Smart Answers

Small Businesses Should Focus on Exports


This fall, U.S. exports hit their highest level in two years, according to the U.S. Commerce Dept. While census data show that small and midsized businesses account for 97 percent of all exports, that comes to less than half the dollar value of those exports—just 31 percent. Small businesses need to start exploring how they can tap into market growth overseas, particularly in the developing world, says international business consultant Kathleen Brush, who has helped lead 20 different companies since 1994 and who recently published her latest book, Leadership: Getting Ready for the Latest Global Challenges. She spoke recently to Smart Answers columnist Karen E. Klein about how U.S. businesses can increase profits by expanding internationally in 2011. Edited excerpts of their conversation follow.

Karen E. Klein: What are you telling small and midsized businesses about the need to expand overseas?

Kathleen Brush: The data [are] overpowering in terms of where growth is going to be coming from over the near future. It's not just related to the slowdown in the U.S. economy but also to demographics. China and India each have four times the population of the U.S. and for the first time, their economies are growing exponentially.

Many—if not most—smaller companies have always relied on increasing U.S. sales to fuel their annual growth. Does that strategy no longer work?

Well, by 2015, U.S. [gross domestic product] is estimated to grow by 23 percent. Compare that to 73.7 percent for China, 68 percent for India, 69 percent for Russia, 60 percent for Indonesia, and 38 percent for Brazil. The contrast is even starker when you look at the growth projections for our traditional trading partners, like Germany at 12.7 percent and Japan at 21 percent.

So in the big, macroeconomic picture, I think all companies—large and small—are going to have to look outside the United States for growth. Look at global GDP: Ten years ago, 66 percent of it came from the traditional developed countries. Today that figure is 50 percent. Ten years from now it will be down to 40 percent.

The resources to do global trade have always been associated with large, multinational corporations. How feasible are overseas sales for smaller businesses with less money and personnel?

We have to get with the program as a nation. The name of the game is global trade and we're not ready. The Germans grow up learning how to import and export, but it's completely foreign to most American companies.

Small businesses need to start getting educated. You approach foreign markets like you'd research a market in the U.S.—looking for attractive opportunities for sales. There are 200 countries out there. You don't need to look at all of them. Look at what you're selling and then figure out which populations will buy it.

What are the top U.S. products being sold internationally?

Emerging countries are building their infrastructure. In places like India, Russia, and Indonesia, it's often frightening how bad conditions are. The trains are dilapidated, electricity is unreliable, and roads are impassable. These countries have to get their health care up to speed and they have to get their populations educated.

So there's a high demand for help with transportation, with equipment and skilled personnel to help with building roads and homes. A lot of these countries have terrible problems with pollution, so they're looking for clean and efficient energy production. They need telecom, medical equipment, and supplies of all kinds. Anything to do with agribusiness and software are always good industries for exporting.

These are sectors traditionally associated with larger companies. Where does the small business fit in?

General Electric (GE) may be the company that's providing the big, expensive equipment to a country, but there are a whole lot of supplies needed to fill hospitals. And these countries don't have factories making those products. The specialized products and services—those niche opportunities that are too small for larger companies to produce—are needed in developing countries.

Franchising is another huge opportunity in almost all the emerging countries. They are now filled with people who want to own their own businesses and who very much respect known brands. If you can offer training to walk these people through the whole process of starting a business, that's seen as very valuable.

The process of international trade may seem daunting to small business owners. Where can they get started?

This is one area that the U.S. government does really, really well. There are some phenomenal services in place to help U.S. companies export products. The U.S. Commercial Service produces very informative guides to tell you about specific opportunities in various markets, who you'll be competing with, what other countries are going after this market, and what are the bugaboos you need to be aware of.

They do a fantastic job, plus it's pretty darn easy to get access via phone and e-mail to the folks that are in the foreign offices. I've used the Commerce Dept.'s gold key service six times and each time the work they did for me was unbelievable and relatively inexpensive.

They put together lists of candidates for you in terms of local distributors, you identify good fits, and they set up the meetings for you at the U.S. embassy in that country. Before you know it, you're hosting meetings at the U.S. embassy with Barack Obama's picture behind you. It really lends you a lot of credibility.

Karen_klein
Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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