Question: We have a family business and manufacture small farm equipment. Our business has been successful, and our sales are growing every year, but we only sell in Ireland and Northern Ireland.
Our daughter has just finished her business degree. She has worked in the business on weekends for the past number of years and wants us to explore the idea of exporting our equipment. We want to, but it’s a big step, and we don’t want to risk what we’ve built up.
What do we need to think about if we were to start looking at selling abroad?
Answer: Exporting can seem daunting for a family business. There are many considerations such as transport, pricing, currency, payment terms and risk of non-payment. If you plan to export your farm equipment abroad, the following due diligence considerations are recommended.
1. Pricing: When exporting, there are additional costs to your business, such as transport and potential export administration. Ensure that you factor these costs into your pricing.
Who you are selling to can weigh heavily on your pricing also, ie consider if you are selling in bulk to a distributor versus selling individual units to customers in other countries.
2. Potential customers and payment terms: Consider the type of customer you want to sell to. You may have to provide credit terms if you sell to a distributor network in other countries. This can add complexity in terms of the risk of bad debts abroad and differing laws in different countries.
Selling to individual customers will most likely involve payment before delivery. However, increased costs of transport for single unit sales as well as higher costs of acquisition, ie marketing costs must also be considered.
3. Customs and tariffs: There is the potential for customs-related costs when selling to countries outside the EU common market.
We have witnessed increased complexity in terms of exporting goods to Britain in recent years. There are also risks around tariffs in the United States and how they can affect Irish businesses.
4. Currency: A positive for Irish businesses exporting to other EU countries is the euro. It removes currency risk. However, the reality is that our closest neighbour, the UK, has the pound, and there is currency risk attached to this. Many Irish businesses have adopted an ‘invoice in euro, payment in euro’ approach in this regard.
5. Market research: Prior to investing in marketing in other countries, it is important to assess the market. Is there a high level of competition that could affect your sales? If so, is the market very price sensitive? If it is price sensitive, you need to consider if you can make your required margins on the products.
6. Regulations: Given that you manufacture and sell farming equipment, it is worth considering regulations in other countries. This risk may be mitigated if you export to other EU countries. If you were exporting equipment to the United States, for example, you may be required to obtain permits or licences to sell there.
7. Taxes: Outside of potential customs issues are domestic tax obligations. If you are selling directly to distributors, you may not have the same tax obligations you would if you sell directly to customers. It may be a case that you would be required to submit VAT Returns through the Revenue VAT MOSS system.
8. Contracts: It is imperative that you seek legal advice prior to drafting sale agreements with customers abroad. Your agreements should set our clear terms and responsibilities. They should provide for dispute resolution. You may even need to consider if you have intellectual property protections in Ireland that would not apply in countries that you are exporting to.
9. Insurance: Business insurance can be complex at the best of times. Generally, business insurance premiums are heavily based on financials such as turnover, wage costs and net profits. You may require additional insurance protection if you decide to export your equipment.
In summary, there is a lot of merit to a successful Irish family business exporting. What is key is that you take the right steps before and while you are exporting. It is crucial to have a clear plan regarding who you will be selling to, what laws and regulations could impact you, what additional costs you may incur and how you can protect your business.
Calculate costs – include transport, tariffs, and admin fees.Choose customers – direct sales or distributors? Each has pros and cons.Check regulations – ensure compliance with local laws and taxes.Manage currency risks – plan for exchange rate fluctuations.Protect your business – use contracts, insurance, and IP safeguards.Know your market – research demand, competition, and pricing.Thorough planning will help your family business succeed globally.Andrew Brolly is senior accountant
with ifac, which is the professional services firm for farming, food and agribusiness
Question: We have a family business and manufacture small farm equipment. Our business has been successful, and our sales are growing every year, but we only sell in Ireland and Northern Ireland.
Our daughter has just finished her business degree. She has worked in the business on weekends for the past number of years and wants us to explore the idea of exporting our equipment. We want to, but it’s a big step, and we don’t want to risk what we’ve built up.
What do we need to think about if we were to start looking at selling abroad?
Answer: Exporting can seem daunting for a family business. There are many considerations such as transport, pricing, currency, payment terms and risk of non-payment. If you plan to export your farm equipment abroad, the following due diligence considerations are recommended.
1. Pricing: When exporting, there are additional costs to your business, such as transport and potential export administration. Ensure that you factor these costs into your pricing.
Who you are selling to can weigh heavily on your pricing also, ie consider if you are selling in bulk to a distributor versus selling individual units to customers in other countries.
2. Potential customers and payment terms: Consider the type of customer you want to sell to. You may have to provide credit terms if you sell to a distributor network in other countries. This can add complexity in terms of the risk of bad debts abroad and differing laws in different countries.
Selling to individual customers will most likely involve payment before delivery. However, increased costs of transport for single unit sales as well as higher costs of acquisition, ie marketing costs must also be considered.
3. Customs and tariffs: There is the potential for customs-related costs when selling to countries outside the EU common market.
We have witnessed increased complexity in terms of exporting goods to Britain in recent years. There are also risks around tariffs in the United States and how they can affect Irish businesses.
4. Currency: A positive for Irish businesses exporting to other EU countries is the euro. It removes currency risk. However, the reality is that our closest neighbour, the UK, has the pound, and there is currency risk attached to this. Many Irish businesses have adopted an ‘invoice in euro, payment in euro’ approach in this regard.
5. Market research: Prior to investing in marketing in other countries, it is important to assess the market. Is there a high level of competition that could affect your sales? If so, is the market very price sensitive? If it is price sensitive, you need to consider if you can make your required margins on the products.
6. Regulations: Given that you manufacture and sell farming equipment, it is worth considering regulations in other countries. This risk may be mitigated if you export to other EU countries. If you were exporting equipment to the United States, for example, you may be required to obtain permits or licences to sell there.
7. Taxes: Outside of potential customs issues are domestic tax obligations. If you are selling directly to distributors, you may not have the same tax obligations you would if you sell directly to customers. It may be a case that you would be required to submit VAT Returns through the Revenue VAT MOSS system.
8. Contracts: It is imperative that you seek legal advice prior to drafting sale agreements with customers abroad. Your agreements should set our clear terms and responsibilities. They should provide for dispute resolution. You may even need to consider if you have intellectual property protections in Ireland that would not apply in countries that you are exporting to.
9. Insurance: Business insurance can be complex at the best of times. Generally, business insurance premiums are heavily based on financials such as turnover, wage costs and net profits. You may require additional insurance protection if you decide to export your equipment.
In summary, there is a lot of merit to a successful Irish family business exporting. What is key is that you take the right steps before and while you are exporting. It is crucial to have a clear plan regarding who you will be selling to, what laws and regulations could impact you, what additional costs you may incur and how you can protect your business.
Calculate costs – include transport, tariffs, and admin fees.Choose customers – direct sales or distributors? Each has pros and cons.Check regulations – ensure compliance with local laws and taxes.Manage currency risks – plan for exchange rate fluctuations.Protect your business – use contracts, insurance, and IP safeguards.Know your market – research demand, competition, and pricing.Thorough planning will help your family business succeed globally.Andrew Brolly is senior accountant
with ifac, which is the professional services firm for farming, food and agribusiness
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