Cash flow can be a major challenge for small and medium-sized high-growth businesses when exporting. In this Exportia LAB, we explored how companies can overcome cash flow constraints and successfully expand into new markets.
This session featured:
- Pat Howard, CEO of MSL Solutions, who shared his experience in overcoming cash flow challenges while expanding into the UK market.
- Christelle Damiens, CEO of Exportia, who revealed the 5 costly cash-burning mistakes businesses should avoid when exporting to Europe.
- Adam Pearce from Export Finance Australia, who explained how Australian exporters can leverage financial support to scale their business internationally.
This short and sharp 30-minute LAB provided practical insights and solutions to prevent cash flow bottlenecks when exporting.
The Five Biggest Cash-Burning Mistakes When Exporting
Exporting can drive significant business growth, but missteps can quickly drain cash reserves. Here are the top five mistakes businesses should avoid:
Choosing the Wrong Market
Selecting the wrong country can lead to wasted resources and delayed results. Businesses should conduct thorough market research before entering a new country. Assessing the total addressable market size, identifying demand, and learning from experienced exporters are crucial steps in making the right choice. One example highlighted in the session was an American company that regretted starting in the UK instead of Germany. They later realized that their largest potential customers were in Germany, which would have allowed them to scale more quickly.
Launching an Unproven Product in a New Market
Selling an untested product in a foreign market can lead to long sales cycles and high costs. European buyers generally prefer products that have already been proven in the market. To avoid costly delays, businesses should start by selling their best-performing and most established products first. Securing local reference customers to build credibility is essential, as buyers in Europe are often hesitant to invest in new technology unless it has a proven track record.
Poorly Negotiated Trading Terms
Bad payment terms can cripple cash flow. Many small businesses feel pressured to accept long payment terms, often up to 90 or 120 days, which can create severe cash shortages. High distribution costs and unfavorable exclusivity agreements can also limit a company’s financial flexibility. It is essential to negotiate terms strategically, ensuring that any concessions made are matched by benefits received in return.
Hiring Too Soon
Hiring a sales team or setting up an office too early can lead to unnecessary fixed costs before revenue is secured. A smarter approach is to focus on revenue generation first. Learning the market before hiring new employees allows businesses to make better hiring decisions, ensuring that they attract the right talent at the right time. Some companies have faced costly dismissal expenses, sometimes exceeding €250,000, when hiring senior European salespeople too soon.
Granting Exclusive Distribution Too Soon
Giving a distributor exclusive rights can slow down growth. If the distributor underperforms, replacing them can take years and cause significant financial loss. It is advisable to start with non-exclusive agreements, work closely with a small number of committed partners, and scale gradually to ensure that each partner succeeds before expanding further.
Case Study: How MSL Solutions Solved Cash Flow Issues and Expanded in the UK
MSL Solutions provides point-of-sale technology for stadiums, arenas, and large venues. When Pat Howard joined as CEO in August 2019, the company faced serious cash flow challenges. They had expanded too quickly, opening offices in multiple locations without generating revenue. Additionally, they were reselling third-party products instead of owning their own intellectual property, which made it difficult to scale profitably. At one point, their cash reserves dropped to $95,000, while their monthly costs exceeded $1.5 million.
To resolve these issues, MSL Solutions adopted a focused cash flow turnaround strategy. They concentrated on a single market, prioritizing the UK, which allowed them to land large deals and build credibility before expanding elsewhere. They transitioned from reselling products to developing their own technology, which significantly improved their profitability. By leveraging financial support from Export Finance Australia, they secured funding without diluting equity. They also avoided over-hiring and focused on CEO-led sales and strategic partnerships before scaling their team.
Within 18 months, MSL Solutions went from being cash-strapped to having $9 million in cash reserves. They became cash flow positive every month, successfully leveraged their UK contracts to expand into other European markets, and saw their stock price more than triple.
How Export Finance Australia Helps Australian Exporters
Export Finance Australia is Australia’s export credit agency, providing commercial finance to businesses that need support to grow internationally. Their services include loans for export-related activities such as setting up offices, hiring, and working capital. They also provide security guarantees to help businesses secure funding from Australian banks. Additionally, they offer financing for purchase orders and contracts, ensuring that businesses have access to cash flow while awaiting customer payments.
Export Finance Australia provides financing solutions ranging from $20,000 to over $350,000 for smaller businesses. They offer purchase order financing, which allows businesses to receive up to 80 percent of a contract value before payment is received. They also provide overseas expansion funding, covering leasing, hiring, and marketing costs in new markets. For businesses selling on platforms like Amazon, they offer stock and inventory financing to ensure they have products available in local markets.
Companies interested in accessing these financial solutions should start conversations with Export Finance Australia early, as the approval process can take between three and twelve months.
Q&A Highlights
Can Export Finance Australia help with late payments from international buyers?
Export Finance Australia does not collect payments from customers but can introduce businesses to government representatives who may assist with international trade issues.
Does Export Finance Australia fund marketing expenses for export growth?
While Export Finance Australia can finance marketing as part of broader export expansion funding, businesses should also explore grants from other government agencies that specialize in marketing support.
What are the requirements to qualify for Export Finance Australia funding?
Businesses must have a minimum of two years of trading history and at least $250,000 in revenue.
Final Thoughts and Next Steps
To successfully manage cash flow while exporting, businesses must avoid common mistakes, secure financial support when needed, and strategically plan their market entry. The key lessons from this Exportia LAB include focusing on the right market, generating revenue before hiring, negotiating favorable trading terms, and leveraging financial resources to accelerate growth.
Companies should review their current strategies and identify one actionable step they can take to improve their cash flow management. Export Finance Australia provides valuable financing options that can help businesses scale in international markets without facing severe cash flow constraints.
For those interested in further insights, the next Exportia LAB will take place on August 9th, featuring another case study on cash flow and export financing with Export Finance Australia. Businesses looking for expert support in scaling their operations in Europe can visit www.exportia.com.au to learn more about how Exportia can help.