Canada is a relatively small market and many businesses look beyond its borders to grow.
Exporting can result in an increase in revenue and profit, and by expanding to multiple markets, you can also mitigate risks by ensuring not all your eggs are in one basket.
A company’s geographical expansion is important because businesses that export are generally more innovative, profitable and productive.
Despite all these advantages, it is still necessary to take the time to prepare for export. Otherwise, businesses that move too quickly to take on new markets can jeopardize their future.
There are several factors to consider before exporting, and aspiring exporters should pay attention to the following three pillars of their business.
You must first determine whether your product or service offering is competitive in terms of price, quality or innovation.
Although a favourable exchange rate can be persuasive, it should not be the only factor in decision-making. Many exporters experienced difficulties when the Canadian dollar appreciated and reached parity with the U.S. dollar about a decade ago.
Your company needs to stand out from the competition, and it must also be able to meet increased demand for its products. An increase in orders necessarily leads to a need for additional production, but if you are already operating at full capacity, meeting the needs of new customers may be impossible.
One of the advantages of our Global Growth Trade Service is that our Trade Experts will assist you in evaluating the international market space and recommend countries where your product will be more strategic and competitive.
You must also properly assess the impact on your company’s finances. Review your company’s financial health over the past five years. Is it 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.
Costs incurred, such as 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.
Your business must have the necessary capacity and flexibility to ensure that all these steps will not adversely affect its cash flow.
There are insurance products available from EDC (Export Development Canada) that help companies reduce these export risks. Both EDC and BDC can also finance international purchase orders to provide exporters with improved cash flows.
Our Trade Experts can access your business, provide recommendations on government grants and programs your business could be eligible for, and then assist you in accessing them.
It is also important to have an excellent organizational structure as you take your first international steps.
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.
Still, do not be discouraged if sales are low after six months. Exporting requires a lot of time and money. Even if your business has a good domestic reputation, you often start from scratch in a new market. Concrete results rarely come quickly.
If you are exploring the idea of venturing into exporting, reach out to our trade experts today for a free consultation.
This article was first posted on Business Development Canada. Read the original post here.