Much has been written in recent years about how SMPs are experiencing a growing number of commercial challenges that disrupt the client services they have traditionally relied upon for revenue generation.
Equally, many argue that more SMPs need to consider whether diversification into new advisory services could be the key towards the sector’s future success. However, such change can be difficult when talent flows in the sector are uncertain and competition is fierce.
ACCA was therefore interested to explore whether international trade is one area where SMPs’ unique experience and expertise might lead to the development of a new, specialist service provision.
Our findings suggest that many SMPs are equipped with an excellent platform towards providing additional value-added support to clients. However, despite SMPs stating that the overwhelming majority of their clients had been involved in some form of international activity over the last three years, their current provision of relevant support remains highly focused around a small number of limited areas.
Our new report, Growing Globally - How SMPs can support international ambitions, revealed the following about internationalization and the relevant advice landscape for SMEs.
SME internationalization today
- Just under half (45%) of SMEs said the main benefit of internationalization was access to new customers in foreign markets. Increased profitability (35%), faster business growth (33%) and access to new business networks (30%) followed.
- Both SMEs and SMPs considered ease of doing business and high growth potential as the most important factors when choosing an export destination. Geography was seen as less important, which may be a result of new technologies reducing its significance as a perceived barrier.
- Both SMEs and SMPs recognized foreign regulations as the most significant barrier to internationalization. For SMEs, the second most important was competition (27%) whilst for SMPs it was foreign customs duties (33%).
- In terms of the future, SMEs’ international ambitions are focused on building the capacity of their business (45%), building networks in foreign markets (45%) and introducing or developing more products and services to market (44%).
The advice landscape
- A wide breadth of professional advice and support is used by internationalizing SMEs, who tend to reach out to different sources as they move along their internationalization journeys. Government or relevant public agencies (39%) are the most widely used source of professional advice, closely followed by lawyers (35%) and then banks (33%).
- Accountants are most likely to be used by SMEs when looking for support on international tax, regulatory compliance, foreign exchange and accessing external finance.
- Only 9% of SMPs said they had no clients who had been involved in any international trade activities over the last 3 years. Importing and exporting activities were the most common, as was participating in broader international supply chain networks.
- SMPs mainly rely on internal and informal resources when advising clients about internationalization. However, this gradually shifts towards a reliance on more external and formalized resources as practices grow in employee size.
- Just under half (47%) were not members of any networking organization, potentially missing out on valuable resources that could enable the development of more effective forms of international support.
Using these findings, ACCA conducted a series of interviews and roundtables with SMPs and SMEs globally. The subsequent insights were used to develop recommendations on how practices can look to develop their international advisory provision.
- Specialization is key - For those developing their international advisory provision, it is vital to first identify an area of the market where you believe your practice has the opportunity to effectively develop its expertise, resources and intelligence to best suit the needs of your clients. SMEs’ demands for international advice vary according to sector and size of business. Building a market focus is more likely to make any future expansion of international support more achievable and successful.
- Adopt a strategic mindset - Identifying where you could best add value in terms of international support requires SMPs to think strategically and embark on initial planning and research. The best place to start is with existing clients rather than prospective ones, as they provide a readily accessible (and more approachable) evidence base to explore where demand is likely to be greatest. Making efforts to understand your clients’ internationalization needs can then help you shape your wider international advisory offering.
- Expand your international network - Networks are integral for the development of new professional advisory services but particularly with regards to internationalization. This is because global value chains often necessitate close and efficient coordination of activities between businesses. SMPs should therefore aspire to become the central referral point for clients looking to find the most appropriate source of professional advice.
- Invest in professional development - Practices must have highly skilled staff with the appropriate intellectual knowledge for clients to recognize the value in the services you offer. Creating a structured program of learning activities for staff around international trade could be useful for SMPs looking to upscale their international advisory provision. This could involve introducing formal learning activities across more technical areas of international trade (such as tax, compliance and foreign exchange) as well as working with other firms to develop knowledge networks where staff can learn, collaborate and access good practice.
As SMEs continue to seek new ways of engaging in international trade, partly brought about by developments in technology, practices are being presented with opportunities to develop and widen their international advisory provision.
For some SMPs providing additional support to clients involved in international markets will not be feasible or practical. Nonetheless it is important for all practices to continue recognizing the changing realities of how SMEs are operating globally.
The key challenge in taking advantage of such opportunities is centered on the risks that inevitably come with the business model optimization required to provide new and relevant client services.
Read the full report here: Growing Globally - How SMPs can support international ambitions.