Considering Exporting?

Thinking of Exporting? Don’t just think… Act!

New Zealand’s is an export-led economy, driven by a handful of major industries like dairy and wine. But more and more smaller players are also conquering offshore markets with smart, innovative products and services in every sphere.

If you’ve ever contemplated trying your hand in international markets, remember that you don’t have to be a Fonterra to make it. With the right preparation and support, even a small business can take on the world.

We recently interviewed Jim Henderson of Business Consulting for Banking about the keys to international success. Here are some key excerpts from that interview.

Q: Jim, let’s start by you telling us about yourself and your business.

Jim: My business is BC4B, Business Consulting for Banking. We’re located in Auckland, Wellington and Christchurch. We’re independent banking, payments and working capital specialists helping importers and exporters be successful in sourcing and selling product overseas.

Q: What are the main reasons for exporting goods or services?

Jim: Increased sales, more customers, increased profit margins and perhaps increased utilisation of capacity, say production capacity.

Q: What would be some reasons for not doing it?

Jim: The complexity in manufacturing and selling goods successfully overseas is much more than in New Zealand. Understanding what those complexities are and managing those risks is really important.

Q: What are the biggest pitfalls?

Jim: Many businesses have started exporting and come unstuck. Some spectacularly and some have managed to recover, but underestimating what’s required in terms of investment and capital and money and time and process to develop a market overseas is a big pitfall. Then there’s understanding the working capital investment required to keep that business running and growing overseas. Making and selling goods within New Zealand has a relatively small timeframe from getting an order, producing goods, selling them and getting paid. That financial supply chain is really short.

When selling overseas, that financial supply chain becomes a whole lot longer, so it perhaps takes longer to get an order. The order might be larger, so there’s more time to produce the goods. Distance to market, that’s greater. Then maybe you’ve got goods in-country overseas, so you can supply your distribution network or your customers overseas just in time, and maybe it gets longer to get paid. Maybe it’s more difficult to get paid overseas. Those are important financial issues to understand at the start.

Then there are customs in different countries. Our biggest markets for exports from New Zealand is Australia. The way they do business is slightly different to ours. Their laws and regulations are different. In a lot of areas they are very similar, but in some key areas they are not. Understanding those issues and how your product might be perceived in that market is important. You need to spend time building relationships. Selling goods isn’t just about the value that your product brings to the end-buyer. It’s about relationships.

Q: What about compliance issues?

Jim: Australia has different structures in terms of registering business, information that you have to provide, what’s available through the Australian Tax Office relative to the IRD in New Zealand. Their customs rates and tariffs require understanding. Not all goods produced or manufactured in New Zealand can be sold into Australia. Apples as an example.

Q: What would your recommendation be about the key sources of advice to put around yourself?

Jim: New Zealand Trade and Enterprise is clearly a key place to go. MBIE is another good place. Business New Zealand is another one. New Zealand is an outward-looking country and so the New Zealand government and associations like the Chambers of Commerce, for instance, provide a lot of specialists to help businesses understand the business model that’s going to work best for them in their country. Every business is different and every industry is different.

You’d certainly want to engage your accountant. A lawyer. Your contract, the terms of trade need to be specific to the markets you’re going to. Certainly finance is important as we’ve mentioned, so a bank. One of the services that we offer is an independent source of information and a network to a lot of banks, insurance companies and non-bank providers.

Exporting is more complicated and complex than selling domestically, but the benefits are huge. There’s a broad range of people in New Zealand willing to help new exporters discover and work at being successful. Don’t shy away from it. Get the right advice, grab the bull by the horns and be successful.