Industry view: Keeping ahead of the global game
As Aberdeenshire-based oil services firm ThinJack Ltd celebrates its 10th anniversary, director Guy Bromby shares some of the company’s experiences in international trading.
In a 2014 survey, Aberdeen and Grampian Chamber of Commerce reported that 41% of members see international market growth as “critical” but these companies do not necessarily have the “means, motivation and support to break into new overseas markets” which would move “the UK closer to producing exports worth £1trillion per year by 2020.”
HSBC’s airport advertising predicts a future where “even the smallest business will be multinational”. So just how can small and medium sized businesses put this into practice?
A conventional business plan might start with growth within one’s domestic market then look at overseas sales, working with organisations such as Scottish Development International to assess a company’s readiness to export.
At ThinJack, two of our company’s founders had worked in many countries before starting a service for separating seized well flanges.
However, even we were surprised when 90% of our first £1million of turnover was from sales outside the UK including the US, Australia and the Netherlands.
International trade may include advertising, receiving and understanding a customer enquiry, agreeing the work scope and terms of supply, forming a contract, identifying and managing risk which you can not eliminate, delivering the goods or service – and getting paid promptly.
This will, of course, be familiar to you so what is different with an overseas customer?
There are different and local taxes, business culture, labour laws, insurance requirements, health and safety and payment in another currency – it is important to collect and process this myriad information in a way that suits your organisation, possibly adapting systems which exist within UK operations.
Many people you will meet will immediately want to be your agent or distributor. Don’t rush this but focus on the interaction with the end customer who needs your services.
We found our most committed agent by accident after seeking advice on setting up a local company. Meeting the agent, in a Middle East country, was unintended but involved much focussed networking.
The company is well established and has several UK-based principals, including blue chip companies. But there is no website, no entry in a business directory, and their office is almost unsigned.
This is typical in his country. But the match between our two companies is excellent, the agent has outstanding local knowledge and respect from our customers and the market is significant.
It was well worth the wait to find the right local partner whilst continuing to develop the market ourselves in the meantime.
Many people will speak excellent English but it is worth remembering that there will be key decision makers who don’t and they will want to communicate with you in their first language.
Get a phrase book and try to speak a few words of the local language straight away. You will make many mistakes but that is part of the fun and the learning process – the effort will repay you a thousand times and you will enjoy your travelling far more.
In our experience, it is important to put maximum effort into getting paid until you understand the client’s payment system and can fine tune your processes accordingly.
Assume nothing and start tracking your invoice through the client’s system from the moment you believe they have received it and keep going until your bank confirms receipt.
We recently followed the payment process proscribed in our contract for services in Africa. As directed, the invoices were posted to a PO Box in Houston in December 2014 although we might as well have sent them to Santa Claus for payment down the chimney in December 2015.
On following through in the New Year we found out that the invoices were placed in a suitcase which was sent to the African country when filled up with other invoices from everyone else. Clearly, no one was being paid on 30 days using that system.
Extensive calls to Asia, Europe, the USA and Africa led us to understand the actual invoicing process, which was very different to that described in the customer’s contract but well known to established vendors.
We also learned that it was, in fact, allowed to send invoices to the customer by email, despite conflicting instructions. By January 17 we were paid all of a six figure sum, on three invoices, with an average actual payment terms of 33 days.
Maybe our experiences at ThinJack will help to make some of the exporting process a little clearer.
Don’t always follow what others describe as “best practice” as it might mean “worst practice” for your company but do conduct all your dealings legally, ethically and respectfully and don’t be in a hurry – except when it comes to getting paid.