Small Business Passion
Horizon 2020 is a fantastic opportunity for many innovative SMEs with global ambitions to further their company objectives and progress a technological or product development towards a successful commercialisation. Below are 3 major points a company would need to address when preparing their SME Instrument application:
1. Excellence and Impact
Before attempting to apply for H2020 SME Instrument funding, make an honest and thorough assessment of your product or technology. Is it truly innovative when compared to the current state of the art solutions on the market today, but also emerging solutions that may not have hit the mainstream market yet, and does it provide true added value? Does your proposed innovation deliver high-level impact, not only to your company in terms of revenue and jobs, but impact on the European level for example by making the EU more competitive in the respective industrial sector and does it align with EU Policy and Call objectives? Does your proposal have potential to create a profound impact on the society or have the ability to be spun-out to other applications, industries or sectors? Only consider applying for H2020 SME Instrument Funding if the answer to all of these questions is 'yes'.
2. Every Word Counts
The template provided by the European Commission contains many helpful hints as to what information needs to be included in order to deliver a high quality standard proposal. Do not skip past, or ignore these prompts. Every time you ignore what is essentially a request for information, you put the success of your proposal at risk. Follow the instructions to the letter. Many proposals based on extremely innovative ideas are going to be in direct competition with each other and the final funding award may sometimes come down to very delicate nuances in the score. A well prepared proposal that is complete in all respects may well gain that last inch of an advantage to get it over the line.
3. Mind the Limits
Again, following the instructions to the word in this area is essential. Not following the font size limit of 11 points might affect your eligibility – ignoring this may mean your proposal may get disqualified. Also, the page limit needs to be strictly observed – if you cross the limit, the information provided beyond the page limit will be ignored and will not help your case whatsoever. This is also true if you attempt to be savvy and include information from one section with imposed page limit in another section where no page limit implies. This may have a negative impact and impede your chance of success.
For more information on H2020 SME Instrument funding, go to https://ec.europa.eu/programmes/horizon2020/en/h2020-section/sme-instrument
It always surprises me to see how little awareness there is out there concerning some fairly mainstream funding options for small businesses. Most of the people will be fairly familiar with two of the mainstream funding options, which seems to top the poll, namely the Enterprise Ireland funding (www.enterprise-ireland.com) and the Local Enterprise Offices funding (www.localenterprise.ie). Here I look at other attractive funding options that often get overlooked.
What’s to like? LEADER funding is European funding provided under the Rural development Programme (RDP). They generally range up to €150,000 per project/company (always bearing in mind the de minimis rule). Capital and feasibility projects can be funded up to 75% which is an incredibly advantageous rate of grant funding. In case of the promoter needing specialist training, this rate extends to up to 100% and the grants are non-repayable (T&Cs apply).
What’s the catch? You have to be a rural enterprise to apply, and have less than 10 employees. Your local LEADER company can advise you if your area qualifies as rural, broadly speaking areas outside the major cities will qualify. You have to also demonstrate a certain degree of innovation and displacement (where funding your business could displace jobs at similar companies in the area), as with all other grants, should not occur. Due to the change in the way the grants are going to be administered, it is anticipated that this funding will be accessible again from Spring 2016.
InterTrade Ireland Funding
What’s to like? There is an incredible array of immensely useful funding to be found here. For example, under the Fusion programme you can avail of funding to acquire a high calibre science, engineering or technology graduate and funds to partner with a third level institution with specific expertise. Under the Elevate programme £5,000 (€6,000) worth of consultancy time is available to you. You choose the expert that suits your company and they will work with you to develop a winning sales plan and fast track your cross-border exporting and success. It is 100% funded by InterTrade Ireland and the application process is very simple. Then there is the Acumen programme under which you can get funding for a Full Time Sales Person, a Part Time Sales Person or Market Research…how cool is that!?
What’s the catch? This might be fairly obvious, but I will still say it – you need to work towards engaging in trade with, or exporting to, Northern Ireland. You also need to be fairly established in the domestic market first. This is a great opportunity however to break into the UK market, via what is geographically a market that is easy to access.
Horizon 2020 SME Instrument
What’s to like? Gone are the complex requirements of forming international consortia to get a slice of the action – Horizon 2020 SME Instrument provides SMEs with an opportunity to apply for funding between €50-500k in their own right, online! The application process is fairly straightforward and succinct.
