The seesawing U.S. economy, coupled with President Obama’s National Export Initiative, makes this an ideal time for small business owners to consider international expansion.
After the past few years of recession, the U.S. economy is still on uneven ground. Business owners have struggled not just grow their sales, but even to stay afloat. Meanwhile, it has been well documented that the BRICS (Brazil, Russia, India, China, South Africa) countries are seeing tremendous growth, and the International Monetary Fund has identified as many as 150 emerging international markets on the cusp of economic expansion, as well.
Expanding overseas can seem very daunting because of the uncertainties that come with doing business outside of the country. Questions arise about the cost and logistics of shipping across the globe, learning customs and trade laws, as well as keeping up with fluctuating currency conversion rates.
This is where the NEI comes to the rescue.
Seventy percent of American exporting is currently done by small and medium-sized businesses and the goal of the NEI is to double the nation’s exports by 2014 by providing a platform for U.S. businesses to go international. The program is meant to help American firms win more foreign government contracts, find buyers worldwide, participate in more trade missions and trade shows, receive more export financing and learn new ways to sell products and services overseas.
By considering a few factors, business owners can get a handle on the opportunities that exist and avoid some of the potential pitfalls.
1. Identify markets: Whether you are importing or exporting, conducting research on countries to do business with should be one of the first things you tackle. This is a vital step in deciding which firms you will buy from or sell to and which countries have a need for your service or product.
Developing countries such as Chile, Egypt, Mongolia, Kazakhstan, Mexico, Philippines, Vietnam and Turkey are rapidly growing and should be included as a list of potential business partners. These emerging countries have a growing middle class that is more educated and has more earning power, affording them the capacity to consume goods and services more rapidly.
When identifying markets, business owners should pay attention to specific growth sectors within each country. For example, Vietnam has a high demand for electronics and fertilizer, while Mongolia is importing sugar, industrial consumer goods and cars. In other areas such as China, healthcare-related goods are in demand, while Hong Kong has a burgeoning upper class interested in wine and the fine arts.
From an importer’s standpoint, market research will help determine which international countries are most capable of meeting your demands: economically, logistically, geographically and politically.
For example, if your small business is based in California, does it make sense to ship to Europe or can you accomplish your goals by shipping more directly to Asia? Also, what are the country’s logistical capabilities – does it have a port or airport nearby? How will this affect the length of time it takes to receive your shipment?
2. Know the rules: If you begin importing or exporting, there are customs, trade and shipping laws that will come into play. These can vary greatly from one country to the next, and these laws will not only govern how your shipment is received, but they will also be specific to the type of product you are sending.
For example, companies in the life sciences industry will have a different set of laws than a company selling electronics overseas. Additionally, depending on the product and how long it will take to arrive, it might have to be packaged differently, which leads directly into the next important factor.
3. Find a logistics agent: Perhaps the most important decision to make when taking your firm international will be selecting a logistics partner. If your shipments do not arrive on time, stall in customs and require additional fees or arrive in the wrong locations, this could put a quick end to your growth goals.
Business owners should find a shipping partner that understands the intricacies of shipping overseas and has the bandwidth to ensure that products arrive on time, in proper shape and in a cost-effective manner. The company should also have offices that are located within the major international ports and airports to ensure proper logistics management.
Good logistics agents will also do more than simply provide the means for your shipments to be delivered; they will offer you additional services to make the process easier. Some of the leading companies provide shipment cost (including duties, taxes and other import fees), time calculators, comprehensive country trade and customs information and automated processing. A good way to review your logistics agent is to ensure they have been certified by the Transported Asset Protection Association.
4. Secure financing: Expansion typically requires additional funds, but fortunately, because of the NEI and the country’s general push towards globalization, capital is generally available for business owners interested in expanding overseas.
The U.S. Small Business Administration’s 7(a) program offers financing through its special loans and export loans programs. The U.S. Export and Import (Ex-Im) Bank provides working capital guarantees (pre-export financing), export credit insurance, loan guarantees and direct loans (buyer financing). On average, 85 percent of Ex-Im’s transactions directly benefit U.S. small businesses.
5. Utilize free resources: The best news for business owners expanding internationally is that you do not have to go it alone. In addition to the detailed information available to you through your shipping agent, there are numerous U.S. government and Chamber of Commerce websites that will provide detailed information and a roadmap on what’s needed to become a global company, including the following:
Opportunity is knocking for American small business owners to go global. With thorough research and a well-defined strategy, you can cross those international barriers.
Eugene Laney is vice president of international trade affairs for DHL Express, which provides international mail and shipping services.
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Do you have your own tips for entrepreneurs who are considering taking their business overseas? Please share your thoughts in the comments below.