EXPORTING ESSENTIALS: SELLING PRODUCTS AND SERVICES TO THE WORLD SUCCESSFULLY (2014)
Chapter 2. Writing an Export Business Plan
A Guide During the Life of Your Export Business
“The plan is useless. But planning is essential.” Former President Dwight Eisenhower said that. Planning is a process, setting concrete milestones and tracking progress, with frequent review and revisions. But you can’t do planning without starting with a plan.
—Tim Berry, founder, Bplans.com
Congratulations! You have determined you are export ready. You have what it takes to export and have decided on the type of export you wish to launch: a product, a service, or both. Now it’s time to map out what you intend to accomplish during the life of your export business. It’s time to think about your export prosperity in a new and dynamic way. This starts with the global mindset we covered earlier and moves to crafting what’s ahead for your business on the international front. The process, which many dread because it requires a deep dive into strategic thinking, becomes an operational plan for controlling the export business and serves as a guide for growth and export success. The export business plan will become a part of your overall business plan—you’ll see how and why later on.
Note The Internet plays a huge part in the exporting world, and that is reflected in this book. There are a lot of online tools and resources referenced throughout the book, so it will be handy to have a computer or tablet nearby.
Purpose of an Export Business Plan
There are four main purposes for the export business plan that you will write. The first is that it will serve as a guide during the initial stages of your export growth. The second is that it will give you a chance to describe your product or service offering, detail a realistic sales-and-marketing strategy (e.g., how you will reach your customers), provide a range of viable return-on-investment figures, and explain what variables will affect those numbers positively or negatively. The third purpose is that if you plan to seek out loans, whether export related or not, a business plan that includes an international expansion component is required by potential partners, lenders, and investors in order to understand your business strategy. And last, if you are looking for direction, creating a great export business plan will get you there quicker.
Putting a plan in place doesn’t mean you look at it once and file it in a cabinet. It’s a powerful, living document reflecting your ideas, team, and efforts. It’s meant to be edited, referred to, and shared constantly throughout the growth of the business. A plan can be as simple as ideas jotted down on the back of a napkin or as thorough as a twenty-five-page report. Whether short or long, the plan should focus on what is important to you, what energizes and motivates you, and what gives you a sense of purpose and meaning—doing something bigger and beyond yourself. Start with the basics:
1. What do you like to do?
2. What are you planning to do?
Then ask yourself whether the two answers you came up with are in alignment. For example, my answers might be:
1. What do I like to do? I love to eat Italian food.
2. What am I planning to do? I plan to export hammers because I have a good supply source.
OK, you get it. I’m out of alignment on my vision for what I love to do versus what I intend to do to make that vision a reality. Let’s try again:
1. What do I like to do? I love to eat pizza.
2. What am I planning to do? I plan to export frozen pizzas.
There you have it! My passion for something I love to do is in line with what I plan to do for a business—the ideal scenario for starting a business. That means my love of the product will sustain me during the sharp turns and bumps on the road to achieving exporting success. Experiment until you find your passion. Sometimes it can take several attempts before you realize what turns you on—whether it’s selling pizzas, hammers, or making money!
Being purposeful is not something that just happens. You must be proactive and intentional. Did I personally start my business with an export business plan? Yes, for myself and the benefit of my team. Did we follow it? Not exactly. Our primary focus was to secure an initial overseas customer who would translate into an export sale and then push the transaction through to make a profit. We then reviewed the plan to see how we fared relative to what we were trying to accomplish, and we compared results to the realities of the market. We then decided to forge ahead on similar type deals in other countries.
In getting a business or an initiative like an export transaction off the ground, customers matter the most, but you need to go further. A great plan outlines and supports the assumptions you have going into the business and serves as a guide for where you’re headed.
Pitfalls of Not Having an Export Business Plan
Not interested in developing a plan? That’s an option and it is your choice. You must be short on time and eager to get to market. Bypassing strategic thinking for short-term gain can be risky (think along the lines of driving a car to a new, distant destination without a map or GPS). Yet it can be tempting because it is a quick way to test whether a product or service will sell in the export marketplace.