What’s the catch? This funding is only suitable for a certain profile of companies. You will want to be a fairly mature SME with a product or service that is able to impress with innovation and impact on the European scale. Also, there are themes that you have to apply under, so your field of activity has to fit the specified strands (e.g. blue growth).
What’s to like? While this is a programme funded and supported by Enterprise Ireland, it is implemented and run by the Institute of Technologies (IoTs) via their incubation centres, nationwide. The programme has a solid support and training structure, coupled with – in Phase 2 of the programme - a stipend of €15,000 paid out over a period of 6 months to be utilised towards the development of a business idea.
What’s the catch? This is funding that is firmly aimed at a High Potential Start Up, meaning that you have the potential to become an export orientated business capable of creating 10 jobs within 3-4 years along with reaching a target of €1,000,000 in revenue. Also, there is a competitive application process so you will be pitted against other entrepreneurs.
In the context of business planning, it would be fair to say that producing financial projections is the most teeth-clenching, hair –tearing, sweat-inducing, sanity-defying task of them all. This is particularly true with regard to sales or revenue calculations. The business is judged by its sales, and your sales projections set the standard for profits and growth. I have been asked countless times ‘how do I predict the sales, how am I supposed to know what revenue I am going to make’? There is a fine distinction, but a very important one, between predicting sales and projecting sales. The first one allures to pure guesswork, of the gazing into a crystal ball variety. The second one, however, involves a much more scientific approach. Same difference, I hear you say – what does this mean in practical terms?
Well, the methodology involved in achieving sound sales projections usually involves some or all of the following elements:
Defining Operational Limitations
Simply put, if the business possesses only one piece of equipment capable of producing a maximum of 500 units in a week – that will define your maximum amount of weekly sales, no matter what. Similarly, you will have limitations in manpower - for example if you are a sole trader providing a service, you will only be able to put a fixed number of hours into the business, even if you assume that orders are flooding in continuously. Define all your limitations. They may involve working space size, stock turnover, transport capability or warehousing capacity. This will help you define your assumptions on which your financial projections, and in particular sales, will be based.
Defining the Market Limitations
If your target market is, for example, men in Ireland between ages of 18-24, then the maximum possible number of sales to this target group is your limitation, which has to be worked into your financial projections. Similarly, the geographical spread might be another limitation. If you are working on a local basis and your reach is a 30 mile radius, working out the maximum sales output within this area will help you define a realistic sales target, which again will help shape your financial projections. Also, undertake a thorough research of the competition. How are they doing? You can benchmark your projections against sales that are achieved by more mature players in the market, another important indication of whether your financial projections make sense in the real world.
Where does the growth come from?
Financial projections usually span over 3-5 years. Where does the growth come from? Again, if you are showing an increase in sales over time, make sure this involves sound principles. This may involve for example:
· Introduction of a marketing campaign, resulting in higher sales
· Introduction of an additional sales person, resulting in higher sales
· Selling to new market segments or new markets
· Introduction of additional product lines
· Introduction of additional sales channels (e.g. online/offline)
· Introduction of additional features (added value)
· Introduction of bundled packages (added value)
· Price increase based on e.g. greater brand recognition
· Introduction of special lines (limited edition)
Be mindful of seasonality. If you have, for example, a tourist orientated business the bulk of the sales would be generated in the summer. Make sure your projections reflect any market trends that are specific to your product or service, include any rise and fall in demand that can be reasonably foreseen. Be mindful of technological advances and consider how they may impact and influence sales of your product or service, and ultimately – can introduction of new technologies increase your sales by increasing their appeal/adding value.
What if I have an online business?
In many ways, an online shop is very much like a physical shop. You need to be able to project how many people are likely to visit your shop, and out of those visitors, how many are likely to end up making a purchase. A good place to start is to utilise one of the many free web analytics tools ( http://www.inc.com/guides/12/2010/11-best-web-analytics-tools.html )available. Have a look at similar websites to yours and work with the numbers you extract from your research – such as the number of Unique Visitors and the bounce rate. You can use this research to work out your assumptions and limitations.
In summary, the answer to what makes a good realistic sales projections lies within the specifics of your business. Work out your limitations and what is realistic within your target market and the necessary ‘how to’ structure for your calculations will become apparent.
