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I’ve worked with many small business exporters over the last four years as Executive Director for Efic, the Australian Government’s export credit agency. It’s inspiring working with Australian businesses who are making their mark on the world stage.
During this time, I’ve learnt a lot about the traits of successful exporters and what small businesses need to do to succeed internationally. I’ve identified five ways in which successful exporters can increase their financial security, and set their business up for export success.
#1. Keep your financial health in check
As your business grows, ensure you have an accountant that understands the fundamentals of your business. Your accountant will help you stay on the right track with your finances as you expand into new markets. It sounds obvious, but many small businesses are so focused on their next big idea, that they forget to cover the basics – don’t make the same mistake.
#2. Understand your cashflow requirements
One of the most common challenges I see with growing businesses is when their growth rate outstrips their capacity, which can create pressure on working capital. By developing detailed cashflow projections into the future, you can ensure you are able to plan and manage your cashflow to avoid such problems.
#3. Build a strong relationship with your banker
Don’t underestimate the importance of a good relationship with your banker, who will be crucial in your growth journey. The most successful small businesses will keep their banker informed on a regular basis on what their plans are, what direction they are heading in and any financial issues they anticipate. If your banker has been closely involved in your business from the beginning, they will be in a better position to help if and when things go wrong.
#4. Develop a financial plan
Whether you actively plan to enter into exporting or just start winning export-related contracts, you need to be prepared for all finance eventualities. For example, exporting can mean a longer cashflow cycle for your business, a greater risk of non-payment and exposure to foreign exchange risk. Putting together a detailed financial plan, one that you can easily adjust as you collect more data and change your assumptions, can help you determine if your export plan is viable.
#5. Consider alternative sources of funding
Many of the small businesses I have worked with over the years have struggled finding sources of finance for export – from their bank or otherwise. When your bank is unable to help, there are alternative avenues to explore. One such alternative is Efic, which provides finance to help small business fund their export contracts.
Putting it into practice
One company I’ve worked with which has followed these five steps is NSW-based experiential education technology company, Intersective.
Co-founders Beau Leese and Wes Sonnenreich started Intersective in 2012 after having worked across the education industry and large employers for a number of years.
“Work-integrated learning collaborations between employers, universities and students is actually a really hard problem. It is a three party collaboration problem and it’s difficult, it’s expensive to manage, and it’s easy to go off track,” says Beau.
Their answer was to build the ‘Practera’ software platform and products. According to Beau, this solution makes collaboration between students, universities and employers more efficient and effective, helping drive better learning and project outcomes.
Building financial security
With a successful domestic start to the business, Beau and Wes looked to grow the business globally.
“Our major export challenge has been how we resource the time and effort spent engaging effectively with large overseas organisations. This takes a bit more overhead than dealing domestically. We need to get legal advice to look at off-shore contracting and we obviously need to travel to do that. So it’s more time intensive.
“But the chance to work with a forward thinking partner in Vietnam, to deliver a new type of product and secure a long term licensing agreement, was an opportunity too good to pass up,” explains Beau.
Turning to alternative sources of export finance
Beau and Wes had a great international opportunity, but ran into a common problem – their bank couldn’t lend them the money needed to meet the export order due to the company’s lack of security. They turned to us at Efic, and we were able to help them with our new Small Business Export Loan.
Intersective is a great example of a small business which has actively taken steps to ensure financial security, and expanded their international presence in doing do.