In my experience working with hundreds of start-ups and business owners, those who fail to develop a plan make several mistakes along the way. Here are some of the common pitfalls. Believe me, these aren’t all of them.
1. They move too soon and fast—having a knee-jerk reaction as opposed to executing on a well-thought-out and -crafted strategy.
2. They fail to take a pulse on where their business stands currently.
3. They divert attention to the overseas market to the detriment of their local business.
4. They employ too-little staff to take on the overseas market.
5. They proceed to export in a complex market (e.g., where there is a lot of red tape or the natives speak a different language) or open up negotiations with the wrong party (e.g., someone who is untrustworthy or a bad fit).
6. They are too quick to execute on a sale and fail to secure a guaranteed payment.
7. They act in a too fast and aggressive manner in providing online banking information to get paid or to pay a supplier, only to find later on that they have been cyberattacked.
8. They don’t state clearly on their Web site, blog, or Facebook page whether they accept international sales orders. If they don’t, they should say so. If they do, then they should state specifically which countries they serve and follow through when inquiries roll in.
9. They put all their eggs in one basket and don’t diversify enough to offset the ebbs and flows of the marketplace. They put too much emphasis on one product and one market that aren’t working.
10.They never fully understand that they might have vulnerabilities that could impede their ability to get things done.
These so-called export sins are just the tip of the iceberg on what can potentially go wrong if you don’t plan accordingly. If you are still dead set on moving ahead without a plan, do so at your own risk. I urge you, however, to at some point consider formalizing a plan so that you can fully capitalize on your idea and leverage it for luring potential partners, lenders, and investors.
Pointers for Developing an Export Business Plan
You should always measure your plan’s progress against the market reality, which can be highly unpredictable. You can’t go wrong with that approach. For example, you might sell designer diapers via your e-commerce site, emphasizing distribution to English-speaking countries such as Australia and New Zealand, only to find out quickly that the bulk of your inquiries are in French, the native language of the majority of your prospective customers.
Whatever plan you select, have backup Plans B, C, and D in place. For example, let’s say you select Ireland to export catfish to and find out two months later that the Irish don’t like catfish. Plan B might be to sell your catfish to another market, say the United Kingdom, or to sell another fish that the Irish like. Be smart and apply the global mindset we talked about in Chapter 1, which is to stay flexible and adaptable. Just because you revert to Plan B or C doesn’t mean you failed and that exporting won’t work. Rather, it means the market reality is such that your original plan won’t work and thank goodness you were smart enough to develop contingency plans.
Last, free trade agreements improve foreign market access for exporters, promote economic growth, and create jobs. Study active FTAs in advance of selecting an export market and preparing your export business plan to see how they will benefit your organization. Factor that information into your decision-making process accordingly. For example, NAFTA is the FTA among Canada, the United States, and Mexico serving to remove most barriers to trade and investment in that region.
UNDERSTAND MARKET CONDITIONS
Once you have a good idea of what you want to export and where, you can fill out your picture of market conditions by answering questions like these (this is a list I put together for a client):
1. Who will buy your product and why?
2. What is the size of the market?
3. Who is your competition?
4. How new is the product to the market you have selected?
5. Are there growth opportunities in the market?
6. What do the country’s demographic profile, economy, and mass culture look like right now?
7. Are there demographic, economic, or cultural trends that will shape the market in the future?
8. Does the government help or hinder the sale of imported goods? For example, are there any barriers to entry or to sales within the market?
9. Will the country’s climate or geography present logistical problems for sales of your product of choice—for example, selling chocolates to hot and humid Bali?
10.Does the product have to be adapted to that market by way of a physical reconstruction, a new package, or a change in servicing practices?
11.Does the product have the same use conditions in the international market as in the home market?
12.Does the product require personal after-sales service and, if so, can you provide it in the prospective market?
Use your own business sense and add to the list. Once you actually start research (refer to Chapter 4), more questions will arise. This is all part of the process of turning your vague ambitions into a concrete export business plan based on market realities, so the smarter your questions and more upfront your answers, the better your chances of success.