As a small business, one of the biggest challenges in trying to grow sales is recruting of new personnel due to the high costs of employment - not only in terms of salary, but also in terms of additional taxation and charges, and also sometimes additional cost of employee insurance, training and induction. That is why every little helps and grants and financial assistance in getting the job created can hopefully result in a sustainable employment that will pay for itself in the long run. Here is the summary of the current incentives, schemes and reliefs a small business can avail of:
FÁS Work Placement Programme
This Programme facilitates a business to take on a person for a work experience placement for a maximum of nine months. While the person is gaining valuable work experience they are also contributing to the business. If the business is in a position to recruit then they will have had the opportunity to determine the suitability of the participant. Businesses in the Public, Private, Community and Voluntary Sector can apply to offer work placements. A Work Placement Programme application can be completed online. Payment of Participants is not a requirement of the programme. Participants in receipt of a social welfare payment may be entitled to keep their payment for duration of the scheme. The number of placements a provider can avail of depends on the number of full time employees that business has. The Participant and the Provider are required to complete Progress Reports during the placement. A monitoring visit will be conducted within two months of the commencement of the work placement. A subsequent monitoring visit may also be conducted either on a random sample basis or if considered necessary.
JobBridge National Internship Scheme
The principles are similar to those of the FÁS Scheme. In order to qualify for an internship an organisation must have a minimum of 1 full time employee who is employed for 30 hours or more per week (i.e. on payroll and subject to tax and PRSI). Employment liability insurance is also required. Monthly compliance must be filled online to ensure that internships are proceeding in accordance with the rules of the scheme. Failure to complete the monthly compliance may affect the intern’s internship allowance payment and the host organisation’s continued eligibility for the JobBridge scheme. The internship can be provided for a period of either 6 or 9 months. Payment of Participants is not a requirement of the programme. Interns will receive an allowance of €50 per week on top of their social welfare entitlement. This will be payable for the period of the internship. To be eligible to retain their payment the participant must have been unemployed and in receipt of some form of social welfare payment for at least three months.
County Enterprise Board Employment Grant
A grant of a maximum of €8,000 per new job created in respect of up to 10 employees in eligible projects. It can only be approved in case where it can be demonstrated that labour shortages do not exist. Employment grants cannot represent more than 15% of the Board’s annual grant approval budget. The business wishing to apply must submit Business Plan/Application Form and undergo approval process. They must submit evidence of PRSI paid and certification from accountant. Tax Clearance Certificate is also needed. The grant is usually payable in 2 instalments – first on Commencement of employment, and second after 6 months of employment.
NB: In Irish Speaking areas under the Employment Grants’ Initiative, Údarás na Gaeltachta may provide grant aid to businesses to cover the cost of employing staff on a full-time or part-time basis with the amount of aid payable varying with the required skill level and the related cost of staff. The geographic location of a project also impacts on the amount of aid payable.
Employer Job (PRSI) Incentive Scheme
This scheme exempts employers from liability to pay their share of PRSI for certain employees for a maximum of 18 months. The scheme is open to employers who create new and additional jobs. While waiting to be approved for the scheme, standard PRSI should be operated. The person employed must have been getting an eligible social welfare payment for a period of at least 6 months (156 days). An eligible person directly from JobBridge or the Work Placement Programme once the required 156 days criteria has been satisfied can also be employed. The job must be a new and additional post/job – employers are not allowed to substitute existing employees to avail of the scheme, be for at least 30 hours per week and last for at least 6 months. An exemption from employer’s PRSI is available for a limited number of employees. This limit is 5% of the existing workforce or, for smaller companies, a maximum of 5 new jobs.
Revenue Job Assist
Employers who employ people who qualify for Revenue Job Assist can make a double deduction of the employee’s wages from their company’s taxable income for up to 3 years provided that the employee remains with them. This means that double the amount of the wages of a qualifying employee and double the amount of the employer’s PRSI contribution for that employee can be deducted by the employer from the company’s taxable income. You can apply by filling out Part 2 of the form RJA (Part 1 needs to be filled by the employee). To qualify, the position must be new, last at least 12 months and for at least 30 hours a week.
Acumen Sales and Marketing Programme
Acumen will fund up to 50% of the cost of a full time Sales Person’s salary in the first year. The maximum cost covered can be up to €37,500/£30,000 with Acumen paying up to €18,750/£15,000. If it is required 50% of recruitment/selection/advertising costs for the appointee will be granted as part of the total allowable costs. The person recruited should be knowledgeable about both the product and the market, and would be required to be located within the target cross-border market. The company that wishes to apply for this programme needs to supply a business proposal and application form.
