“The biggest mistake that small businesses entering the export market can make is to be conservative and overconfident. It is often what you don’t know that can hurt your business the most,” says Bobby Madhav, head of Trade and Collateralised Trade Finance at FNB Business.
For SMEs that are fortunate enough to have made it locally and are ready to go to next level of growth, venturing into the export market is the next step. However, Madhav warns that SME owners should avoid costly mistakes that could potentially harm their businesses.
The most common mistakes are assuming that merely doing research and having a good concept and value proposition are enough to guarantee success, he says.
“In spite of these important factors, without the relevant experience, guidance and partnerships, small businesses are bound to fall victim to costly export errors,” says Madhav as he shares 10 common export mistakes that businesses should aim to avoid.
1. Not willing to learn from others – SMEs that consult experienced exporters, within their sectors, learn a great deal from their past failures and successes. This form of advice is usually free and can save a business time and money.
2. Abandoning core market – neglecting the core market can result in the business losing customers and market share. This can lead to complete failure, should the export business not do well.
3. Replicating products – because each market is unique, it is essential that products and services are tailored accordingly. Merely replicating a model does not guarantee success.
4. Not forming the right partnerships – it is not practical to try and understand all the local market dynamics through acquired research. SMEs should aim to form the right partnerships with suppliers and stakeholders on the ground to improve their chances of success.
5. Long-term commitment – venturing into an export market should be approached as long-term commitment for the business. Expecting success too soon will often result in disappointment.
6. Underestimating competition – SMEs should never underestimate competitors regardless of how good their offerings may be. Competitors do not want to lose market share and can quickly adjust their products and services, since they understand the market better.
7. Over extending the business – resources and energy should be invested in one market at a time. Once successful and the business is operating smoothly, only then can expansion to other markets be considered.
8. Trade finance mistakes – collaborating with a bank or financial services provider that can offer SME exporters unique solutions to overcome financial constraints is essential. For example, Collateralised Trade Finance (CTF) offered by FNB provides businesses with tailor-made solutions that meet their trade financing needs outside of normal banking credit lines. CTF provides SMEs with innovative financing and risk hedging solutions that cater for all their exporting needs.
9. Poor risk management – it is almost impossible to prepare for the scale of business risks presented by foreign markets without a comprehensive risk management plan in place, which takes into account factors such as politics, regulation, crime, cultural and market risks etc.
10. Not having a plan C – one of the questions that business owners should ask themselves when putting together their export plans is – what happens if my plan A and B fail? A thorough export plan should be forward looking and contain the lowest level of detail.