Three Types of Export Business Plans
Now you’re ready to get organized and create your own plan. To keep the process manageable, let’s look at three different types of sample template plans, each with distinct advantages for business people with different needs. Pick the one that works best for you, keeping in mind that you can shorten the analysis while keeping the major components of the plan intact.
· The back-of-the-napkin export business plan (suitable for born-global entrepreneurs)
· The traditional-export business plan
· The Laurel export business plan
The Back-of-the-Napkin Export Business Plan
The back-of-the-napkin export business plan is for folks who are big on ideas and pressed for time and want to get to market fast. While it’s typically short and sweet, it serves a better purpose than having no export business plan at all. A back-of-the-napkin export business plan can be as simple as explaining what the business does, what you want to do next export-wise, and how you are going to get there (who is going to be on board). It might look like this:
1. “We make the absolute-best purple widgets on the planet.”
2. “We will export purple widgets.”
3. “We will export purple widgets to France.”
4. “We will consider making other type widgets, say in red, if a customer in France is large enough to justify the change.”
5. “Suzy, Ted, Mike, and I will work on this initiative.”
6. “We will export, at a minimum, twenty thousand purple widgets within the first year.”
7. “We will not reduce efforts from our domestic business to apply them to the export business.”
8. “We will figure out how much money we need and when we need it.”
9. “We will finance the exports of purple widgets with profits from our domestic business.”
10.“We will find our own customers directly via our Web site, blog, and Facebook.”
11.“We will consult with our banker to provide payment options on all export sales.”
12.“We will have fun in the export journey to success!”
Add a Web site link to show what the business does and provide an executive summary that includes the founder’s bio and the key team members, and you’re done.
The Traditional Export Business Plan
It’s important to have a business plan, but you don’t have to reinvent the wheel to create one. One place to visit and bookmark online is the Small Business Administration’s “Export Business Planner” (http://www.sba.gov/exportbusinessplanner). It is a free, customizable tool for small-business owners who are exploring exporting. When you are using the planner, you can refer to Getting Started: Creating an Export Business Plan. It outlines the following (in Chapter 124, we guide you on market research so don’t overly challenge yourself if you can’t answer all the questions at the initial planning stage):
1. Profiling Your Current Business
a. Identify current successes.
b. Determine competitive advantages.
c. Evaluate companywide commitment.
2. Conducting an Industry Analysis
a. Find export data available on your industry.
b. Research how competitive your industry is in the global markets.
c. Assess your industry’s international growth potential.
d. Research government market studies.
3. Identifying Products with Export Potential
a. Select the most exportable products/services that your company will offer internationally.
b. Evaluate the product/services(s) that your company will offer internationally.
4. Marketability: Matching Your Product/Service with a Global Trend or Need
a. Classify your product.
b. Find countries with the best-suited markets for your product.
c. Determine which foreign markets will be the easiest to penetrate.
d. Define and narrow down those export markets you intend to pursue.
e. Talk to your US customers or other companies who are doing business internationally.
f. Research export efforts of US competitors.
5. Determining Market Expansion Benefits/Trade-Offs
a. Assess the benefits to exporting.
b. Determine the trade-offs to exporting.
6. Identifying Markets to Pursue
a. Select the top three most penetrable markets (see the sidebar at the end of this list).
7. Conducting an Export Marketing and Sales Analysis
a. Come up with an overall marketing strategy.
b. Figure out sales strategies.
c. Write a detailed product or service description.
d. Map out the product life cycle.
e. Make a list of copyrights, patents, and trade secrets.
f. Determine research and development activities.
8. Short-and Long-Term Goals
a. Define short-term goals.
b. Define long-term goals.
c. Develop an action plan with timelines to reach your short-term goals.
In summary, the most difficult aspect in developing an export business plan is determining the demand for a product or service offering in a foreign country. It’s one thing to know a product can be sold in a market—after all, that’s why you selected a particular market—but it is a totally different ballgame when it comes to forecasting how much you can sell and over what time frame. Assume that the demand for a product develops in direct proportion to the economic development in each country. This might be a useful way to think about it, especially when data might be unknown.
