What is stopping small businesses exporting?
Complex regulations around tax and VAT can seem onerous to SMEs, but there is support available to help businesses cut through the red tape.
Amid a climate of strengthening business growth and economic prosperity, budding SME exporters should be feeling more confident than ever about sending their goods and services overseas.
According to the British Chambers of Commerce (BCC) almost one in five service sector firms is currently on the verge of exporting.
So what’s holding them back? For almost a third (32%) of those exporting for the first time, excessive overseas regulation was seen as the biggest barrier, the BCC figures showed.
In another survey by BSI, one in four (25%) SMEs fear external regulations will hinder international expansion, followed by a lack of contacts (17%), resources (16%), knowledge (15%) and talent (15%).
The complex regulations around tax, VAT, and compliance that surround the export process can seem onerous to SMEs, especially those trading overseas for the first time. The situation is compounded by the fact that the rules around exporting vary from one market to another.
But with help and support available from a variety of sources, there is no reason for SMEs to allow red tape tie up their export plans.
Often it is simply the fear of the unknown; foreign markets, unfamiliar languages, cultural nuances and confusing local laws that must be observed.
A solution for many exporters is to engage the services of a third party provider that has the specific expertise and knowledge of the destination market as well as established relationships with delivery partners in those territories.
Many of the largest logistics service providers include useful information on their website, for example, the UPS Export Toolkit explains how taxes are calculated on goods crossing borders and clarifies the rules around VAT ratings. As a customs broker UPS can also help facilitate moving goods across borders. Some companies have found that investing in staff training can also help with complexities of international export regulation.
Headquartered in Derby, digital communications firm Simoco Group operates in the US, South East Asia, Middle East and Australia as well as in the UK.
Regulations vary between countries, so it’s important to understand local legislation and stay on top of any changes, says CEO Mike Norfield.
He says: “Obtaining export licences can be time consuming and complex as the regulations are different for each country, so it is important to have well trained and experienced staff. Exporters, whether new or not, should invest in specialist training and regular refresher courses for their staff.”
The company also calls on the services of their local chambers of commerce, which they find particularly helpful as they can and do pass on the shared experiences of other member companies.
Where SMEs are unable to tap into the networking and support services of a trade association or local chamber of commerce, Hari Mann, entrepreneur and faculty member at Ashridge Business School, suggests they contact the British embassy in their destination market.
He says: “They help to promote UK trade and provide government support for the exporter. However, I think that more needs to be done to make SMEs aware of this.”
Other organisations such as UK Trade and Investment and the Institute of Export also have experienced staff dedicated to providing practical help and support with regulation and compliance around exporting.
These bodies also offer training courses, often delivered as short modules that focus on specific elements of export legislation in key markets.
Exporters can never have too many good contacts, and the advice to new exporters from Stephen Fear, the British Library’s Entrepreneur in Residence, is to ‘network, network, network’.
He advocates searching online for good quality export forums to engage with and adds that the Business & Intellectual Property Centre at The British Library in London is well worth a visit, not least for the huge amount of largely free advice on offer to exporters.
Finally, SMEs need to overcome the psychological barriers to exporting, which can often be the result of listening to the negative experiences of other exporters.
There are horror stories about shipping goods to some of the more challenging overseas markets in the Far East, but SMEs with export plans of their own should not be deterred by another business owner’s bad experience.
By seeking out the advice that is available from the relevant bodies, finding an experienced delivery partner, and finding out as much as they can about their chosen markets, many of the barriers to exporting will be removed.
Stephen Fear adds: “We all suffer from fear of the unknown, so my advice to new exporters is to educate yourself until the issue facing you is no longer unknown.
“Become knowledgeable about the subject of exporting, either by going on courses yourself or designating a couple of members of your team to go. Only after acquiring knowledge are you ready to take on the world.”
Content on this page is paid for and provided by UPS, sponsor of the Exporting to New Markets hub on the Small Business Network.