Kevin Smith
Partner and Brexit International Trade Lead
KPMG

Perspectives from leaders on exploring global opportunities

Jo Fairley, co-founder of organic chocolate brand Green & Black’s, and Howard Hall, CEO of Solutionpath and DTP Group, an IT solutions and service provider, share their top tips for exploring overseas opportunities.

"The logical starting point is to make sure you have a product/service that people want to buy"

Kevin Smith, Partner and Brexit International Trade Lead, KPMG

“The logical starting point for a privately-owned enterprise is to make sure you have a product or service that people in foreign markets actually want to buy,” says Kevin Smith, KPMG Partner and Brexit International Trade Lead. “Unless your product is unique or very appealing, it’s going to be a struggle. Even in the era of a weaker pound, privately-owned British companies seldom thrive overseas on the basis of a price-led approach.”

It’s easy to stumble into overseas markets almost by accident. But a lack of preparation and a lack of structure may undermine the whole process. Unfortunately, there are plenty of one-off exporters out there nursing their wounds, reluctant to give overseas expansion another go.

That’s why it’s vital to be rigorous when assessing an opportunity. “Talk to your contacts on the ground and ask your professional advisors to share their market insights,” says Kevin. “Also, carry out research into whether there is true demand for your product and what the competitive landscape looks like. Once you’ve looked at the evidence, including the broader economic picture, ask yourself if you are still confident of turning a profit.”

Do your homework

Businesses often presume they should target big markets such as China, India and the United States. However, these are very tough territories to break into. European countries closer to home can be a much better place to start.

“I have joined clients on trade missions to countries such as Spain, Germany and France,” comments Kevin. “It’s a smart way to build contacts and scope out market potential.” Unquestionably, trade ‘recces’ of this kind in Europe require much less of a time commitment than looking at far-flung markets.

Before entering a market, do your homework and seek support and guidance from bodies such as the Department for International Trade (DIT).

Think of the consequences

It’s also important to have a robust and flexible model – and to be realistic about payback. It takes time to turn a profit if you’re building a factory or investing in developing your workforce. Remember:

  • Be realistic about your commitment in-country: “Trying to run things from a distance sounds convenient, but it seldom works in reality,” says Kevin. In order to succeed, you will probably need a senior member of your team on the ground, capable of making important decisions. “That means they will have to take their eye off the core business for a while – or even for a long time – so make sure you’re happy with that,” adds Kevin.
  • Ensure you have the right people: “Make sure you have the right talent to call upon within your existing team,” Kevin comments. “Think about the support you can give your rising stars to help them step up to the mark.”
  • Think about your digital infrastructure: “Technology, of course, will play a big role,” adds Kevin. “Make sure your website is fit for purpose to sell internationally but also give thought to challenges such as running overseas payroll and accounts payable systems. In some countries, if you send an invoice in the wrong format, it won’t be paid.”

To buy or not to buy?

“The appeal of making an overseas acquisition is that it provides ready-made access to customers and suppliers,” says Kevin. “But it requires a great deal of time and effort to identify an appropriate target. And when it comes to striking a deal, there is the risk of overpaying. Added to which, it can be difficult integrating an overseas acquisition into your business.”

Clearly, acquisitions that are not well thought through may deliver poor financial returns and drain group management time. The KPMG Enterprise Going global report has a useful checklist of points to think about when you’re considering an acquisition.

For many companies expanding internationally, it makes sense to work with a local partner. Indeed, in some markets, this is mandatory. Be sure to conduct due diligence before a trading relationship begins. 

"A mistake made by many expansion-minded businesses is to begin by seeking significant funding"

Kevin Smith, Partner and Brexit International Trade Lead, KPMG

Customers first. Then funding

A mistake made by many expansion-minded businesses is to begin by seeking significant funding. “The thinking is, this will pay for plenty of people on the ground, who will in turn bring in a large amount of business. I believe that is the wrong way to go about it,” says Kevin.

“Personally, I feel much more comfortable about businesses actively attracting customers ahead of securing funding for overseas expansion. Establishing a customer base, even if only a small footprint, gives you a better story to tell investors. It also opens the door to a wider array of funding opportunities. By demonstrating your business is an attractive proposition, funding will likely come on better terms.”

Kevin also advises companies against trying to conquer the whole world at once. "Far better to identify the best market for your product and take the trouble to weigh up all the crucial factors, from sales opportunities to tax implications,” he comments.  

Key takeaways

  • Conduct thorough research to understand the market and whether it offers sufficient demand for your product
  • Ensure you are targeting the right market
  • Arm yourself with sufficient information from the target market – that may or may not involve acquiring a native company
  • Bear in mind the management and talent implications for the wider company
  • Line up customers before securing funding

If you want to explore international opportunities, take a look at the downloadable KPMG Enterprise report Going global or get in touch to continue the conversation.

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