WHERE DO YOU WANT TO GO?
Keep your analysis of markets that you want to pursue to one page and break it into four manageable parts (use a, b, c, and d below). The purpose of this exercise is to establish a broad scope for your research-market analysis but not so broad that you overwhelm yourself. Try to begin with the end in mind: where do you want to go and how will you know that you have arrived?
A. Select the top-three most penetrable overseas markets that appear to have the best potential for your product or service offering. You can conduct market research online; meet in person with an international trade expert (see the SBA’s “US Export Assistance Centers”:http://www.sba.gov/content/us-export-assistance-centers); or test your product or service by exhibiting at a local trade show. Trade shows give you access to potential customers from all over the world without you having to analyze a thing. For example, if you sell hardware tools and exhibit at a hardware show and find that you get a lot of interest from attendees from a particular foreign market, such as Australia, you would know there must be a market there, because why else would these attendees be asking for information? From there, you can address those inquiries, learn as you grow, and conduct further research.
B. Analyze the market factors and conditions in each of the selected countries. Delve into each country further by reviewing cultural attributes, geographical characteristics, political stability, demographic characteristics, market size, and growth rates. The goal here is to conduct a sound assessment of a foreign market. What might the barriers be? What makes it a good market to enter? How will the local culture influence the sales of your product or service offering? Such in-depth market research information is necessary to make sound marketing decisions and it must be done with each new market entry.
C. Determine the pros/cons to conducting business in each market. Look at potential language barriers, legal restrictions, logistical challenges, and payment problems that might get in the way of doing business in a particular market. Include all relevant variables in your assessment. Do an analysis of your company’s own strengths and weaknesses in a selected market. Will your product or service offering be in the low-, middle-, or high-end pricing level? Is there a similar product or service offering currently available in the selected market? If so, who is making it? Where are they based? Can you compete? Why would you? How would you? The more pros you have for entering a new market, the better your chance for success. If you can draw on the perspective of a native (better yet, an actual prospective customer) of the country where you are keenly interested in doing business, do so. Nothing beats an on-the-ground assessment.
D. Select one market to get started! Now you are ready to interpret your findings in light of the stated objective: where do you want to go and how will you know that you have arrived? (This gets back to the back-of-the-napkin plan.) At this juncture, you should have enough data and experience (from going to trade shows, for example) to decide which market is best for you to begin in. Hold off on the other two countries and don’t start doing business with them until after you have a proven success with the first overseas market. If the first selected market doesn’t work right away, say after six months or a year, move on to market No. 2, and so on. Don’t muddy the waters. You don’t want to do too many things at once because you will end up not doing any of them right.
The Laurel Export Business Plan
The following plan—I’ll call it the Laurel export business plan (LEBP)—has worked well for many of my clients. You can focus on each section heading and then build out accordingly based on the questions I pose and comments I make. What many clients experience as they develop an export plan is the eureka moment: “I can do this!” The trick is to craft a plan that suits you and can absorb economic shifts and shocks along the way yet still allow for you to achieve successful results. And it can’t hurt for you to use both the traditional business export and Laurel export plans to develop yours.
Tip It is important to identify where the cash will come from to support your export operation. Conduct a complete audit of your cash situation so you are not surprised later on to learn you need more money than anticipated to reach a new overseas market. Face weak links and potential problems before you are knee deep in a fantastic opportunity.
1. Introduction: Compose an explanation why you should export and what your company wants to gain from exporting. Your answers will serve as your guiding light and foundation for your entire export business plan.
2. Executive Summary: Specify your long-term financial and nonfinancial vision for developing an export business. Think three, five, and ten years out. This part shows clarity of purpose, direction, and intent. It is an understanding of the company’s identity and a short, concise picture of the company in the future. Think of it as an entire business plan in miniature.
3. Strategic Leadership: State your leadership ability clearly. Do you have what it takes to drive results for your export operation? (Refer to Chapter 1 for a refresher on the global mindset.) The business owner must have the ability to set direction, make decisions, and provide long-term planning.
