The size limitations of the Australian domestic market mean that in particular sectors, small businesses struggle to achieve their growth potential. For many small businesses, these limitations can be resolved by tapping into much larger foreign markets that offer greater opportunities.
The beauty industry in Australia is a good example. This market is a relatively small industry here in contrast to those in countries such as the US and the UK.
Some companies, such as Sydney-based cosmetics company ModelCo, have tapped into foreign countries to turbo charge business growth.
The challenges often lie in identifying when to start exporting, as well as navigating the difficulties in securing financial support. ModelCo’s export journey provides some valuable insights for other small companies looking to achieve export success.
Quickly identify difficulties when seeking financial support
Small businesses often spend significant time managing their cashflow, and exporting often places increased pressure on cashflow levels. Small businesses often struggle to keep enough cashflow in the business to meet new export orders as working capital cycles can be very long depending on the market.
Given the issues around additional working capital, ModelCo approached its bank for some additional funding. While the bank wasn’t able to provide the finance ModelCo needed, it was suggested they contact Efic.
Efic was able to provide a A$120,000 Export Contract Loan, enabling ModelCo to successfully supply the increased volumes needed by its key overseas distributors.
Identify the level of demand for your products
It is crucial that small businesses identify the level of interest from another country by testing how it will be received in the local market. A product may be well-received in one market, but this may not be the case in another market due to differences in manufacturing standards in various countries.
When ModelCo realised that customers in various markets were interested in its ‘beauty box’ concept, they decided to enter multiple markets including the US, UK, New Zealand, Europe, Asia and the Middle East.
After multiple market tests and the realisation that demand for ModelCo’s products was sufficient, the company then spent considerable time on modifying their products for each market.
“We spend considerable time designing, testing and sampling our products, based on customer feedback,” says Shelley.
For ModelCo, identifying the international demand and modification of its products for the various markets were the two key points that led to the successful decision to pursue its export goals.
With its continued focus on product innovation and listening to customers, ModelCo looks set to benefit from the strong worldwide demand for its products.
ModelCo’s export journey is a timely reminder for Australian businesses to seek out export opportunities in 2018. If you operate in a small industry in Australia and you have reached your growth potential then look to international markets for new opportunities and growth.
About the author
Andrew Watson is Executive Director, Export Finance with Efic, a specialist financier that helps small businesses win business, grow internationally and achieve export success.