept store with branches throughout the country. Since then, we’ve also been on UKTI trade missions to South Korea, Hong Kong, Norway, Copenhagen, Istanbul, Abu Dhabi and Dubai. It’s a lot of work knowing how to start exporting to a country, and even then, there may be issues that you’re not aware of without the relevant experience. UKTI has staff in countries all over the world, which makes them the best people to advise us on exporting to those countries.
Making the most of missions
“It’s a lot of work knowing how to start exporting to a country, and even then, there may be issues that you’re not aware of without the relevant experience.”
Passport to Export gives you the tools for export success, but you’ve got to be able to spot opportunities and seize them. Our tips for doing so include the following: 1.
Research the overseas market that you are considering It’s important to conduct initial research on the country that you want to export to. Draw up a list of questions to research once you are there, too. For example, it’s important to us to know what’s popular in an overseas market when it comes to leather bags, in terms of colours, types of leather, and so on.
2. Start building contacts before you visit the country Research potentially useful contacts abroad and get in touch before travelling. Try to set up appointments to meet these contacts when you are in the country. 3. Make your own route On one trade mission, we made some time to visit shops that we’d researched before the trip. We managed to make an appointment with the manager in the first shop that we entered. 4. Collaborate We met luxury menswear designers Ada + Nik on a UKTI mission to Hong Kong. They asked if they could include our bags and accessories in one of their catwalk shows. We don’t normally do our own catwalk shows, so this helped us tap into an audience that we don’t usually get in front of. Export success We’ve come a long way from trading in Kensington, London to expanding to countries all over the world. We now export to countries as diverse as South Korea, Nigeria, Japan, Russia, South Africa, Venezuela, Turkey, the US, UAE, France, Italy, Spain, Norway, Hong Kong, China, Vietnam and Taiwan – thanks to UKTI. We’re proud that we’ve achieved our initial milestones, but this is where it gets more exciting: in some ways, the journey has just begun.
Mark Farhat and Tiziano Giusti are the founders of the MARK/GIUSTI label. markgiusti.com
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Funding international growth with trade finance Steven Pleace from Sterling Trade Finance Ltd. introduces trade finance and explains how it can help businesses to fund international sales and growth.
Many UK companies are faced with opportunities to take on additional business but may be prevented from doing so due to inadequate financial resources. Limitations on the financial resources of small businesses routinely arise through a number of factors, which may include rapid expansion, seasonality of the business, exceptional one-off large orders or restrictions imposed by the final customer’s credit requirements. If your business faces any of these problems, then trade finance may offer the solution. What is trade finance? Trade finance is most simply understood as the ability to provide financing for a transaction that spans from a supplier of goods (the seller) to the final customer (the buyer). This covers both international and domestic transactions and often involves an intermediary party (the client) who buys from the primary manufacturer and sells to the actual end user or retailer.
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Facilities can be offered based on traditional credit analysis and balance sheet strength, often by credit insuring the client directly. However, specialist trade finance providers will use a variety of other finance products to provide an ‘off balance’ sheet alternative for companies which may not have the sufficient balance sheet strength, such as start-ups and growing companies.
This can be achieved by transferring the risk to the credit worthiness of the final buyer of the products via a factoring or invoice discounting facility. Such facilities on a stand-alone basis only address the post-delivery cash flow requirements by funding a company against their sales ledger or a selection of customer sales invoices once goods have been delivered. However, combined with a purchase finance facility, the client is also provided with the finance at the time of the purchase of the goods from the supplier. The trade financier can also act merely as the guarantor, undertaking that a supplier will receive payment before goods will be released. Products can then be held at a third party warehouse, allowing the customer to inspect the product and confirm that the quality is acceptable before making payment and taking delivery. Questions to ask when choosing a trade finance provider: •
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Can they be flexible? What are the variety of products they offer, and can you tailor your facility as your requirements change? Choose a specialist provider who can finance the whole supply chain. Are you important to them? How does the size of your facility requirement compare with those of their other clients? How much do they know about your industry sector? This may indicate the type of service you can expect.
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Will you be liaising with an experienced decision maker, who can provide added insight into international trade?
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What is the amount of funding required? Are the funder’s credit lines provided by a bank? At what level and how often does the funder have to seek their banker’s approval for larger transactions? This may affect the speed of decision making when it comes to funding.
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How do they handle the currency exchange and risk?
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How is the fee structured? Will you be charged on capital paid out or on end customer sales values? Are there minimum or non-utilisation fees?
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What is the length of the contract and are there penalties for early termination?
