Chapter Summaries

Business Start Up Guide {www.thedesigntrust.co.uk}

Chapter Summaries

Chapter 13: Exporting

This chapter looks at the problems and challenges a business will face when they begin trading overseas. Key points that should be considered when thinking about trading your product/service overseas:

• How will you find and develop your markets?
• What are the relevant regulations governing (a) exporting from the UK and (b) importing into the particular overseas market
• What methods of transport will be used?
• What are appropriate forms of packaging?
• How will you communicate effectively with clients at a distance?
• What cultural and other differences are there in business customs and etiquette?
• How will you deal with any language barriers? Will you need an interpreter or a translator?
• What is needed to adapt your contracts, and how much will this cost?
• Will payment delays seriously interfere with your cash flow, and how will you allow for this?
• How will you organise safe, efficient and prompt international payments? If payments are delayed, how will you enforce penalties?

The chapter then lists numerous organisations that may be able to assist the business and help overcome these problems when trading overseas:

UK Trade and Investment: offers support for UK companies who are keen to develop international business and also provides support for overseas companies wishing to invest in the UK. It offers designers interested in exporting a range of services that will maximise their chances of breaking into overseas markets.
Advice and Support: UK Trade & Investment’s network of International Trade Advisers based in local organisations such as Business Links and Chambers of Commerce can provide you with essential, impartial advice on all aspects of international trade.
Passport to Export: The Passport to Export programme combines many of UK Trade & Investment’s services in a cost-effective package specifically designed for new and inexperienced exporters.

These are just three examples of the organisations mentioned, and the chapter also mentions:

• Visiting trading seminars to test the market and attract customers,
• The Trade Development Officers, who are based at embassies and consulates, who can alert you to new business opportunities,
• Overseas Market Introduction Services who can introduce and connect you to staff overseas.

Chapter 14: Working with Agents and Distributors

This chapter discusses what to do if your products are not being sold direct to the client, and typically they will be sold through either a distributor or an agent, so which channel of distribution would best
suit your product/service.

Distributors are sales-based companies that buy and sell on.
Agents are independent sales representatives who sell your product to the most suitable retail outlet.

Costs involved when working with a Distributor:

• When working with a distributor, you will pay all manufacturing and development costs,
• Distributors will ask for a hefty discount on your normal trade price (the price at which you sell to the retailer). They will expect to mark up their cost price by around 40% before selling on. Ideally the price of the product should be approximately the same whatever channel they are sold through.

Costs when involved when working with an Agent:
• Agents usually work on commission and pay for all their own expenses,
• Most furniture agents will not contemplate taking on a company unless they can see a potential income of £7,500 to £10,000. This means you have to be able to produce £75,000 to £100,000 of furniture per annum. Some agents may work for less if they see potential for the future.

Always have a written agreement; either in the form of a contract or letters.

A representative carries out the same job as an agent, but he/she is an employee of your company; you are therefore liable for all of their expenses. The advantage of a representative is that he/she concentrates solely on selling your product, and you have complete control of his/her movements. However, the cost of a representative is rarely viable for a small company.

How to find the right Distributor or Producer:

• Have a full understanding of the product, its potential market costs and price point.
• Research similar products, or products that you feel work in the same market – find out who makes them, and who sells them.
• Visit trade shows; research the companies you are interested in approaching.
Find out who makes the decision on product selection; contact him/her to arrange a meeting to show the product.

How to find an Agent:

• By recommendation from another manufacturer.
• By advertising in trade journals.

Chapter 15: Getting Your Work Manufactured

This chapter helps you to decide whether or not your product is suitable for batch manufacture and highlights the issues involved.

Many designer/makers want to focus on the design and marketing of their products than producing a batch of them, which takes a great deal of time, so subcontracting is an option available.

However, there are questions that should be considered before you decide to go down this route;

• Can you sell enough subcontracted products at the right price? Your products may sell well in small numbers at a relatively high price, but will the demand and the price hold up when the product isn’t new any more? Will you be able to sell enough additional products to make the investment in manufacturing? To answer this you will need to have done some serious market research.
• Is your product suitable for mass production? Is it intended to be a bespoke item, or multiples of a commission piece? Because if so, it will need the personal touch.
• Quality control.

What does subcontracting the manufacture of your product involve?

• Raw materials,
• Production,
• Logistics (where is your product going to end up and how will it get there?)
• Packaging.

What are the processes involved? Can just one supplier produce your product, or will you require different suppliers to carry out different stages of production? And how much value is added at each stage?

Products made by one supplier:

• Easy to subcontract; the suppliers are adding value to the piece, you add a mark up and sell it on.

Products requiring many suppliers:

• If your product needs many suppliers, you are likely to be establishing a complex business and perhaps spending more time managing the various suppliers than when you made everything yourself. Can the design be refined to reduce its components or processes? Can you persuade suppliers to provide you with sub-assemblies rather than individual components only? If not, you probably need to redesign the product to take into account the capabilities of potential suppliers.

Products needing a small number of suppliers:

• The products that are most successfully subcontracted tend to need a small number of suppliers, each responsible for a key part of the product. You can develop good relationships with three or four suppliers in a way that you could not with ten. You can also have alternative suppliers in mind for when demand increases, or in case a supplier lets you down. You can build up a good body of knowledge in particular processes, and this may lead on to more designs. You can retain the highest value-added aspects of the production for yourself. For example, the final assembly and packaging is often where most of the value is added to a product, so if you retain an element of finishing for yourself, this will allow the product’s value to remain high as there is still a bespoke element in the product.

All three kinds of products can be subcontracted, but each kind will result in a very different role for you. It is important to establish what sort of business you want, and then fit the products to that business model, otherwise you run the risk that your first products will dictate the nature of what you end up doing.

Finding a suitable manufacturer:

• Numerous hard copy directories and internet sites, which you can research for listings,
• Think laterally – if you can’t find what you need, think of the processes involved and what does that process also make.
• There is no substitute for going to see manufacturers, discussing your requirements and adapting your design and other specifications if necessary. This also gives you an idea of the manufacturers’ character and how you could start to form a commercial relationship.