British businesses are already exporting all sorts of products to North America, from Postman Pat books to foldable bicycles and industrial PCs, while a new trade agreement could break down the last of the export hurdles, opening up a 300 million customer market to thousands more UK firms. Chris Goodfellow finds out more.
The US boasts a huge opportunity for British small businesses, with 300 million American consumers open to new products and interested in the Made in Britain brand, and thousands of UK-based small firms are already exporting to North America.
However, dealing with legislation that can vary on a state-by-state basis, paying antiquated import tariffs and understanding the regional nuances of a diverse market can create major hurdles for small businesses.
Negotiations over the Transatlantic Trade and Investment Partnership (TTIP) is set to address legislative issues and charges, but is likely to take several years to implement.
Is your business offering viable for North American exports and how can your business break into the largest market of English-speaking consumers on the planet?
Spencer Mahony, east coast director for UK Trade and Investment, the government department responsible for helping entrepreneurs export, says the first thing his team looks for is whether the product is unique and will win business.
"There are going to be hundreds of companies competing with you," Mahony warns. "What is its USP or can you offer a better customer experience that’s going to help you win customers?"
Mahony says the next questions to ask are whether you could maintain that edge and be competitive if local competitors try to emulate your success, how the product would be marketed and what the pricing strategy’s going to be.
Exports make up of 50% of sales for British bookseller IglooBooks with the US a key market. CEO John Styring advises businesses to take a similar approach, starting with market research.
"First and foremost, make sure a market exists for your goods," says Styring. "Then make sure demand isn't already being met by competitors and, if so, whether you have a product that makes your company noticeably different. Where there's no competition check that there are no good reasons why not, for example, any laws restricting the sale of your product."
However, from the palm lined beaches of Los Angeles to the wilds of Alaska, the world's biggest English-speaking market hosts different answers to these questions.
"The US is almost like the EU," says Mahony. "It's one country, but like the EU each state has different policies, regulations and economic incentives."
The difficulty of understanding different markets means businesses often start by targeting a specific region. This could mean businesses in the oil & gas sector focusing on Texas, and those in television Los Angeles or Washington DC. There's also an opportunity for smaller suppliers to identify locations with a second tier of buyers where there is less competition, for example, the burgeoning TV production market in Atlantic Canada.
Researching these opportunities can be a complex process. While there are lots of resources online small businesses can seek entrepreneurial support through organisations like UKTI and British Chambers of Commerce.
UKTI supports thousands of businesses that are targeting the US every year. It focuses on mid-sized businesses, however, it has a range of support for smaller firms that includes providing advice, helping companies take part in trade shows and networking events, and making introductions to potential customers and distribution partners.
Mahony says UKTI tends to look for businesses that are keen on the US and have done "a bit of homework". Among the success stories he cites Peanut Hottie, which is now selling to Walmart, folding bicycle maker Brompton and security company RepKnight, which is working with the US government.
Sussex-based sparkling winemaker Ridgeview has grown its operation from 25,000 to 250,000 bottles in the last 15 years and plans to double production over the next five. Exports are a key part of this growth and, although they already make up 20% of sales, volumes are expected to double this year.
Ridgeview has taken part in several UKTI schemes to assist with this process, including Passport to Export and Gateway to Global Growth and Overseas Market Introduction Service, and received support when visiting an international wine conference for the first time. It also worked on market mapping.
It's likely taking legal advice is going to be crucial too.
Mike Saunders, founder and CEO of web startup Commonplace, says this has been the biggest distraction when trying to establish the company’s presence in the US. "Because we're collecting data we wanted it to be watertight in terms of data protection legislation," he says adding that this was priced into the quote.
For PP Electrical Systems this means understanding the standards that cover risk and fire protection, which can be far stricter than the measures put in place in other countries.
"Being able to certify compliance to these standards is crucial if you are going to supply direct to customers in these markets," explains Tony Hague, managing director of PP Electrical Systems. "This means we have to design control panels systems and machinery in a different manner.”
Hague adds they have had to increase the company’s insurance policies.
Local distribution partners are normally a necessary part of doing business and retailing products or services in an overseas market, particularly when they are unable to have a permanent presence in the country. This means securing the right distribution partners is a crucial part of exporting.
