Scaling an export business is an incredibly complex process. Often it doesn’t start that way, however, but with entrepreneurs working out how to ship products overseas simply because an opportunity falls into their lap.
Take child’s suitcase brand Trunki, which sold its first container of products to New York’s Museum of Modern Art after a blog post caught their purchaser’s eye; they were selling internationally from day one.
Today, it’s a different story. Trunki generated half of its £8.5m brand revenue overseas last year. It’s an operation that’s taken ten years to scale, requires a number of different types of supply chain and counts over 35 distributors.
So, how do you balance the need to move fast and capitalise on opportunities with strategic growth and achieving? And when, if ever, should you move from one to the other?
Sean Ramsden built British food exporter Ramsden International to a 130-country operation with a turnover of £50m over the last 20 years. Speaking at the British Library Scale-up Summit yesterday he said he wrestled with the balance between structured and ad hoc growth.
“How much resource do you put into researching markets versus responding to enquiries? Having an analytical mind helps. But experience is a huge bit here; the intuitive feel of a successful entrepreneur is something that is very difficult to put your finger on.
“In the ideal world, you have the agility to respond to opportunities, but there’s a bit about balancing it and understanding the trade-offs,” says Ramsden.
It’s often a case of taking a phased approach to a new market. This can start with an opportunistic response to a sales request or because you’ve carefully selected a territory to target. Either way, it’s possible to work on short-term solutions with new distributors and develop the supply chain from there.
Do it, don’t be scared of it, but not before you’ve tried it here and know it’s scalable.
Matt Lumb, CEO and director of hair products business Tangle Teezer, says the business keeps its regional distributors under constant review. Each has a territorial agreement and minimum order targets to hit. These relationships start with a six-month period secured largely on a “handshake” before long-term agreements are put in place.
Speaking after the event, Trunki founder and CEO Rob Law told BusinessZone that the distribution approach differs in each of its key markets and “has a lot of history”.
“Right now we’re working with a distributor for China. We’ve exited our relationship with our distributor in Germany and are doing retail direct. In the US, we’ve had a whole history of trying different things.
“You always have the 80:20 rule; 20% of your customers are brilliant and 80% are average or less than average. That’s always a challenge. I thought international sales would be easy because I was getting so many international requests. But actually, you end up going through a cycle of starting with the small guys, outgrowing them, getting middle size guys and you grow them and then you’re dealing with the large guys,” he said.
Tangle Teezer’s Lumb says the business has developed key KPIs for each strategic market, noting the business is very conscious of keeping to a small number of markets and hitting these targets before expanding further. The expansion plan is reassessed every year.
Secure product-market fit in the UK before looking to export
Taking a step back, founders that have successfully scaled export businesses – even those that exported very early on in their journey – stress the importance of getting product-market fit in the UK first.
“There’s an issue of timing,” advised Ramsden. “I see a lot of small food manufacturers spending a big proportion of their resources trying to cover the world when they haven’t reached maturity in the domestic market.”
Paul Lindley, founder and chief executive of organic baby food business Ella’s Kitchen, gave an inspiring talk at the British Library event that drew on his ‘why’ - to improve children’s lives through developing healthy relationships with food – to show how the business approaches branding and exporting.
“It’s a mistake to export at the beginning. Understand why your brand resonates, why your pricing strategy works and all of that stuff first. Do it, don’t be scared of it, but not before you’ve tried it here and know it’s scalable.
“The way we think about exports is we need to crawl, and fall over and get up and walk again before we try to run,” he said.
It’s an approach he says has been crucial to building the business’ £100m turnover, 40% of which is generated overseas.
The issue of copycats and IP protection
Another common topic during the debate on exporting was entrepreneurs’ experiences having their products copied.
Lumb remarked that the first instance he saw of a product imitating Tangle Teezer was “absolutely horrifying”.
Trunki’s founder adds that “all you ever do is aspire to have a successful product. No one tells you that when you have a successful product people will copy you.”
It started with a soft-sided luggage that copied the shape (one of Trunki’s big appeals is that children can ride on the suitcases).
“Our success in China lead to a lot more copies,” Law adds. “They started off being exact replicas and then the factories figured out we had our design rights covered. They then started amalgamating them into what looked like inbred Trunkis. We managed to get those taken down. Now they are the same kind of product, but very different. Essentially Trunkis from Chernobyl.”
The business’ approach to dealing with copycats has evolved over time. They started by walking the aisles of trade shows with a lawyer before the internet was a key discovery channel. This then moved on to monitoring Alibaba and making take-down requests, and other routes.
First he took on the responsibility, before passing it on to the customer service team and then a PA. In the end, the technical expertise, languages needed and sheer time involved lead them to engage an outside agency.
Whether it’s knowing when to start exporting, expanding to new markets or dealing with the ever-present threat of copyright infringement, growth requires experimentation. What needs to come from that experimentation is a series of processes that can be scaled. And that’s been the key to these businesses’ success; take risks, re-evaluate, fail, get back up again and scale.
About Christopher Goodfellow
Journalist and editor with nine years' experience covering small businesses and entrepreneurship (ChrisGoodfellow.net). Follow his personal twitter account @CPGoodfellow and his events business @Box2Media. He has written for a wide range of publications in the UK, Ireland and Canada, including The Financial Times, The Guardian, The Independent and Vice magazine.