The benefits of exporting

As a small business owner, you might be thinking, 'Why would I want to export to other countries when I can sell my goods and services in Australia?' The answer is that exporting gives your business many benefits, including a wider customer base and increased sales and productivity, which a singular market may not be able to deliver.

According to the Australian Trade Commission  (Austrade), exports contribute to around 20 per cent of annual Gross Domestic Product (GDP), yet only four per cent of businesses are currently involved in export activities. Here are four main advantages of exporting your goods and services.

Increased profitability

On average, businesses that export are more profitable than those who do not export, according to Austrade. This is largely because foreign markets are more diverse, with consumer habits and needs different in each country, and thus can offer increase opportunities for certain products or services that don't currently elicit any demand at home.

With most of the world's consumers living outside of Australia, the world can become your oyster if you are able to identify a gap in the overseas market and reduce your dependence locally. Even if your product or service is already popular with the domestic market and you are turning over a profit, you can still benefit from exporting overseas if demand is strong.

For instance, the Australian wine market is inundated with different types and brands at various price points, making it difficult for a wine company to stand out or gain traction locally. However, in China, there is a strong demand for imported wine driven by improved living standards and increased disposable incomes. Wine is also increasingly seen as a 'status symbol', and in 2011, China was Australia's fastest-growing wine export market with sales rising 23 per cent by value.

Spreading risks

The adage 'don't keep your eggs in one basket' is true here, as exporting allows your business to spread your risks across different markets- so that if one market suffers from a recession, lowered demand or changed preferences- your investment, sales and profits won't be as significantly impacted.

In fact, exporting is a good way of balancing your growth as you can target new markets when there is low demand at home due to seasonal fluctuations. For instance, summer in Australia is generally winter in the Northern hemisphere, meaning that if your company produces seasonal goods such as swimwear, sunglasses and certain fruits that are popular only during summer, they can still be sold overseas when the temperature dips.

Economies of scale

Exporting allows you to take advantage of economies of scale, which refers to lowered average costs as a result of expanded operations, hence leading to increased productivity and efficiency. This usually works better if you have a 'universal' product or service that can be sold to most other parts of the world without significant modification.

For example, a firm that produces organic skincare products may appeal to many markets around the world and hence to the 'global consumer', regardless of where this consumer lives. This is, of course, no determination of success, but a product that doesn't require any modifications will lower costs of production and marketing. Products are also increasingly sold online, further reducing any overhead costs.

Enhanced innovation 

Different markets invariably have different and often new ideas, management practices, marketing techniques and ways of competing that you would not have otherwise experienced at home, according to Export Victoria.

For instance, business practices are different in the Middle East than in Australia as they are largely dependent on religious and cultural values. An Australian business any that has successfully exported their goods and services there is Aconex, a developer of document management software and Internet-based project collaboration.

"When we started our operation there, we arrived a few weeks before Ramadan [the Muslim month of fasting], when the whole region slows down," founder Leigh Jasper told the Sydney Morning Herald.

He also noted that business in the Middle East is very relationship-driven, and that he found it challenging to get paid on time in the region. He overcame this by negotiating partial payment so the business wasn't "out of pocket".

This example shows that exposure to various working environments - and coming up with new strategies to circumvent any obstacles - will allow your business to become more innovative, competitive and poised to cope with changing circumstances.

There are plenty of benefits with exporting, but like with any other business initiative, you should also consider the risks that come with it. You should always research the country you intend to export to and ensure they do not pose a high payment or business risk - or if they do, that you have the capacity to address them.

Check back next week for the next part in the exporting series on what you need to know and do before you export.

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