KEY POINTS:
Eric Tracey, Chairperson of the UK Beachhead Advisory Board, gives advice to NZ firms seeking access to the American market.
An expat New Zealander, Eric Tracey was a partner in Deloitte London for 25 years until 2005, working with a range of companies across different industries. In the past few years he has taken executive director roles in firms facing various forms of external shock and/or financial distress and successfully steered them to safety. He is also a director of a number of UK companies. Eric has a vast network of contacts, is adept at pulling teams of people together and has a passion for helping New Zealand companies succeed in the UK.
Q: Do New Zealanders have any advantages when selling to the UK?
ET: You shouldn't underestimate the general affection that huge chunks of British society have for New Zealanders, who have a reputation for working hard and a can do attitude. Despite the challenges of entering a new market, you have certain advantages over virtually any other country by being a Kiwi. Another advantage is the trust in the New Zealand legal and business environment.
Q: Does familiarity with the UK result in a tendency for New Zealanders to underestimate the differences?
ET: Yes, a lot of New Zealanders blow their advantage by not appreciating that there are differences; particularly in fund raising and new business presentations. I've seen some presentations come over as a bit naïve and I think "You've got a great idea this ought to have worked, if only you'd got a local advisor." It's usually people using the wrong terminology, not behaving in a way that would be expected which shows that you are not sensitive enough to the local culture. While these are small things, they can have a wholly out of proportion impact. They tend to reinforce another stereotype which is that a New Zealand company is a little company. You need to impress that you are actually bigger than you are, that you have more capability, more substance.
Q: What other lessons are there?
ET: When talking young companies, the driving force of the business has to be prepared to spend time in the UK. Small companies have the potential to achieve several times their domestic turnover in a short time but you can't often realise that by sitting in New Zealand. Some companies do it successfully by making several trips a year, but that's pretty tough. You need somebody senior in the UK who understands what the company is all about and can get across that despite being 12,000 miles away you can take care of any problems.
Q: What common mistakes do you see?
ET: The two biggest single problems are not putting people on the ground who have the depth of knowledge and passion about the business and who are able to make decisions, and trying to do much for the resources they've got.
Another surprising mistake is that some companies with really smart IP ludicrously under price - which is to their own disadvantage because you can never push the price back up. They are pricing on what it costs, rather than what it's worth.
The other common mistake is not taking advice.
Q: New Zealand's distance from market can be perceived as a negative, how can companies overcome this?
ET: For software companies the question is how do we get support from 12,000 miles away; it's an issue that can be dealt with by having somebody in the UK fronting with customers. You might also need a partner who can provide 24 hour cover. Convince them you can deal with any problem. It's helpful to show a list of clients.
Food Miles is a barrier and presents a real challenge for government and industry.
Q: How can companies prepare for success in the UK?
ET: Because of the size of the economy, you can get dramatic growth and that of course is a lovely problem to have, but it's obviously a problem that requires capital and a rapid expansion of people which isn't an easy thing to manage. People have to think hard what their business model is going to be and how they are going to grow.
Given that most products and services are based around exploiting some form of IP, probably the models that work best are those that involve partnering and taking a royalty - letting other people own the physical assets and have lots of employees. With a royalty your margin will be smaller but the reality is a small percentage of a great big number is likely to be far bigger than anything you can get by trying to own everything.
Partners can also open doors. I'm involved with a functional food company Yellow Culture that's gone to the UK on a mission to make good food fun for kids. The UK offers the ability to grow quickly, but the big supermarkets dominate the market. If we just knocked at their door and said we've got a fantastic new idea they'd say isn't that interesting, goodbye. Instead we teamed up with a cheese maker who's been supplying Sainsbury's for 50 years and the supermarket came to see us.
Q: What examples do you see of NZ companies doing well in the UK.
ET: Endace has got a good business in the UK, Sysdoc is a small consultancy making good progress, as is Assured. Comvita is doing really well and so is water technology company Derceto. These are some of the successful companies that have done their homework, got a local partner, listened and been prepared to take advice.
Q: How should expansion from the UK into Europe be approached?
ET: Europe is a challenge and for smaller companies in particular you must again ask where are you going to put your effort. You have to prioritise and focus on what you want to do really well and build out from that rather than chasing whatever sales come your way and being a bit of everything. Be strategic.
Q: What can the Beachheads Programme offer?
ET: We do two things: One is we give incredibly blunt business and strategic advice based on our own experience and observation; secondly we give access to networks, we speed up the growth of companies by putting them in contact with people they would take 5-10 years to know otherwise.
Top Tips:
* Do as much homework as you can in New Zealand first – use the Beachhead Board and UK Trade & Industry (UKTI) to help do that.
* Take advantage of the sensational agreement NZTE has got with UKTI which allows New Zealand companies in the market to be treated like UK companies for the purpose of government grants and schemes.
* Put the people who drive the business on the ground in the market - you've got to have someone there selling the product, but the chances are if it's just a commission salesman they are not going to have knowledge or passion for the business or be able to make decisions.
* Realise right from the outset that you are going to be different kind of animal once you start doing business in the UK and you are going to need help and advice – get that sorted from the start.
* Acknowledge that in two years time if you succeed then you are going to have a bigger turnover in the UK than New Zealand. Put your effort where the value is going to be.
* Don't spread your resources too thin – act strategically not reactively.
* Start behaving like a UK company right from the start and set up the right model for the market, one that enables you to grow.
* Ensure you prove your credibility and capability and that despite the distance you can solve any problem.
