Market Intelligence

  • Written By: John Morris
  • Published: Fri, 12 Apr 2019 16:38 GMT

New markets are the lifeblood of a growing business. Yet accessing those markets brings major challenges – how to forge new supplier agreements? Find new customers? And access the right talent? In the 2018 ScaleUp Institute Annual Review, accessing new markets was listed as the second most important factor (after talent) for delivering growth in scale-ups – 79% identified it as vital or very important.

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It can be transformative. For example, Grenade owners Alan and Julie Barratt had previously limited the distribution of their health food products to gyms and health-food stores. When they made a protein bar, it gave them access to a whole new market and allowed them to take on the chocolate manufacturers. They have now sold 100m bars and their business has moved to a new level.

That said, it can also be fraught with danger. Ill-considered expansion is a peril for scale-up businesses and has been a major factor in business failure. It has been a particular problem in the restaurant sector, where some businesses have rolled out their concept too far, too quickly and then been forced into a retreat.

Domestic markets

New markets can be domestic or international. For domestic expansion, a new market will often represent a step-up in size. A scaling business that wins an anchor customer, such as a major corporate or a government department, passes a huge milestone. It is a gateway to other large customers, and even international businesses.

The challenges domestically are often different to building a presence abroad. Scale-ups consistently cite the culture and procurement processes that go with trying to become a supplier to a large corporate as difficult and time-consuming.

The solution? Certainly, corporates need to become clearer and more transparent in their supplier requirements and to create simpler online tools that make the procurement process easier for smaller suppliers. However, scale-ups will struggle to influence this. In the meantime, corporate collaboration can also be an important step in improving the procurement process. Sharing best practice between businesses on how to improve connections with larger buyers and more easily integrate into their supply chain is all important.

When the ScaleUp Institute looked at this area, it found that those corporates that had successfully engaged in procurement with early stage scale-ups tended to have at least one ‘friendly’ procedure. 67% have a fast track option, 48% have special legal templates 33% have dedicated procedures and 26% have other practices such as preferential payment conditions.

Government entities remain a huge potential market for scale-ups. Central government spends £40bn a year with non-public sector organisations. They have stated their commitment to use more start-ups in their procurement, including expanding the ‘Contracts Finder’ to include large corporate supplier subcontracting opportunities. The ScaleUp Institute has instigated a new Public Procurement Index designed to benchmark this commitment. It identifies almost 400 individual scale-ups who have been procured from the public sector to a total value of £1.5bn and looks at how their business flows are changing over time.

International markets

The majority of scale-ups (64%) are already involved in international trade and most have aspirations to do more. Here, the challenge is building local partnerships, gaining introductions to overseas buyers and overcoming cultural and regulatory barriers.

Scale-ups say the government can help and they want more effective support: that means better introductions to buyers overseas. In the ScaleUp Review, four in ten wanted a single point of contact with the Department for International Trade in the UK.

Trade missions have previously been an important means for scale-ups to build an overseas presence. An increasing number of industry or government-sponsored bodies now organise trade missions to help British exporters explore international business opportunities, introducing them to key business contacts, distributors, agents, partners, buyers and sellers.

For example, the London Chamber of Commerce and Industry runs an average of eleven missions per year that have included Brazil, China, Dubai, East and West Africa, Switzerland, India, Mexico, Qatar, Russia and Saudi Arabia. The Mayor of London’s International Business Programme, Go to Grow, selects 50 leading businesses in the tech, life sciences, urban and creative sectors and has helped those businesses scope out markets such as China, India and the USA. The group also organised a Female Founders trade mission to San Francisco in May 2018.

The ‘B’ word

Like it or not, the European Union is a vitally important trading partner for smaller companies. 59% are involved in some trade to/from the EU. At the same time, the EU is the most likely target market for expansion. As such, the current uncertainty over Brexit is a problem. 30% of respondents to the ScaleUp Review said not knowing how Brexit would unfold was a major barrier preventing access to markets.

Some steps have been put in place. More recently, the Department for International Trade confirmed that the UK would be an independent member of the Government Procurement Agreement (GPA) after Brexit, an agreement within the World Trade Organisation framework and including major economies such as the USA, Canada, the EU and Japan. This means UK companies can continue to bid for public sector contracts overseas on similar terms to those available today. This is a £1.3 trillion market.

Scale-up businesses are expanding elsewhere, building a footprint in North America and emerging markets such as the Middle East, Asia and Africa. Around half (53%) trade outside the EU. This may prove a more important area depending on the outcome of Brexit.

Expanding into new markets is a necessity for scaling businesses with big ambitions. There is help out there to find the right markets and forge the right relationships. 2019 may be the year for scale-ups to take advantage.

Smith & Williams: access to markets

How to establish and operate successfully in new markets is as important as selecting the right one.

With wide ranging capabilities in over 100 countries, we deliver high touch, high quality, bespoke solutions to help scaling businesses confidently expand, consolidate and compete in new markets.

ScaleUp Institute

The Annual ScaleUp Review can be found in full on the ScaleUp Institute’s website.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


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