A part-time sales person position can also be supported. If it is required – 50% of recruitment/selection/advertising costs for the Appointee will be granted as part of the total allowable costs. The maximum cost covered can be €20,000/£16,000 with Acumen paying 50% and you paying the balance.
Third option is that of hiring a sales graduate for 12 months to grow the business into export sales. They will assess the market potential and develop a tailored strategic approach to exporting that can be replicated in any market. Acumen will fund up to 50% of the cost of employing a graduate in the first year. Maximum Salary cost covered can be up to €28,125/£22,500 with Acumen paying up to €14,065/£11,250. There are further allowances for Travel, Subsistence and Equipment cost and InterTradeIreland will cover recruitment and training costs.
Pop-up shops are, in a nutshell, temporary retail spaces leased for a short, flexible hire term. The original concept for a pop-up shop was based on Japanese consumer culture and its devotion to rare and limited edition products. The concept was soon snapped up world-wide by corporate brands and high-end designers, and has recently become a main stream strategy for new businesses looking to test and explore new ideas as well as for existing businesses to grow their sales and brand awareness.
The Irish property market downturn means that there are numerous vacant high street and shopping centre spaces available which are perfect for pop-ups and offer many advantages to brands and retailers looking to target key consumer locations. Pop-ups can also be used for cafés, product launches, sample sales, experimental and experiential marketing, meetings, training days, events and exhibitions so that the tenants would include community groups, local craft workers, artists and social enterprises.
To take advantage of the pop-up trend, some facility management companies now provide a pop-up shop package which includes the store fit out, an advertisement campaign before and during the trading term, a full clean of store when the term of lease expires and maintenance support for the duration of the lease.
Furthermore, there have been local initiatives, such as the Dún Laoghaire Pop-up Shop Initiative, promoting the pop-up concept in order to increase footfall and attract new visitors, to generate publicity and to showcase empty properties to potential tenants to help them be re-let.
Pop-Up Shops as a Strategy for your Business
The benefits of a pop-up shop are that it represents a low risk, low cost strategy to undertake any of the following:
- Testing an Idea - whether you are a new business or an old one, a pop-up shop offers the ideal opportunity to test a new product, concept or service without committing to long-term cost exposure as part of a wider market research strategy. Will your idea work? Here is a way to find out!
- Assessing a new Market/Location - should you consider expanding your business to a new market/area, this is also a very efficient way to test the waters by dipping in your toe with a temporary set-up. For example you can verify your assumptions about the local footfall and identify the local demographic of the target area.
- Eliminating excess stock - Liquidating excess stock can vastly improve your cash-flow, so a pop-up show may be a low cost investment resulting in a high return.
- Making the most of Seasonality - If your line of business is particularly affected depending on the particular time of the year, a pop-up is an ideal opportunity to maximise on your traditionally strongest sales periods. Halloween and Christmas shops are an example of seasonal pop-ups, but the same principle can be applied if your business is for example summer-orientated or if you want to take maximum advantage of the January Sales season.
Some Useful Tips
If you decide a pop-up shop is the right strategy for you, here are some issues to consider:
Rates and Utilities: When you are budgeting for your pop-up, do not forget to include the cost of the rates and utilities for which you will still be liable.
Regulations: Ensure that you have the appropriate public liability insurance in place, that you will not operate in contradiction to the existing planning permission or licensing applicable to the location and that a valid fire certificate is in place.
Consumer Affairs: Make sure that your ability to comply with consumer regulations is not affected. Put a valid returns policy in place and make your permanent business contact details known in case of any queries.
Integration and Record Keeping: If you are not able to operate your usual systems (e.g. EPOS, bar code scanners, credit card terminal), make sure you put in place suitable alternatives that will integrate easily with your existing transactions recording system. For example, a mobile phone app for processing credit card transactions might be a suitable substitute for a credit card terminal.
To be forewarned is to be forearmed. When it comes to the whole business of applying for a grant with one of the agencies such as County Enterprise Board, Enterprise Ireland, LEADER companies, there are few 'rules' that generally apply. I talk about them here:
1. Not all Grants have been Created Equal
When you are lucky enough to be the type of business that qualifies for a grant under several headings with several agencies, it is important to consider whether the grant is repayable or not. Sometimes, the promise of financing also involves relinquishing some shares in the company in favour of the agency. Furthermore, not all grants are provided at the same level. Capital grants can be provided at 50% or even 75% of the capital cost, depending on the particular grant. As with everything else, do your research and identify the best option for your business.
