Over the past 10 years, the number of small-company exporters has more than doubled. But selling internationally has become a real challenge lately -- the result of a persistently strong dollar, slowing global growth, and rising competition. The Sept. 11 terrorist attacks on New York and Washington have only made venturing abroad more daunting. Nonetheless, Jean Smith, deputy assistant administrator at the Office of International Trade of the U.S. Small Business Administration, says persistent entrepreneurs can still find ways to navigate the global Web and do business beyond America's borders. Smith recently spoke with Small Biz writer Naween A. Mangi.
Q: In this tough new environment, should small companies still consider exporting?
A: Absolutely. You just need to be cautious, learn what you're doing, and [not] rush into it. But the benefits of growth a company can experience can be exponential -- especially if they already have a strong domestic side. After all, you may be a well-grounded company here, but the U.S. has only been growing at the rate of 3% a year. Some countries are growing at 12% a year, and if you get a nice niche there, there's no ceiling on growth.
Q: What do you need to think about before going global?
A: Look at the nature of your company. If you're a manufacturing facility, how sophisticated is your production capability? If you're a service company, how sophisticated are you technologically? Then, how many employees do you have -- and can you afford to have people outside the country? Or will that jeopardize your domestic operations? Then you need to look at whether you have the capital to manage the cost of marketing overseas and following up on sales.
Q: Say you've determined that exporting is viable. Then what?
A: The most basic question is where your market is. Domestically, we know intuitively where markets are. For overseas, you have to do feasibility studies. Entrepreneurs are often intrigued by a country and forget that basic research.
Then, you have to make a decision as to how to access those markets. If you're a very small company, you don't want to get into direct sales in a foreign country, because the risks and costs are higher. Instead, look for agents and distributors there who are well known. In most cases, Canada and Mexico should be considered first because they're the most accessible, we know the most about them, and they're inexpensive to travel to.
Third, you need to look and see whether you will have to adapt your product for foreign markets and how much that will cost. Changing the name or branding is one thing, but if, for instance, you have to switch systems for electrical components, the cost may be prohibitive, and it may make you uncompetitive.
There are also all kinds of customs issues that can be difficult. Your goods can be sitting on the docks, and you can't get them through. In some developing countries, there are problems with bribery. You either have to have the experience of knowing how to get your product through in developing countries or have people on the ground -- your buyer there or U.S. officials there -- who can help.
Q: How much of a risk is doing business globally compared to sticking to domestic markets?
A: One of the reasons people feel comfortable doing business in the U.S. is because of the sophisticated credit infrastructure we have here. It's the same in Europe or Canada. For other countries, the Dept. of Commerce can help you find agents or distributors who have strong reputations.
But if you're transacting with a smaller company and you can't get a creditworthiness rating on them, the most secure way is to get a letter of credit from that foreign buyer. It costs more, but if you can structure the deal and be competitive, it can be a very safe transaction. Edited by Larry Kanter in New York