Take a look before leaping overseas

While most small and medium enterprises (SMEs) can probably pinpoint their successful start to an initial focus on the domestic market, they recognise that international competitiveness is fast becoming essential to ensuring long-term survival and growth.

Venturing overseas can be an exciting and rewarding prospect for these businesses, given the rising challenges in the domestic market such as rising costs and a small market in the UAE.

However, venturing abroad also has its problems, as businesses have to contend not just with business challenges, such as the lack of cashflow and payment facilities, but also to deal with the burden of working through the unique business climate and practices, laws and regulations, as well as social and cultural norms.

Local businesses should thus assess their readiness to expand overseas. They should also ensure that the following pointers are reviewed before venturing forth.

(i) Getting financing. Small businesses need more than just cash. SMEs should look for a financier that would provide not only capital, but also support and expertise to the overseas business. They should look to follow basic steps to raise finance for expanding business - prepare a business plan, decide on how much financing is needed, review the various financing options; and assess the risks.

(ii) Getting legal and taxation advice. Legal problems can tie up critical resources for months or even years, and leave the business vulnerable. Businesses should see a professional advisor about the range of laws likely to affect the business, and ensure tax liabilities are met.

They should be aware of restrictions, if any, on sales activities in the overseas market and comply with local employment legislation.

(iii) Watching out for tariffs or quotas. Each country has its own tariff and quota system, so it is essential that the SMEs are knowledgeable on the trade tariffs and quotas in their target market.

(iv) Tailoring marketing efforts. Trade fairs can provide a useful source of contacts for potential customers and help the businesses to research the new markets. Marketing and publicity efforts should be localised.

(v) Insuring the business. Small businesses should look to protect themselves against potential risks they face when trading overseas. Trade credit insurance offers safer penetration into new export markets where the businesses may be working with new international partners and customers. It can also protect against political risks.

(vi) Recruiting the right people. Businesses should familiarise themselves with recruitment procedures and employment laws in their target markets.

SMEs should explore all options, including hiring full-time, part-time, temporary staff or even outside contractors. Businesses should ensure that workers are fully trained and are able to operate to a high standard, as investments in training can pay long-term dividends.

- The writer is head of Business Banking at HSBC Middle East.