2. Mind the VAT
One thing that can be omitted from one's funding calculations is the VAT. The grants, as a rule, do not cover the VAT portion of the bill, so you need to factor that in when looking at the funding breakdown. In practical terms, that means that for example, a machine costing 12,300 Euro inclusive of VAT financed by a grant at 50% will mean that the agency will fund 5,000 Euro – not 6,150 Euro. This has a cash-flow rather than a 'true cost' implication, as the VAT can be reclaimed later in the usual way.
3. Bridge the Gap
This is a sticky point for a lot of businesses. You will be required to purchase the item you are seeking funding for first, in order to then claim the grant payment. This seems like an impossible task for many. However, there is a solution available: bridge loans. Bridge loans are temporary short-term loans from your bank that help you pay for the item in order to be able to avail of the grant. The bank will need to get a confirmation from the agency supplying the grant that the grant had been approved in principle. And, just to add in case you were wondering, you cannot retrospectively apply for a grant for an item you purchased already.
4. Do not Cause Displacement
In order to avail of a grant, as a general rule you are not allowed to cause any displacement. What that means is that your application needs to include evidence that you are not going to cause job losses in your area. For example, if you are attempting to open a bakery and there is an existing bakery in that area, you will not get funds. The agency is precluded from putting your business at an unfair advantage and thus causing potential losses to or closure of the existing businesses.
5. Cross Thy t's and Dot Thy i's
Good paperwork is essential. Besides submitting a sound and water-tight business plan, you need to make sure that all the required additional paperwork is submitted in a complete fashion and in the required format.
6. Be Realistic
Just because you may qualify for a grant it doesn't mean that the company vehicle suddenly gets upgraded from a Ford Focus van to a Ferrari. You will need to justify your spend AND you will need to provide comparative quotations, a single quote will not do unless it is a very specialised item from a unique supplier.
7. Honour Thy Taxes
Simply put, if you are in arrears with your tax payments, you will not be able to avail of any grant. A Tax Clearance Certificate is pre-requisite.
8. Thou Shall Not Covet Other Business Grants
What this means is that there are rules regarding application to several agencies simultaneously. You will always be asked to declare if you have already applied with another agency at the same time. There are also limits (a maximum) as to how much funding you can avail of within a given time period.
9. Deal only with Approved Suppliers
When you are looking for quotes for the items you would like funded, you also need to ascertain that the chosen supplier has a Tax Clearance Certificate. A grant payment will only be issued when this has been proven so you risk losing your grant if you do not verify in advance that your potential supplier is fully tax compliant. In case of international suppliers different criteria may apply.
10. Thou Shall Apply in Good Time
The agencies usually have to do a preliminary application review followed up with a board review, usually taking place once a month. The complexity of the approval cycles can vary, but on average it will take at least 6 weeks for a grant application to be processed. Also bear in mind that most agencies will not have a board sitting in December so if you were hoping for a decision before the end of this year (2012), you need to make your submission by early October.
If you thought you knew everything there is to know about selling online to an international audience, here are three topics that may give you further food for thought:
1. International SEO
Search Engine Optimization can present a bit of a headache even when you are only selling in the domestic market. Most popular keywords and tags relevant to your website need to be carefully identified and applied, and that is just the easy bit. This is also true for international SEO. Google, although extremely popular in English speaking countries is not the only search engine you should consider. Ever heard of Baidu, Yandex or Seznam? If you are hoping to sell to China, Russia or Czech Republic, you should!
Similarly, the keywords that you are using to attract the local customer will not necessarily work internationally. Research is needed to establish the buyer behavior in your target export markets, what are the keywords they use and in what combination – the phrases, expressions and colloquialisms tend to vary from market to market.
