New market opportunities

Exploring new market opportunities can open the door to fast growth

Scale-ups by their fast-growing nature need a sizeable market to sell to. This can mean looking to export into international markets or developing a product that can break into new sectors.

The benefits of exploring new market opportunities are clear – out of the 1138 MSBs that started exporting between 2010-13, over 14% of these businesses scaled-up. This is higher than the 11% of the total MSB population that scaled-up during the same period. The fast growing companies we interviewed testified that exporting can be key to boosting further growth through opening up new business partnerships or gaining access to niche markets.

"TestPlant had an international outlook from the outset – we didn't have a national plan. We wanted to build a global software business with the US as one of the key markets. Now our exports amount to 85% of sales."

1 George Mackintosh, CEO, TestPlant

Scale-up businesses can have vastly different export journeys, some being global business from day one courtesy of their online presence while others start at home before looking further afield. While there are many different paths there are common practices that can help mitigate risk and get the most out of exploring new markets.

Scale-up case study

Name: Quadralene

Founded: 1930

Growth: 70% of sales are from new markets

With over 85 years of history, Quadralene is now a leading business in the field of design and manufacturing of high-quality specialised cleaning detergents and disinfectants for the healthcare and dental markets.

Hired in 2005 Andy Corley, MD, and Bob Newsome, Commercial Director, introduced a long term plan to transform their company from a manufacturer of car shampoo to an infection control products company. This required the development of a product portfolio and the business expertise necessary to become a global player through the establishment of creative OEM partnerships. Exploiting this type of niche market would be key to Quadralene's high growth and after proving their value to a UK procurement division they successfully pitched to the global parent to manage R&D, product design, manufacture and logistics from the UK to 65 country markets on four continents.

The strategic alliance with this global brand was opened up because Quadralene demonstrated significant specialist expertise which was vital to the strategic objectives of their partner. With clear new market opportunities the business has a roadmap for the future and is looking to double in size again over the next five years.

4 tips scale-ups use in successful export journeys

1 Ensure the business has a digital and online transactional presence

2 Talk to people who have operated in the markets that your business is looking to enter

3 Explore whether partnering with existing companies in the region can reduce risk and provide market intelligence

4 Leverage UKTI to gain access to key contacts and access market opportunities

MSBs are performing well when it comes to distributing goods internationally with over half the 100 businesses we surveyed in 2014 saying they export. However, 28% of companies highlighted that they find it difficult to identify opportunities in foreign markets. There is a vital role to play for support schemes such as UKEF and the Growth Accelerator in giving businesses the intelligence and capabilities needed to access new markets.

"Scaling-up is an exciting process, but remember to keep an eye on core operations and their performance while you are expanding. You're likely to need your core operations to be at the top of their game more so than normal."

1 Alan Beresford, CEO, Omega Resource Group

Actions for government

Allocate a portion of UKEF's Direct Lending Facility to fund working capital for general pre-shipment expenditure

  • Trade finance and services play a vital role in helping exporters overcome key challenges like: longer lead in times for deals; higher information barriers and the need to transact in foreign currencies.
  • UKEF should broaden the working capital support it offers for medium sized businesses to help them on their export journey.

Continue to push for standardisation of the European VAT threshold at €100,000

  • The EU wide threshold on VAT rates at the place of purchase is having a disproportionate effect on small businesses, particularly digital firms.
  • In a business environment in which we are trying to encourage all businesses to utilise digital technology to take advantage of the benefits that operating online can bring, inconsistency in the rates is a big barrier.
  • The VAT threshold rate should be raised to a consistent level to encourage more business to export.

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