More essential export tips from Colin Crabbe, International Trade Manager with BGI

Colin Crabbe is a highly experienced exporter with over two decades of first-hand familiarity in diverse markets in Africa, the Middle East and the Far East.

Drawing on his own experiences, Colin is a regular contributor to this website with practical articles to assist the less experienced exporter. Here are some more of his commonsense nuggets of wisdom:

“This month’s tips comprise a few basic observations which may seem a bit obvious, especially for more experienced exporters, but they are based on queries which keep recurring at the export seminars and workshops which I attend.  The more I have thought about them, the more important I think they are – so here are a few export “back to basics”.

• Use free advice services whenever you can.  The point here is that in export support – and indeed in many other areas of business – there are a large number of consultants and professional advisers who, although commercially driven, are often perfectly happy to dispense a degree of free, high-quality advice during a business introduction.

Don’t feel inhibited at asking for a free consultation of this sort if you have issues to be sorted or need specialist guidance.  I know a lot of people feel advice of this sort can cost an arm and a leg – and indeed, so it can – but a lot of service providers live in the real world and will be very willing to give you some good free advice.

 

From my past experience, they may do this for a combination of motives.  In the first place, they may welcome the opportunity to show you what they can do, and impress you with their capability for future business opportunities.

 

But I have also found a lot of goodwill around.  Professional firms don’t like to see people struggle or fail simply through lack of direction.  They have a living to earn and are not a charity, but I have often found a great willingness to help small businesses in particular to achieve success.

• Letters of credit.  Another important export issue which particularly affects providers of services, as distinct from products, is a dangerous reluctance to use letters of credit because of a perceived difficulty in defining the scope of your services.

I have talked about this topic on numerous occasions with bankers and the general consensus seems to be that, although you may require some assistance from a bank to do so, if you can describe your service and in particular how much can be delivered at key points in a contract, then you are in a strong position to negotiate for stage payments along with a letter of credit.

 

It is undoubtedly easier to define the scope of a product contract – eg “delivery of xxx drill bits” – but it does also appear possible, with a bit of thought, to define key service points – “yyy hours of training or consultancy”- and in this way improve your cash flow along with reducing your risk of exposure.

 

On the subject of letters of credit, don’t ever be tempted to avoid this critically important process because you have a rush job, or because of technical problems like the above.  Early on in my own exporting career, we were once under great pressure to deliver a product and, in the rush, we over-ruled our clear company instructions that every consignment had to be supported with a letter of credit.

 

We pulled out all the stops, made the “hero delivery” and had a very satisfied client – or so we thought.  But when our experienced finance director learned that the goods had been supplied without a letter of credit, he simply said “I’m now going to have to write that off as a bad debt”.  That’s how important he thought a letter of credit is.

 

I’ve often found that banks will give you some good advice about how you can manage the “risk ladder”.  In an ideal world, you may want payment in advance but your client might prefer payment following delivery.  Your bank may well show some ways in which you can meet your client somewhere in the middle of the ladder.

• Protecting your intellectual property.  If you have products or services which have patent protection in the UK, you may want to think strategically about how this impacts on your overseas business.  Certainly you cannot simply assume that you can expect – or, come to that, afford – the same degree of IP protection in all overseas markets.  So you might well end up with a situation where, despite the opportunities presented, you choose to completely avoid suspect markets where there are known risks of product “cloning” and in which there exists little meaningful IP protection.

In short, especially if you have a product or service which could be easily copied, the strategic trade-off that you may have to make in your overseas market entry is simply sticking to markets where patent law is recognised and affordable.  It is certainly unlikely that you can afford to cover the costs of global IP protection.

 

And one tip which I have heard repeated by a number of legal experts is to ensure you secure the appropriate domain name as an affordable and effective first step towards more widespread patent protection.  In particular, if you manage to secure the “www”.com domain name variant of your preferred brand name, then you are in a strong position when you subsequently register for a trade name or formal legal brand protection.

• Definition of a contract.  This may seem very basic indeed, but it is imperative that you and your overseas client have a common view on the definition of the completion of a contract.  Are there recognised contract milestones, or is it measured by the number of man-days? Make sure you check this out with your client right at the onset of the contract – that’s when you want to find out whether you may have divergent views on this key area, not at the payment stage!

• The devil’s in the detail.  And finally, a brief reminder to ensure you don’t underestimate the complexity or the importance of basic procedural compliance when you enter a new market.  I’ve met so many exporters who got off to a sticky start simply because they didn’t manage to get work permits, banking arrangements or other basics right from the start.  There are many sources of advice and guidance in these matters – never hesitate to check them out.”