Take into account local nuances which can exist, even in the same language, an example being Austrian German vs Swiss German vs German German. Beside the impact of language and local search engines, here are some other issues to consider:
- Domain Strategy: Pros and cons of using a generic TLD (e.g. .com) vs. use of multiple sites geo-targeted to local countries (e.g. .co.uk)
- Site Hosting: Hosting sites in target country and use of content delivery networks for improved performance/customer experience
- Local links: Focused promotion of site within target country, driving targeted users and improving local search performance
2. Credit Card Fraud
Unfortunately, Credit Card Fraud is quite rampant in the international online selling business arena. A fraudster will use a stolen credit card number to buy legitimate goods from an unsuspecting seller. The seller will not get paid for the merchandise, but he or she will have to pay the credit card fees and, even worse, lose the merchandise because it has been shipped to the fraudster. Small businesses are particularly vulnerable as every loss of merchandise and costs really affect the bottom line. Here are a few tips on how to deal with this particular issue:
- Ask for customer ID verification. For suspect orders or large orders, ask the customer to fax or e-mail a form of identification to rule out usage of a stolen card.
- Be sceptical. Is there anything unusual about the order, such as large quantities of the same product or peculiar delivery instructions?
- Do a BIN look-up. The first 6 digits of a credit card are called the bank identification number (BIN). They tell you which bank has issued the credit card. If the issuing bank is located in a country that is different from where the order is originating, you should ask for further verification.
- Purchase fraud-detection tools. Many credit-card providers and payment gateways offer effective fraud detection tools that are very affordable. Use those tools.
3. EU Distance Selling Rules (DSR)
Distance selling involves communication between a supplier and a consumer where they are not in each others physical presence. This includes sales made online via an e-commerce website, where a physical distribution of the product has occurred (e.g. downloadable products are not subject to these rules). The European Directive for Distance Selling binds the Irish E-commerce sellers to these rules. For example the Directive spells out rules regarding how the VAT is to be charged, but also what the consumer rights in relation to distance purchases are.
If a supplier fails to comply with legal obligations, he or she is then exposed to the risk of criminal prosecution and fines of up to 3,800 euro. Consumer protection organisations can bring proceedings in the High Court to enforce the Regulations – it is therefore important that the e-commerce businesses fully familiarise themselves with their obligations.
English is one of the main business languages so why would you need to bother knowing any other language when trading in export markets?
According to the ELAN study focusing on use of languages within Europe, there is clearly either an issue of complacency based on the lack of implementation of language strategies in Anglophone countries (UK and Ireland), or simply a belief amongst companies in these countries that English is adequate for all trading purposes, which diminishes the recognition of languages as a means to increase trade worldwide.
Language and communication strategy
It has been demonstrated that the most effective performers amongst export SMEs tend to have a language, or communication, strategy. In the aggregated and total European samples, 48% of the firms acknowledge having a formal communication (or language) strategy. The UK with 3% and Ireland with 1%, deviate substantially from the norm.
One of the most self-evident steps for an international trader is to develop a website in another language to enter a new market. This is the most common tactic used amongst SMEs in relation to international communication. On average, 62% of the firms in the European sample have produced websites in other languages for the purpose of export, in Ireland this figure is a mere 5%.
The above statistics are perhaps far less surprising considering the modest levels of SMEs that do presently export, but one could argue that not overcoming the language and communication barrier to trade internationally is precisely one of the causes that more firms are not exporting.
All of the above strongly indicates that there is an acute need for Irish SMEs to adopt a language and communication strategy in order to compete more effectively in the export markets. There are several ways in which a company may adopt a foreign language strategy:
- Employing people with relevant language skills is one of the most straightforward ways in accessing a foreign language skill directly, and would make sense for a company that will have to use the prospective language over a longer period of time and if the intention is to build long-term relationships with countries in which such languages are used. The downside is that a firm cannot hire an expert in each language of each export market one would hope to trade with and the cost to benefit ratio may be very low in the early stages of exporting.
- Choosing and using local agents in foreign markets who can speak your own language can be the first step in opening up a new, or sometimes unknown, market. The downside to this is being able to control the pace and scope of activities in the foreign country less effectively and not having a direct presence.
- Use of translators and interpreters – this option is used very little at the moment - only 4% of Irish businesses engage translators or interpreters. However, it can be a very flexible option as it offers the benefit of being able to trade directly with the chosen export country without loosing direct management control, and can also offer higher cost to benefit ratio than employing people with relevant language skills, especially seeing that this method offers easy access to a great variety of languages instantaneously.
Franchising is - in short - the practice of 'transplanting' firm's successful business model. Some of the most successful and well known businesses that use franchising as means of growth and international expansion are in the area of Fast food (Burger King), Restaurant (Pizza Hut), Retail Shops (O2), Business Services (Kendlebell) and Distribution/Delivery Services (Fast Way). Almost any type of business is capable of being franchised.