"Picking your partners is so important," says Ridgeview's sales and marketing manager Mardi Roberts. "Our product needs to be hand sold, and they [the distributor] end up being the storyteller and ambassadors of what we are."
Roberts advises businesses going through this process to look for distribution partners that are enthusiastic, understand the product and that you get on with them on a personal level, adding: "It's about picking them not too big or too small, so that you have potential for growth, but if they’re too big you have the potential to get washed away in the portfolio and not stand out."
Styring says it's crucial to choose wisely and adds industry conferences can be useful for identifying contacts: "Find out which networking events are most suitable for your business and ensure your key staff and business development teams attend. By talking to associates in one region, you may find they have useful contacts in nearby markets."
Visiting the market is always useful to build an understanding of local consumers, but the extent to which this is necessary depends on the business’ offering. Mardi says this has been crucial to the Ridgeview's success,
Mike Saunders from Commonplace started selling in US without visiting the country.
He has been able to maintain client relationships without meeting face-to-face by clearly identifying the contact point, making sure they are available day and night, and taking advantage of collaborative tools.
It's possible to leverage existing supplier relationships to get a foothold in the North American market.
Saunders found the international nature of the consultants he works with in the UK provided a natural in with their first US project.
Commonplace helps collect feedback about cities to improve the collaboration between local authorities and developers, and the people that live and work there. The 18-month-old business launched its product a year ago, but has already started its first US project in Boulder, Colorado.
Saunders says the team was aware of the potential to export from the start, but had planned to wait. “Right from the beginning I had a strong interest in researching and seeing what was happening in the [United] States, but I didn’t think we would do anything there for a few years. .
"I wanted to prove we could do it here first because it might stretch our resources, but it happened as a result of favourable outcomes of some of the projects that we did in London."
Hague says the majority of the manufacturer’s products that are being sold in the US through European manufacturers, although this has led to getting direct customers.
UK businesses have the opportunity to leverage the Made in Britain brand and Mahony says those that have a story to tell tend to do well.
Sonny Winger, owner of online retailer The Vintage Pattern Shop, which specialises in designs from the 1930s to the 1970s, says she plays on her status as a UK business to make sales.
"It's very much in the consumers' mind and their interpretation of British folk,” says Winger. "I very much concentrate on Britishness and they seem to love that."
For online retailers like Winger, working with products that aren't subject to onerous legislation when exporting to the US can be more about refining marketing and customer service.
Winger says she played on decades of experience as an air stewardess and shopping in the US to develop this sales pitch.
"The American consumer can be an increased source of income for any small business, but you have to understand them and make them feel comfortable," said Winger. "You have to look at the American folk as a consumer, the buying experience is very important."
The practical tips Winger recommends are not quibbling about refunds, working with online portals like eBay to increase confidence, ensuring prompt delivery, and responding in a clear and timely manner to emails and communications.
The tariffs paid on UK products exported to the US are charged at a relatively low average of around 2%. However, a slew of protectionist measures can make it difficult for small businesses.
This includes a 130% tariff on peanut imports and 350% on raw tobacco. It also means working with complex legislation that, for example, applies no tariff to exporting assembled X-ray machines, but charges 2.4% if the parts are broken down.
In some cases tariffs will be paid by local distributors, however, this cost will still need to be priced into products alongside considerations for marketing expenses.
The Transatlantic Trade and Investment Partnership (TTIP) is set to revolutionise trade between Europe and North America by removing the $1bn paid by UK businesses in export tariffs and the legislative barriers.
Trade and investment minister Lord Livingston explains the TTIP would seek to address the issues facing businesses trying to export to the US, including a chapter dedicated to small businesses.
"Small and medium-sized businesses who want to export to the US find they are hard hit by a double whammy of duplicate regulations and import duties," says Livingston. "Larger firms might be able to make separate products to comply with subtly different regulations, but smaller businesses can’t afford to do this, so they are effectively often denied access to a hugely important export market."
TTIP will help small businesses by removing trade barriers when it comes into force in the next two-three years.
In the mean time, North America still offers a huge opportunity for the Britain's army of small businesses and the inspirational firms featured in this article show it's possible for all sizes and types of companies to break into the US market.