A company’s geographical expansion is all the more important because businesses that export are generally “more innovative, profitable and productive,” says Marie-Élaine Beaudoin, Business Advisor, BDC Advisory Services.
Exporting also involves many risks
Despite all these advantages, it is still necessary to be ready to export. Otherwise, businesses that move too quickly to take on new markets can jeopardize their future.
“You don't wake up one morning wanting to take on new markets. Even if exporting is not that complex, you nevertheless have to consider several factors,” emphasizes Ms. Beaudoin, who helps Canadian entrepreneurs explore international markets.
She advises aspiring exporters to pay particular attention to the following three pillars of their business.
1. The operational pillar
You must first determine whether your product or service offering is competitive in terms of price, quality or innovation.
“Your company needs to be able to stand out. A favourable exchange rate should not be the only decision-making criterion,” says Ms. Beaudoin, noting that many exporters experienced difficulties when the Canadian dollar appreciated and reached parity with its U.S. counterpart about a decade ago.
Your company needs to be able to stand out. A favourable exchange rate should not be the only decision-making criterion.
Your business must also be able to meet increased demand for its products. An increase in orders necessarily leads to surplus production, but if you are already operating at full capacity, meeting the needs of new customers may not be possible.
2. Financial pillar
You must also properly assess the impact on your company's finances. They must be strong enough to get involved in an export project.
“The costs of exploring new markets are often higher than expected, while revenues are not immediately available,” warns Ms. Beaudoin, noting that the company should review its financial health over the past five years.
Costs incurred, such as for attending fairs or trade shows, or travelling abroad to meet potential customers, can increase rapidly, while obtaining the first purchase orders can take several months, and payment cycles can be longer than in the domestic market.
“The business must have the necessary capacity and flexibility to ensure that all these steps will not adversely affect its cash flow,” advises Ms. Beaudoin, adding that there are insurance products available from EDC (Export Development Canada) that help companies reduce these export risks.
EDC and BDC can also finance international purchase orders to provide exporters with improved cash flows.
3. The organizational pillar
It is also important to have an excellent organizational structure.
- Do you have management and information systems (ERP, CRM) that can optimize the processing and analysis of sales and customer data?
- Will you be able to respond quickly to customer inquiries?
- Will you be able to offer them effective after sales service and support?
- Do you have employees who have experience in international trade and who speak the language of the target country?
- Is your website up to date, effective and available in the target market’s language?
But, in any case, “management’s motivation and willingness to commit to such a project are critical to taking the first international steps,” Ms. Beaudoin insists.
Finally, your products will have to comply with the standards and rules required in new markets. For example, food, pharmaceutical or cosmetic products will have to be recognized by the United States Food and Drug Administration (FDA) before being exported to the United States.
Likewise, CE Marking (European Conformity), the indicator of a product's compliance with European Union legislation, is mandatory for many products destined for Europe.
But it is worth the effort—Canada's new trade agreements with these major trading partners provide better access to new markets for hundreds of millions of consumers.
Several organizations, such as BDC, can assist you in your exporting endeavours.
“Exporting requires a lot of time and money. It is better not to expect concrete results quickly and, above all, to avoid being discouraged if sales are not forthcoming after six months. Even if your business enjoys a good domestic reputation, you often start from scratch in a new market,” concludes Ms. Beaudoin.