Hey, entrepreneurs, got a global itch? Like risk? Then Asia's crisis may be your big break. The dollar is king. Imports are cheap, and well-off U.S. consumers can't get enough of those bargains, right? And just look at the World Wide Web, with deals galore for cut-rate Asian products from desperate sellers -- silk pajamas, plywood, you name it.

Before you try your hand at profiteering, however, beware. Asia is a much more perilous environment than it seems because in the worst-hit countries like Korea and Indonesia the crisis has touched every sector a would-be importer might deal with -- from banks to factories to shippers. Manufacturers lack cash to produce goods, and teetering banks aren't lending. "You definitely don't want to extend credit if you're a small business," warns Craig Johnson, principal at PITA Group, an Oregon technology consultant. "Anyone in business there is living hand to mouth."

In short, it's pretty unlikely that a neophyte can make a windfall off of Asia's woes. The fact is, small businesses that are thriving in Asian trade aren't just buying low and selling high. Finding good deals takes personal contacts built up over many years, lots of patience, and the money to absorb mistakes.

It's true that Americans suddenly have more buying power, with some foreign currencies losing up to 75% of their value. But some Asian goods, including some high-technology equipment, aren't as much of a bargain in dollars as you might expect, old hands at the Asia import game say. After all, the evil twin of devaluation is inflation, and imported raw materials that go into some Asian-made goods are more expensive than ever in local currency.

Even with the dollar riding high, no one is safe from currency risk in such turbulent conditions. Kevin Yang, vice-president of sales and marketing at the Korean-American Chamber of Commerce in Silicon Valley, points out that some small San Francisco technology importers lost out big on Korean shipments that arrived right after the won collapsed in mid-November 1997 because their letters of credit with their suppliers were pegged to the old dollar rate. In effect, they overpaid for the goods.

Then there's the matter of getting the goods home. Those 55-cubic-meter shipping containers are scarce, and space on ships is at a premium. When a regular customer comes in with a big load, little guys may get bumped. For a small company with an order for a major retailer, that could be devastating.

Of course, volatility is a fact of life in developing economies, which doesn't mean small businesses should stay away forever. Instead of jumping blindly into the fray, entrepreneurs can use the crisis as an opening to start building up contacts. The reception is likely to be better than usual, since hard-hit Asian companies desperately need foreign investors and markets.

The problem is finding the right partners. National chambers of commerce and government investment agencies are places to start. For example, you'll get a warm welcome at the Korea Trade Center in San Francisco, an arm of the government Korea Trade-Investment Promotion Agency. Kenny Kim, associate trade manager says: "We're here for the novice importer. The large companies don't need us." The agency will work with someone seeking a manufacturer in Korea "from beginning to end" at no charge, down to setting up appointments and hotel reservations in Korea.

Paul Denning, a managing director at Hambrecht & Quist LLC, a San Francisco-based investment bank specializing in high-growth companies, recommends approaching Asian offices of big-name consulting firms for advice and contacts. "It's worth paying a fee," he says, adding, "I would never do something over there without a local partner. You wouldn't leave home without it."

Some real-life lessons from entrepreneurs who've learned the ropes:

Long-term relationships pay off: Chicago businessman Keith Armato, whose company imports fancy tin cans from China and Japan to the U.S., is lucky. Thanks to the Asian currency devaluations, "we're probably looking at a 20% increase in revenues to $8 million, with earnings probably increasing 30% to 38%," he says.

Armato's success is no flash in the pan. A veteran of his family's 80-year-old decorative tin business, which still exists, he started spadework in the region 15 years ago, after striking out on his own. His company, VVGI Corp., takes advantage of cheap Asian labor and old-fashioned equipment that's easily retooled to offer 3,000 forms of sizes and shapes of cans, many times more than a fully automated U.S. plant can offer.

The investment in time and relationships has particularly paid off in this crisis. Years ago, when shippers were hurting, he made a "handshake deal" with Mitsui that said as long Armato got fabulous service and never got a container bumped, he would never even take a bid from a competitor. His cans, which often have seasonal motifs, have arrived on time despite the freight crunch.

Cost savings get eaten up along the way: Just ask Charles Woo, chief executive officer of Megatoys, a Los Angeles toy wholesaler that imports some 200 plastic and metal models. It's true, he says, that toy companies have seen some price drops from the Asian crisis. "They're able to purchase a very inexpensive product," Woo says. But he adds: "Prices haven't come down as much as you would think," because the raw materials are more expensive.

What's more, bringing the goods home is a logistical and financial headache. "There's a lot of uncertainty," he says. "Ship space is short, imports delayed, and there's a lot of gouging going on from shippers and freight forwarders." One shipping company told Business Week Online that average contract rates for moving a container from Korea to Long Beach, Calif., rose more than 17% in May alone, to $2,000.

"I wish everything was normal, so I could execute my plans," Woo grumbles.

Look after your suppliers, and they'll look after you: The advantages of a devaluation are short-lived, says Sean Mehta, president of the family-owned Je Matadi Dress Company Inc. of Houston, which imports evening gowns and other fancy dresses, mainly from India and China.

"Yes, your initial shipments at the time of devaluation do cost less," says Mehta. But once inflation kicks in, it's self-defeating to force a supplier to absorb the entire price drop in dollar terms. "The moment I get greedy, I see major changes in the quality of the product," he says. "Imagine a beaded dress, with 10,000 beads, all hand-stitched. It'll take six laborers up to two weeks to finish. Not many suppliers can do what you want."

He adds that for companies like his with ties to Asia, there's another reason to avoid profiteering. "We have a family factory in Thailand," he says. "You don't want to take advantage of your family." Mehta's suggestion: Set the price in dollars to keep both sides happy, or agree that if there is a devaluation, the buyer and seller each absorbs half the impact.

By Julia Lichtblau in New York
julia_lichtblau@businessweek.com

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