Case study We recently worked with a young and growing UK company with their own brand of fashion wear, with a requirement for funding stock purchases for their retail customers in the UK, USA, Europe and the Middle East. They also required stock for their own flourishing e-commerce site, and have opted for trade finance to fund the purchase of the stock, which would then be sold on to customers. The client placed their largest customer only on the selective factoring facility, which also provided them with insurance cover on bad debt. We purchased the goods from a number of suppliers based in Europe, which satisfies all their retail customer requirements. These suppliers require payment before delivery, and goods are then transported by truck to the UK warehouse. On arrival, the goods are split into delivery to retailers and stock to be held for sales online. The facilities can also be used to pay for freight, duty and VAT costs where required. Sterling is repaid from the sales invoices raised on the customer and directly from the client as the e-commerce stock is sold. Trade finance facilities also provide the client with options to fund stock for their own retail operation or concession within some of the major high street stores. This has provided the company with the confidence to increase their PR and Marketing activities, as well as accept larger orders now that there is a mechanism to support their growth. It also gives the owners the confidence to take a more measured view to investment offers that their success is attracting.
Steven Pleace, BA (Hons) Economics, is Operations Director at Sterling Trade Finance Ltd., a provider of facilities including selective factoring, supplier purchase finance and e-commerce finance. Steven has 18 years’ experience within the independent and bank owned trade finance, factoring and invoice discounting sectors. sterlingtradefinance.com
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In the spotlight: Sustainability Ethical manufacturer of reusable bags and eco-friendly packaging Supreme Creations started out selling to small farm shops. Today, the brand is one of the world’s largest manufacturers of wholesale jute, juco, canvas and cotton bags and sustainable packaging, supplying to over 50,000 clients worldwide. Company CEO Smruti Sriram shares the brand’s story, and provides tips for other eco companies on business growth.
Who are Supreme Creations? We are the world’s largest ethical manufacturer of reusable bags and ecopackaging. We create reusable and biodegradable alternatives to disposable plastic bags, supplying over 50,000 clients from international corporations to local businesses. Our products are produced in a manner that benefits both the environment and our thriving workforce in India. In recognition of our efforts to develop sustainably and ethically, we have been named HRH Prince Charles’s National Winner as his Example of Excellence, and have also been finalists in The Grocer Gold Awards’s ‘Green Supplier of the Year’ and British Promotional and Marketing Agency’s ‘Company of the Year’ awards. How have we grown in recent years? Our origins are humble: selling small orders of reusable promotional bags to farm shops and health food outlets. Then, in 2005, the movement away from disposable plastic in Britain led supermarkets to turn to us to help meet the new demand. An eye for long-term growth and a desire for this new craze to benefit the world led our founder Dr R Sri Ram to invest in our own factory in Pondicherry.
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After establishing our highly creative team, and releasing the UK’s first Fairtrade cotton supermarket bag with the Co-operative, our company has continued to grow from strength to strength. Now, our products can be found in millions of homes around the world, and we work at fashion weeks in London, Milan, Paris and Berlin. Brands such as Nike, Topshop and Unilever use our reusable bags as part of their marketing drives – showcasing their latest releases or brand messaging on these ‘walking billboards’.
“Have the courage not to be a simple channel through which others’ ideas flow, but shape those ideas to leave a greater mark; clients will then remember why they chose you.”
Bags of ethics The desire to produce our goods ethically is the cornerstone of our company. Our factory workers, 90% of whom are women and many of whom are sole breadwinners for their families, are paid more than their industry counterparts, leading to a far lower-than-average worker turnover. Our products are made so as to be carbon neutral, with eco-friendly inks eliminating chemical effluents. We also support the Wings of Hope Children’s Charity, providing education to children in Malawi and India.
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Tips for business growth
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Don’t be boring! We at Supreme Creations live by the mantra that ‘creativity takes courage’. Have the courage not to be a simple channel through which others’ ideas flow, but shape those ideas to leave a greater mark; clients will then remember why they chose you. Earlier this year, we launched the Innovation and Impact Awards, which recognises the most creative designs and products that we produce for our clients. The philosophy behind these awards is to ensure that, through collaborative efforts, we can be at the forefront of fresh and exciting ideas across industries.
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Be hungry The hunger for success is what drives growth. For your company to flourish you must always aspire higher, and push towards new targets. Though a small company, hard work made us a supplier for the UK’s leading supermarkets over the years. However, we could not sit on our laurels, so we aimed to be internationally recognised. Today we supply some of the world’s top brands in fashion, food, retail and lifestyle.
