Research conducted by accounting and advisory firm Bentleys suggests that only 19 per cent of Aussie SMEs currently operate in markets other than Australia and New Zealand.
Business owners cited physical distance as one of their chief concerns about overseas expansions, with 35 per cent citing this as a barrier to entry.
Despite this fear, businesses already operating abroad say that in the modern era, distance actually plays very little part in constraining their operations.
“It's so good ... we're sort of middle of the world, because we're selling to South Africa one way, and then we sell to America the other way, and we're not importing from China and pretending to go out, it's direct from us to the world,” Scott Boocock, of South-Australia based HEGS Australia, told My Business.
“What it does do on a marketing aspect ... is it's Australian made, which is a very powerful brand worldwide. We get extra deals because we are Australian made.”
Interestingly, Mr Boocock said his greatest challenge when doing business in other countries is managing currency fluctuations – yet this didn’t even register among the SMEs surveyed by Bentleys.
“Currency is a continuous risk for us as a small business. You can benefit from it and it can go the other way. We're always looking at that as a challenge, because at the end of the day it's dollars in the pocket,” he said.
Similarly, Sydney-based travel wholesaler Michael Lavilles, owner of Beyond Travel, said that distance is not an issue for generating business as virtually everything can be done online.
Instead his biggest risk, as a niche operator selling holidays in Russia and eastern Europe, is unforeseen events that happen within those markets, such as bad weather or the Malaysia Airlines flight MH17 disaster.
“[But] we are putting things together to absorb the shocks,” said Mr Lavailles, adding that by expanding into other markets, he still has destinations to sell into should one region become less attractive.
According to the Bentleys survey, other concerns of SMEs about entering offshore markets include a lack of interest or perceived value (38 per cent), while 15 per cent cited the simple fact of not knowing how to operate outside of Australia.
And the government clearly has work to do in promoting awareness of trade agreements in foreign markets and their benefits to SMEs, with only 64 per cent of SMEs saying they are aware of the China-Australia Free Trade Agreement and just 40 per cent familiar with the Trans-Pacific Partnership.
Sadly, as these statistics suggest, many SMEs may be passing up legitimate opportunities for growth based on unfounded fears and misconceptions or a lack of understanding on how to grow beyond our borders.
“SME owners can be risk-averse in thinking about going global. For them, international markets may present exciting growth and diversification opportunities but they can also present challenges. This fear often comes from a lack of knowledge in how to make the transition from a local to global business,” said Scott Field, associate director of Bentleys Queensland.
“Going global requires an understanding of the local regulatory compliance framework, from tax and custom laws, to securitisation of intellectual property and asset protection, to appropriate business structuring, so as to identify and mitigate any potential risks.”
Tips for expanding into offshore markets
For SME owners who may be contemplating expanding their operations into international markets, Mr Field has these tips:
• Have a business plan: Perform a SWOT analysis to identify your strengths, weaknesses, opportunities and threats.
• Do your due diligence: Research the market you wish to move into, and ensure you are utilising all resources available through your accounting or advisory network to understand the legal and regulatory framework.
• Have a well-thought out financing structure: Ensure your business has a robust financial forecast quantifying business expansion costs.
• Understand the local economic and political environment.
• Check what government grants are available: The Australian government is trying to encourage exporting and there are a number of grants available depending on the industry and market you are trying to break into. There are also a number of trade agreements in place; for instance in the Asia-Pacific region we have the China-Australia Free Trade Agreement and the Trans-Pacific Partnership.