Knowledge key for new exporters
Export experts say many companies get into exporting “by accident” — and then hit trouble.
Don’t be an accidental exporter — it can be expensive and timeconsuming. That’s the advice of export expert Andrew Bathgate, advisory partner at accounting and business advisory firm BDO, for companies adding to the $80 billion exporters bring to the New Zealand economy every year. “Accidental exporters”, Bathgate says, fall into exporting without really meaning to. The opportunity arises — and is promising — but the companies concerned are often not aware of the pitfalls that can cost them a great deal of time and money. “Many companies just start dabbling in it,” he says, “and then it takes off — but they haven’t necessarily done a lot of planning. “Typically, they can be doing well here when an opportunity comes to send something overseas. They trundle away on it but often don’t take advice and can end up getting into quite a pickle because they haven’t done enough planning and research and haven’t talked to accountants in detail about things like tax planning. If you start trading overseas, you can trigger all sorts of things.”
He is working with one company which had an
opportunity in the Pacific Islands — and people had travelled there to begin a project. However, they had struck difficulty when it came to matters like withholding tax and repatriating money because of local rules and regulations.
“It is so much better and easier to do things up front, rather than after the fact,” he says, “yet so many people do things the other way round. The first step is that research and planning — and there are resources here in New Zealand like Export NZ and a really collegial export community who can help a lot. “Export NZ has accelerator programmes which can help small businesses take those first steps into exporting and BDO, for example has a global network which can help companies in the very countries they are trying to export to.”
Another recent example was a client who looked at an opportunity in India. They had taken some positive steps — including having “boots on the ground” in the target country — but found themselves wrapped up in the red tape of local rules and regulations and an enormous amount of contradictory information. “We were able to steer them to our office in Mumbai and you can imagine what a relief it was to find people and advice that could help them steer a genuine course through things like that.”
Another client was trying to arrange a joint venture in Sri Lanka and BDO had been able to put them onto their Colombo office where local resources were able to help facilitate an appropriate joint venture structure. Bathgate is often a judge in various business awards — and sees many companies benefitting markedly from their export efforts. One example, Haka Tourism Group, recently won the Export Excelerator overall award after first winning the BDO award for Best Medium Business (services exporter) for businesses with annual revenues of $5m-$40m. Haka Tourism are adventure tourism operators who incorporate educational and cultural experiences in New Zealand for thousands of visitors every year. Bathgate says: “They are a very slick operation who are showing the benefits of research and planning and surrounding themselves with the right people — they are doing it very well.”
Finding the right people was important as “telling your story” was often an important differentiator for New Zealand companies — but many needed help compiling and telling that story properly. Similarly, many would-be exporters underestimate the financial and time costs to give exporting “a real crack”. Australia was a target market example as it was difficult to run a successful business in Australia from New Zealand. “Australians want to be calling an Australian phone number and, while that can be worked through, they really want to be dealing with an Australian company — and that can be a big commitment, particularly for a small or medium business.” all or medium business.” Seven early steps towards becoming an exporter:
• Affordability — factor in the additional cost of compliance, setting up, freight and foreign exchange.
• Market demand — is there a need for your product or is the market saturated — and is your pricing competitive?
• Currency — check the volatility of the currency in the target market and whether you need to hedge against movements to reduce risk.
• Business structure — the business may need to be structured differently from home base and to cater for international needs and different ways of doing business.
• Logistics — how to get the product to market and how much help will you need?
• Compliance — what are the rules and regulations applying to doing business in the target county and what are the costs of compliance?
• Barriers — make sure you have taken elements on board like the political situation, language barriers, technology advances, interest rates and the environmental and social impact of your business or product.
Export NZ has accelerator programmes which can help small businesses take those first steps into exporting and BDO, for example, has a global network which can help companies in the very countries they are trying to export to.”