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Internationalise The international market provides huge opportunities for growing companies. Past the language barriers there are vast markets waiting to do business. We at Supreme Creations work directly with over 20 countries.
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Be brave Every business starts small in a world of giants. Those that grow are those who do not shrink from stronger rivals and partners, but eagerly engage with them. Any company can potentially join them as another success story. However, one success should not breed overconfidence. The market was once full of companies trying to profit quickly from the reusable bag craze. Supreme endures because we saw past one lucky break to a future of far greater achievements. Our first success was not the measure of our company – it was sustained success that marked us apart as a giant of our industry.
“These days, ethical business brings you more than just a lovely warm feeling. Consumers now demand more from companies, with 9 out of 10 prioritising brands that support a good cause.”
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Going green won’t leave you in the red These days, ethical business brings you more than just a lovely warm feeling. Consumers now demand more from companies, with 9 out of 10 prioritising brands that support a good cause (source: Edelman Good Purpose Study). Here is a pragmatic reason to behave ethically: it has become good business.
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Say thank you Be grateful to those who help you. This is a simple idea, but one worth reiterating. At our factory we have always tried to reward our workers’ expertise with warmth and appreciation, ensuring their contributions are emphasised to clients, who are told about the people behind their products. Good wages and good conditions reduce worker turnover, ensuing that our clients benefit from the experience of our workforce. Gratitude thus benefits everyone, from worker to client.
Smruti Sriram is the CEO of ethical sustainable packaging company, Supreme Creations. Passionate about empowering young people, responsible business and building networks for good, Smruti is also the co-founder of the Wings of Hope Achievement Award (WOHAA), a social enterprise programme offering 14-18 year olds in the UK the chance to manage their own projects. supreme-creations.co.uk
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Single invoice financing Interface Financial Group’s James King explains how invoice financing can support cash flow.
“Single invoice financing allows a company to sell an invoice or invoices on a one-off basis, as and when its business requires the working capital.”
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Positive cash flow is vital for both survival and growth in business – even profitable companies can run into trouble if their cash flow turns negative. Increasing sales (which can put pressure on existing resources), the lengthy payment terms often demanded by large customers and late-paying customers are just some of the reasons why many businesses face frustrating cash flow challenges. Factoring and invoice discounting are solutions that specifically target these cash flow challenges, allowing businesses to free up funds that are otherwise tied up in unpaid invoices.
Factoring Factoring can trace its roots back many centuries, to when it was used heavily in the textile trade. It involves a business outsourcing its sales ledger maintenance and credit control function to a factoring company, who will lend against every invoice that the company raises, thereby helping to improve the company’s cash flow. The outsourcing of this function has the added benefit of leaving the business’s management free to focus on increasing growth and revenue, rather than on chasing up on invoice payments. Invoice discounting Invoice discounting is a more modern variation, which leaves the sales ledger maintenance and credit control function within the company, but still allows it to borrow against the invoices that it raises. Again, this provides the company with a steady cash flow. Single invoice financing
By opting for traditional contracts, companies that require short-term invoice finance would be paying too much for additional services that they do not need. Invoice finance has evolved to overcome this, bringing forth single invoice factoring (also known as spot factoring or selective factoring) in order to provide a more flexible solution to companies that require shortterm or one-off cash flow injections. Single invoice financing allows a company to sell an invoice or invoices on a one-off basis, as and when its business requires the working capital. The flexibility provided by spot factoring allows the business to obtain the immediate financing that it requires, without being tied in to long term contracts or commitments.
“The emergence of new entrants into the UK market in recent years has helped to both raise the profile of single invoice financing and to dispel what preconceptions might have existed about the industry in the past.”
In an environment in which the availability of business lending and credit is still low, the factoring industry has continued to see solid growth since the financial crisis, with the volume of factored business in the UK increasing steadily year after year.
However, some businesses have a short-term need for invoice finance, whether it is because of irregular needs or reasons to do with seasonality. Traditional factoring and discounting arrangements tend to lock the user in to 12 to 24-month contracts, with ongoing minimum monthly usage requirements and fees.
The emergence of new entrants into the UK market in recent years has helped to both raise the profile of single invoice financing and to dispel what preconceptions might have existed about the industry in the past. With volumes still rising, it appears as though businesses are increasingly turning to invoice finance providers to support their growth.
A Director at the Interface Financial Group UK, James King helps businesses raise funds through single invoice finance. interfacefinancial.co.uk
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