For many UK companies, our split from the European Union is proving to be both logistically challenging and expensive. In response, Anchor Magnets decided to open up their very first satellite office in mainland Europe.
Anchor Magnets was founded in 1984. They create magnetic and attractive products for retailers, printers and any other business requiring signage and promotional materials. The company’s products are exported to around 60 countries internationally. Of these 60, they export to 30 regularly, with France, Poland, and Germany being three of their strongest markets.
We caught up with MD Warren Turner to find out about the challenges the company faced when expanding into Germany.
As Brexit loomed, Warren had to make some tough choices to limit the negative impact on the company’s export business.
“The potential worst-case scenario was a no-deal Brexit. At that point we were unaware of what any duties/ tariffs might look like. We have competitors on the continent so tariff or non-tariff barriers would have caused us a considerable problem.”
The net result of this playing out could have been catastrophic.
“If it became too challenging for our clients to buy from us - or too expensive - they’d have just switched to one of our competitors”, Warren explains. “When our customer base in Europe was almost 50% of our turnover, there was a significant risk there.’’
Germany was the obvious choice for Anchor Magnets to set up their satellite office.
“We already exported to Germany but we also felt it was an untapped market. We thought there was scope to develop that market.”
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Expanding into Europe
Many other UK businesses may now be experiencing Brexit-related problems and considering creating an entity in Europe. Warren has several key pieces of advice based on learnings from opening a GmbH company.
Do your due diligence
If you’re thinking of opening up an office abroad, you cannot afford to leave any stone unturned.
“Do your due diligence - especially following Brexit,” Warren advises. “What are the duties/tariffs? How will you ship your product? What could the complications be in getting it there?”
This is more important in some sectors than others.
“Our products are fairly straightforward. But when you’re talking about markets like animal food products, they’ve become much more challenging following Brexit.”
Of course, due diligence also means doing your market research.
“I think understanding your audience is very important,” Warren says. “We’ve been fortunate because we’ve got German nationals and fluent French speakers who work for us. They understand the cultures of the countries, and how businesses and people tend to operate over there. It’s been incredibly useful.”
Get help from locals
“We’ve seen quite a big expansion in France and Poland and that was down to recruiting the right salespeople with the experience of dealing in those countries,” Warren says. “First and foremost are the language skills.”
Speaking the local language makes it infinitely easier to win new clients. Anchor Magnets even decided to create multilingual versions of their technical documents.
“We looked at doing multilingual documentation. So our technical documentation is available in French, German and Polish.”
“Although we’ve got native speakers, the technical language is very different so we have to outsource the checking of the technical documents. We’re also looking to do this in countries where we don’t have a big presence, like the Nordic countries.”
It was therefore also important to get advice from local experts when planning a move.
“We ended up engaging UK advisors, German advisors, and a German legal firm,” Warren explains. “And some of our customers were incredibly helpful. They were amazing. We went over to Germany and they were saying ‘we can find you these facilities, we can help you recruit people, we can help you understand German law.’”
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Expect paperwork to take more time
One piece of advice Warren is clear about is giving yourself more time than you might think you need.
“There are a number of challenges – cultural, legal, linguistic, employment law. All of the things you’re probably au fait with in the UK are completely different when you’re setting up in another country.”
Expecting these delays can be hugely beneficial.
“If we’d have known this, we would have started everything earlier. Applying for a VAT number, which is a simple process in the UK that takes 4-6 days, took us 4-6 months. Everything is paper-based so emails don’t really exist for formal documents. Everything’s got to be signed, notarised in person. The whole thing is very precise but much slower.”
Just do it
Warren’s ultimate piece of advice is both positive and reassuringly simple – just do it.
“Our business would have been constrained in size had we not exported. Yes, it comes with challenges, but the world is so interconnected now - and so small in some respects - that the barriers to trading internationally are much smaller than they’ve ever been.”
The challenges, as Warren explains, can always be overcome, especially if you’re able to lean on local experts and a network of peers like those found at Vistage.
“Yes, there are some customer and technical challenges but there’s also plenty of advice out there. So many people are actually willing to help.”
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Image: By Алексей Голуб via Adobe Stock