Advantages of Franchising for the Business
Franchising offers the opportunity to secure distribution for your products or services more quickly than it would be the case if you had to train up your own employees and develop your own internal marketing, sales and distribution organization. The use of your capital will facilitate the expansion of a network more quickly than it would be the case if you had to engage in fundraising. Franchisors, with their increased purchasing power (and possibly reduced overheads) may be able to increase the profitability of small units and are likely to have lower gearing than non-franchised businesses, and as a result may be able to survive better in a recession. Linking performance to rewards i.e. turnover to profit sharing is a useful motivational tool that can be used in the franchising process.
In terms of advantages in the context of international expansion, as franchising means that you are effectively partnering with a local firm, many barriers to trade are overcome - such as the language barrier, the cultural barrier and the lack of local market knowledge. Other aspects need to be taken into account, especially with regard to the surrounding legal issues, as franchising is heavily contract based, also tax issues need to be carefully considered, and adequate protection put in place to preserve the intellectual property, just to name some of the key issues.
Methods of Overseas Expansion
Franchising is increasing in popularity as a means of international expansion. Many businesses which do not use the franchising format in their domestic market choose to adopt one of the franchise methods set out below to expand overseas. These methods are:
- Direct franchising - whereby a business grants franchises to franchisees in another country
- Establishing a subsidiary/branch in the target country which grants franchises to franchisees in that country
- Establishing a joint venture with a local partner to grant franchises
- Entering into a master development or master franchise agreement. Under a master franchise agreement the master franchisee undertakes to grant sub-franchises to third parties. Under a master development agreement, the master developer undertakes to open outlets itself rather than by way of sub-franchising.
Do you operate in the services sector and want to start a business in another EU country? If you are, you might be interested to know about what EU-GO does and how it can help.
Thanks to the Services Directive, "points of single contact" have been set up in each Member State. They allow service providers to deal with and to complete their administrative formalities electronically when they want to do business across Europe.
Through this page you can easily access the points of single contact in each Member State and:
- obtain all the information about the procedures you need to complete for your specific services activity
- deal with all formalities needed to carry out your activities (without the need to approach various public bodies one by one)
- complete the necessary steps by electronic means.
With many of Ireland's SMEs facing a fall-off in domestic sales, exporting is becoming a key survival tactic. The benefits of selling to overseas markets include increased sales and a longer lifespan for products and services, lower production costs, more productivity, less vulnerability to fluctuations in the Irish market, invaluable experience and differentiation from competitors. Before you jump in head- first, however, it is important to prepare carefully to sell into new markets.
Here is a seven-point check- list you can follow to help make the move:
1. Determine your export readiness
Look objectively at your business structure, processes and strategies. Assess whether your weaknesses will negatively affect any exporting activities and how your strengths may help. Ensure your production, storage and logistical operations can accommodate export sales. Review your business plan in line with your findings and reassess your financial requirements and projections.
2. Identify your target market
Concentrate on territories which provide you with the best prospects. First-time exporters may focus on a single country or limited number of countries and expand from there. Explore any strengths and weaknesses in the potential market so you can develop your export strategy around this.
3. Research your target market
Identify any regulations and prohibitions relating to exporting from Ireland. Consider the expectations within your export market in regard to standards, brand names, quality, appearance and packaging as well as usage. Understand the market size, growth and competitive environment. Valuable country specific information is published by the World Trade Organisation, EU Market Access Data base and OECD. You may then need to modify your current product or service offering or develop a new product or service for export.
Social media like LinkedIn, Facebook, Twitter and Xing allow Irish SMEs to identify and connect with potential international business partners quickly and cheaply. Do not forget about more traditional networking avenues such as Chamber of Commerce events, formal trade networks, trade missions and trade fairs.
5. If you need help, ask
Talk to other businesses who have 'been there and done it' and share their experience and expertise. Liaise with organisations such as Enterprise Ire- land, the Irish Exporters Association and InternationalChamber of Commerce. Investigate whether support through a local Irish business network exists (such as in the US and Germany).
6. Form local partnerships
Having a local partner takes away a lot of uncertainty and removes many barriers to entry they speak the local language, are familiar with the culture, provide local market knowledge, experience and connections, as well as being able to deal with regulatory and administrative issues as they arise.
7. Harness the power of e-commerce
A commercial website can offer you instantaneous access to global markets and global advertising. However, careful planning and research is required for e-commerce. Starting small and keeping it simple will help form a solid base for the growth strategy.
