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09 April 2015

4 Tips for Selling Your Services Internationally

Posted By: AIB Business
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Major international opportunities exist for services exporters, but not enough small businesses sell their services abroad, writes John Whelan, Export Sector Specialist at AIB.

Demand for services internationally has been growing at twice the rate of demand for goods over the past decade. Here in Ireland we have taken advantage of this global trend more than most, with exports of services rising seven-fold from €13 billion in 2000 to €101 billion last year. By comparison, exports of manufactured goods (inclusive of agri-foods) have not even kept up with inflation over the same period, only growing by a cumulative 6% to reach €89 billion in exports last year.

We are considered a nation of service providers led by software, followed by financial services, aircraft and shipping leasing and related services, engineering, medical, legal, education, training, and sports and leisure – even animation and film-making exports from Ireland are making their mark.

And whereas we have the capacity to take a whole range of services across the globe, only a handful of small and medium enterprises (SMEs) have done so. A mere 7% of our service exports came from SMEs last year, with 93% coming from the multinational exporters from Ireland.

Enterprise Ireland is very aware of the gap in performance and have put a priority on assisting businesses to sell their services internationally. The EU is aware that the same issue exists across Europe, and the Junker Commission has announced that a real Digital Market will be created across the EU as part of the solution.

If you’re considering selling your services internationally, these tips can help put you on the path to success:

 

1. No Single Business Model

In the services sector there are a wide range of non-traditional business models, and no one single model can claim to be the standard. It very much depends on the target customers and the route to reaching the market. The rapidly expanding social media landscape provides instant and direct access to a wide international customer base and often dictates the most effective business model to use. More and more, the customer is directly involved in the business structure, something that was excluded from the traditional business management structure. The takeaway lesson is to build the management structure to meet your customer demand profile and gear the business model to suit this structure.

 

2. Niche is Fundamental

For the majority of SMEs planning entry into international markets, failure is almost certain to arise with a “me too” service. Locally service providers will inevitably have the competitive edge. A new service with unique selling points has to be the start point. And in the rapidly growing global world of consumer preferences there are many niche markets, which can be accessed commercially. But not all niches are commercially viable.

There are three routes to building a unique service offering:

  1. Develop the new product internally
  2. License in the technology (Enterprise Ireland can assist with this process)
  3. Buy in the technology or business with the unique service required for the market entry.

The takeaway lesson is to find or acquire the niche capability and only then start the internationalising process.

 

3. Strategic Partnering

Strategic partnerships can take a variety of forms, ranging from simple contractual selling agreements to cross-distribution of each partner’s services, or new service product development with both partners funding the R&D. The main reasons for strategic partnering is to gain access to distribution and after sales service in target export markets, at reduced risk. Being first mover in the market offers a key advantage to many new service sectors but – in a very connected world – multiple market entry in a short time frame is often the only way to retain the advantage. Unless you have very deep pockets, the strategic partner route can be the ideal way forward, giving economies of scale and enabling early in-depth market knowledge.

Once you have considered the pros and cons of a strategic partnership for your business, you need to choose a co-operation vehicle that is most appropriate for your company.

  • Agency agreements are the most basic, where you want introductions and straight sales activity under your direct instruction. These types of agreements do not include after-sales back-up.
  • Subcontracting is another form of low exposure partnership, where you get a local operator to execute the order to your specification.
  • Distribution agreement – with a known organisation operating in your sector in one or more of the target markets – represents a higher level of commitment between two parties. The distributor agreement usually allows for freedom by the distributor to set their own pricing structure for the service, and it covers after-sales services.

Other forms of partnerships are:

  • Licensing – if you have a technology to transfer
  • Franchising – if you have a proven brand and business formula
  • Joint Venture – if you wish to exploit a large market, such as the German or Chinese market, and need to be able to meet the demands of large-scale customers.

Successful Irish services exporters have extensively used strategic arrangements with companies based in foreign markets to help target new business, and enable early scaling of business growth. Any partnership works best if mutually beneficial and when the two businesses are complementary.

A difficult but important part of using partners to expand internationally is the screening of potential partners, but it is critical as your reputation is at stake. The wrong partner can kill the business opportunity. Online resources can be used to identify and screen potential partners, but the more effective route is to contact Enterprise Ireland, or the Irish embassies around the world, to obtain sources for referrals of quality business partners.

Once you have established a suitable match or strategic alliance, both parties should work to ensure that there is a clear understanding of what is required from each partner. This then needs to be encapsulated in a legally framed agreement, which avoids difficulties arising as trading roles out. Frame a partnership agreement that clarifies matters such as liability, service levels, work plans, decision-making criteria, time frames and intellectual property ownership. Make sure that all aspects of the relationship are clear and unambiguous. It is important to get legal advice.

 

4. Don’t Ignore the Personal Networking

Online professional networks, such as LinkedIn, are designed to create networking communities and opportunities. Set up your own profile linked to your business and invite people you know to associate with you.

 

Written by: John Whelan, Export Sector Specialist at AIB

If you require finance to expand into new markets, talk to AIB today.

 

Related Links:

  • Supporting SMEs Online Tool
    The Supporting SMEs Online Tool is a cross-governmental guide to help small businesses know which of the over 80 Government supports could possibly fit their business.
  • Outlook: Exports
    AIB’s Outlook: Exports report – in association with Bord Bia and the Irish Exporters Association (IEA) – provides detailed research, analysis and commentary, on a multi-sectoral basis, of the SMEs that are currently exporting goods or services from Ireland. An important part of this report is the specially commissioned detailed research on exporting SMEs, which has been carried out independently by Ipsos MRBI on behalf of AIB.

 

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