4. Company Description: Explain what do you do and why are you good at it.
5. Target Export Market: Identify your customers in _______________ (pick a target export market). Think about what would motivate them to pay for your product or service and if they will be able to afford to pay for your product or service. Drill down to a more precise view of your target audience.
Caution Are you crystal clear on who your customers are and why they use your product or service? If not, go back and do a major rethink!
6. The Competitive Analysis (Market and Customer): Distinguish how your product or service is unique, and explain briefly why people in a selected export market would buy it. Do you know the strengths, weaknesses, strategies, opportunities, threats, and financial status of your top five competitors? Spell them out.
7. Marketing and Sales Plan: Detail and clarify how you will effectively and efficiently reach the people with whom you want to connect through your business (direct, indirect, intermediary sales, trade shows, e-commerce, mobile, etc.). Ensure existing local customers are not neglected! Are your products and services suitable for an export market or will major modifications be required? This part should be strategic in that it outlines specific action steps to achieve future sales goals.
Tip Utilizing market and customer intelligence determines a company’s ability to perceive and adapt to changes in the global marketplace. The more homework you do, the better the chance you have to achieve desired results.
8. Operations Plan: Figure out how you will support the business strategies through internal operations, systems, and organizational structures. Describe key factors to use in your business in finding solutions and in meeting the wants and needs of customers, suppliers, employees and other key influencers. If exporting a product, how will it get made? Do you have the capacity to produce and deliver?
9. Information Technology Plan: State how you will leverage technology to take advantage of the export marketplace. Will your export business be heavily dependent on technology? List your business’s strengths and weaknesses in the information technology area. IT will support your company’s business processes and decision making and, at the same time, give it an extreme competitive advantage in the global marketplace. Plan the parts of your business you will use technology for (order taking, mailing lists, social media, finances, e-commerce sales) and how you will use it.
10.Logistics Plan: Outline how you will get your product or service to the chosen export market.
11.Management Structure: Identify the people and experts in your business who will implement your plan and exceed your goals. Compile a management team section that describes who is on your team and what expertise each person brings to the table. This section should also include an analysis of strengths and weaknesses in the team and what might be missing.
12.Future Development: Tailor your business plan by defining future milestones that are in line with your desired goals. Describe your vision for your business, including your exit strategy.
13.Financials (Export Budget): Analyze your available resources (human, material, and financial) to determine how you will support export initiatives. Get together three types of financial statements: a cash-flow statement, an income statement (also referred to as a profit/loss statement), and a balance sheet. Set budget targets and develop pricing strategies. Confront your company’s finances squarely. You want your export business to be sustainable over the long term.
14.Strategy Implementation: How will you follow up, review, and measure results? Have you set a timeline? Home in on a detailed action plan for execution.
Tip Have your export dream team (EDT) review your plan so that they can seek external sources of advice, test it, and hold you accountable and responsible for implementing it.
As your export business grows, you will become more aware of external factors that influence your business plan, which will allow you to develop ways to manage and adapt to them. These external factors might include: import regulations, exchange rates, availability of finance, new or unexpected competition, and disruptive technology and logistics, to name just a few. As mentioned earlier, anticipating change and adapting to it requires strategic leadership as well as Backup Plans B, C, and D.
Summary: Leaving You with Fun and Export Adventure on Your Mind
You should express and experience the passion you have for exporting in the crafting of your export business plan. If that enthusiasm is not there, reconsider what you are attempting to do. It might not be the right time. Individuals e-mail me on a weekly basis saying, “Here’s what I want to do in the export market . . . .” Then they ask me: “Will it work?” My response: “I don’t know. It depends on you.” (Reread Chapter 1!) This brings us back to the goal of this chapter: creating an export business plan that meets your needs and serves the life of your business.
Now that you know what is involved, craft your own export business plan and use it as a tool for building your export business—and don’t forget to maximize profits! Look at it regularly, revise it when necessary, and pay attention to the reality of the market. It will sharpen what you are doing, why you are doing it, and help you define and achieve professional and personal goals.