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When should your business start exporting?

Anmar Frangoul | Special to CNBC.com
Monday, 18 Nov 2013 | 10:21 AM ET
Verity E. Milligan | Flickr | Getty Images

For any SME (a small or medium-sized enterprise), choosing whether or not to start exporting is a big decision. A whole range of factors need to be considered, but if you export at the right time, under the right conditions, then the benefits to your business can be significant.

"The evidence shows that people who tend to export learn a lot," Graeme Fisher, head of policy at The Federation of Small Businesses, told CNBC.com. "There are actually greater rates of innovation and growth. So not only are you taking your product to a new market, you're actually learning from those new markets, and importing those ideas back home."

What factors should a business think about before starting to export? "The basics would be to understand the other country, the legal system, the tax implications," Fisher said. "How do you want to sell abroad? Through a joint venture, a distributor, or do you actually want to open an office?"

(Read more: Should a start-up ever turn down investment?)

"I would probably suggest that, starting off, rather than sinking the cost in offices you might look for a distributor, particularly if you've got a manufactured product," he added.

Over-extending your business is something else to be mindful of, Fisher cautioned. "If your cash flow is fairly weak, then you probably won't want to start thinking about exporting too quickly," he said. "You need to be pretty confident you can make a shot of it before taking the plunge, and if you are, don't obviously bet the house on that. But there are people who have, from small beginnings, really, really grown quickly through exporting."

Moussa Clarke, export manager of independent brewery Bath Ales in Bristol, has overseen the expansion of the company's export business. Today, Bath Ales exports to nine countries across the world, from Ireland and Denmark to Brazil and New Zealand.

How has exporting aided the business? "You can get fairly quick returns with a new deal, but can also set the stage for future growth by establishing your brand in future markets," Clarke told CNBC.com. "Real ale is a strange one, because it's bucked the trend economically, but you still need to look for opportunities out there. Limiting yourself is definitely not the way forward."

(Read more: Words of experience: three entrepreneurs share key lessons for start-ups)

Together with her husband, Sandra Patterson founded Kids Bee Happy, a business creating sand art for everything from children's parties to corporate functions and weddings, in 2011. The company has recently started to export to Europe. "We had enquiries at a very early stage from overseas, but what we'd learnt from a previous business was to not get distracted from international enquiries too early," Patterson told CNBC.com.

"We focussed on looking for distributors of a larger size and from a more experienced background, which meant that for a while we didn't take on or follow up enquiries that we had, because they were just too woolly," she added. "Now, the whole thing is starting to gel together brilliantly. We've now got three distributors – in Malta, Romania and Tenerife – and all of this has happened in the last month."

Since the company has started to export, Patterson estimates that revenue has increased by about 35 percent. That's not to say that there haven't been challenges, though. "It's given us stock issues, for a start, because these three enquiries came in quite close together, and we didn't really want to let them go. All were looking at getting products that they could supply before Christmas, so that was one issue for us," she said.

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A further issue arose due to the lack of face-to-face contact with distributors. "Two of the enquiries were customers that found us via the web, so there's no personal contact, there's no history or previous relationship," Patterson said. "To protect ourselves we were very clear with our terms, so any products would be paid for before they left us."

Overall, though, Patterson's experience of entering the export market has been incredibly positive. "We are a very young business and it's enabled us to look at our next lot of orders that we're putting out, to scale that, to take on more products and create more designs and ranges," she said. "It's moved up the business another gear."

Does Patterson have any advice for SMEs looking to export? "Set yourself some rules, don't rush in, and be disciplined. Because, particularly if you're a new business, it's very easy to get distracted. If you take your eye of the ball, your local operation starts slipping."

For Clarke, preparation was key. "Plan carefully, so study each market's risks and opportunities before taking the plunge," he said. "And visit the countries you plan to export to. You can go and get local knowledge first-hand, go to shops and see how it's done and also meet the people you're doing business with. The internet is a fantastic enabler, but don't assume you can do everything via Skype. It's all about relationships."

  • Caan is one of the U.K.'s most successful and dynamic entrepreneurs as well as the guest presenter of "The Business Class."

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