Small business: Export markets - Simon Peacocke

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Simon Peacocke, Managing Partner BDO Auckland

Simon Peacocke, Managing Partner BDO Auckland.
Simon Peacocke, Managing Partner BDO Auckland.

What are the key challenges for an SME entering a foreign market?

For any business, there are challenges entering a new export market and the bigger the opportunity the bigger the challenges and risks. It is harder for small businesses as they don't have the size, scale, resources and necessary people to devote the time and attention needed to attack a new market. And a new market is more likely to take a large established company more seriously than a small New Zealand business offering the same products or services.

However, the advantage for SMEs is that it's generally the business-owner who goes out into the new market to develop relationships and find customers. They have the best understanding of their product or service and make the most compelling and authentic case. They will also tend to be more focused on building long-term connections rather than just seeking revenue for the short term.

What are some of the key pitfalls for Kiwi SMEs looking to enter foreign markets?

Many small business owners lose sight of the fact that a foreign market - even in Australia -is very different to home base. There are cultural, business and regulation differences that can trip any business up. They'll often intuitively rely on what they've learnt about their business or service and people at home and expect these to translate directly into the new market, often resulting in bad decisions.

This is often the case with customers. A successful small New Zealand business will have learnt what their NZ customers want and service them well. But, assuming the same approach will work with customers for the same product/service in a new market is a big mistake.

The key is to approach the new market and its customers completely afresh and invest time and energy researching your target market, building relationships and expanding in small, measured steps.

Some SMEs do this successfully by entering on the back of an existing New Zealand customer which has an operation in a foreign market and would be happy to buy their products/services there.

The second common mistake is recruitment in a new market, particularly making that essential first hire which is the most significant and most risky recruitment a business can make. As with customers, home-market knowledge and intuition about employees is necessarily valid in a new market.

The key is to invest a lot of time getting to know the people and developing relationships and trust in your particular sector of the new market, and use that as a basis to find the person with the right customer connections, knowledge and experience.

An approach that can work is finding someone in the market such as a business owner who is no longer active but willing to share their knowledge. Or a professional adviser, such as an accountant may be able to assist.

How tricky are tax and regulations in foreign markets?

Coming to grips with tax systems in new markets is obviously crucial and best done well in advance with the support of an international tax advisor. However, dealing with regulatory systems in foreign countries is far more challenging and something business owners have to do alone.

A lot of New Zealand businesses are trying to get food products into China for example, struggling to overcome the complex regulatory hurdles at national, regional and city level requiring significant effort working with bureaucrats at various government levels.

This requires research, patience, perseverance, learning and adapting your approaches and processes.

Is collaboration a good approach for SMEs entering foreign markets?

New Zealand has a history of collaborative approaches to foreign markets and there are plenty of success stories, particularly in primary produce sectors such as dairy with Fonterra, and in the wine and creative sector.

While collaboration is an attractive proposition for SMEs due to the economies of scale, it's not always easy. Most SMEs urban-based companies accustomed to being domestically competitive with very little if any background in collaboration. It's a big ask to turn round and work with your competitors to expand into a foreign market together.

It's essential that you set aside your historical competitive attitudes - and ensure commercial terms are worked through thoroughly to prevent acrimony and loss should things turn sour. Agencies such as NZTE may be able to help you with introducing you to other firms in the market.

Next week, we take a look at the kind of flexible working arrangments SME owners are offering their staff and themselves in the current market. Surely a perk of running your own business is an opportunity to have more freedom on how you work and when and you should be offering this to your staff too. Tell us your stories.

- NZ Herald

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