This article was published in the Sunday Business Post on 3rd July, and on the 'Small Business Can' Blog.
It is updated five times a week with approximately 1500 public procurement notices from the European Union, the European Economic Area and beyond.
You can browse, search and sort procurement notices by country, region, business sector and more.
Information about every procurement document is published in the 23 official EU languages. All notices from the European Union's institutions are published in full in these languages.
TED gives you:
direct access to public calls for tender from across the EU and Europe as a whole;
on average 1 500 new notices every day, which means hundreds of potential business opportunities for you;
official, reliable and legally binding contract information from all sectors of industry and business, as well as the EU institutions.
How to access TED
via the TED website: http://ted.europa.eu
by using the OJ S DVD-ROM, available once a week on subscription from the Publications Office sales agents: http://publications.europa.eu/others/agents/index_en.htm
from authorised licence-holders: email@example.com
Note: Low-value contracts are not usually advertised in TED. Those with a value between EUR 25 000 and 60 000 may be found on the web pages of Commission departments intending to organise a procurement procedure. A directory of these pages can be found at: http://ec.europa.eu/public_contracts/index_en.htm
Read more on EC Public Procurement in the information Brochure 'Doing Business with the European Commission - Tips for potential contractors' http://ec.europa.eu/budget/library/biblio/publications/business/doing_business_en.pdf
Ireland Concentrates only on 5-6% of the EC Funded Programme under FP7 framework and is instead concentrating on tendering in the declining domestic market
Denmark wins 10 times more contracts in the external markets of the International Financial Institutions (IFIs) compared to Ireland
In contrast, 18% of Irish tenders are won by foreign firms, as many European companies are able to submit tenders in English - compare this to only 4% of publc tenders being won by foreign firms in Denmark, France, and even UK
Opportunities in public sector can be tracked in over 200 countries and they are worth over 800 billion USD/p.a.
There are 5000 new tenders each day - equaling to 1.5 million tenders p.a.
On average, on any given day, there are 200 000 live opportunities available
As a comparison, there are 114 opportunities available in Ireland compared to 1200+ in Poland, 2300+ in France and 757 in Romania
EC contributes a lion share of opportunities by way of funds under the 2007-2013 Programme valued at 975 billion Euro, in addition to the Community Programmes and Structural/Cohesion Funding of further 347 billion Euro
There are many advantages to getting engaged in public procurement: secure payment, up to 60% is paid in advance, IFI work is 'recession proof', and english language is an advantage!
I have read that, according to a study published by ISME in October 2010, a good 50% of Irish Businesses expect a deterioration in business conditions over the following 12 months, while 60% confirmed that their sales are down and that the expectations of future revenue is low.
Key survival strategy
I have been stressing that as small businesses face a decrease in domestic market sales and prospects of having to downsize, developing export activities is becoming a key survival strategy. Irish SMEs are perfectly placed to export. The analysis undertaken by the European Commission for Enterprise and Industry has shown that Irish SMEs excel strongly in the area of Entrepreneurship, Skills and Innovation and Responsive Administration. Irish SMEs are also far more active in Internet based trading and have a higher share of new products or income from new products.
Despite this, the EC Eurobarometer has shown that in 2007 (at the height of the economic boom!) only 11% of medium enterprises in Ireland have had income from exports. This is a disappointing figure, considering that some other small open economies have performed significantly higher, for example Slovenia with 21% and Finland with 19%. To add insult to injury, majority of exports have been attributed to foreign companies established in Ireland.
It is widely acknowledged that SMEs face numerous institutionalised barriers to trade internationally, such as different legal systems, contract law, consumer law, differences in licensing laws and standards, different taxation systems and product liability rules. This, coupled with other barriers to trade including language, culture, poor access and a lack of market information has resulted in most Irish owner managers holding little enthusiasm for the exporting opportunities, exporting being something that is being perceived as ‘too difficult to do’.
Such businesses miss out on the significant benefits exporting can deliver, such as increase in sales and increased lifespan for products and services (due to access to new markets), decreased production costs and increased productivity (from economies of scale and better use of resources), decreased vulnerability to fluctuations on the Irish market, as well as increased expertise/experience and differentiation from competitors.
'Made in ireland' is such a valuable brand with strong international reputation, more small businesses should use this to their advantage and give exporting a go.