The bad news is that the U.S. is a global loser when it comes to exports, but the good news is that exports have been rising and the relative lack of competition means there is a lot of opportunity for expansion, particularly for small businesses. Foreign markets are a great way to hedge against domestic instability, but the problem is financing the leap across the pond. Now, some small businesses are getting more help from the U.S. Commercial Service, while others are forming trade groups that pool resources to research and invest in promising foreign markets. For more on this continue reading the following article from TheStreet.
In one piece of positive economic news, government figures show that exports of goods and services have been increasing this year, up 4% in the first quarter and 6% in the second. From July 2011 to July 2012, the total value of exports from the U.S. was almost $5 billion, up nearly 3% from last year.
Looked at through a global lens, however, that output isn’t quite so impressive. The World Bank ranks the U.S. almost last among industrialized countries in exports as a percent of GDP (only Japan and Brazil export as little, percentage-wise, as we do). The good news? There’s plenty of room for improvement — especially within the small-business community.
Large U.S. corporations know overseas sales are the key to maintaining profits despite the uncertain domestic business climate. While many small businesses have stagnated, multinational corporations have kept their balanced sheets balanced thanks to overseas sales. In its third-quarter earnings report, released this summer, Apple (AAPL) revealed that international sales accounted for 62% of the company’s revenue. Just three years ago, 44% of revenue came from overseas.
Of course, large companies have far more resources to call on when it comes to expanding in a new country. For a small-business owner, dealing with language barriers, cultural differences and all that red tape is daunting. The good news is that there is an entire government agency, the U.S. Commercial Service, dedicated to smoothing the way for companies that want to make that leap, with offices in more than 100 cities offering services specifically targeted to small businesses.
Heather Ranck, office director for the U.S. Commercial Service in North Dakota, can point proudly to a track record of success in her state. In the first half of the year, exports were up 24% over 2011.
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She describes her work as a form of matchmaking.
"People here are inherently conservative," she says, "but we tend to look outward in terms of market opportunities. What I’ve found effective is to do lots of due diligence. What country is best for your products? What would your ideal market have? We narrow it down to five factors, then I can produce a ranking of countries based on those factors."
Once certain countries have been identified as good matches, Ranck has an entire federal network at her disposal. The U.S. Commercial Service has experts at every U.S. embassy overseas whom Ranck can call to find out the key players and trends in specific industries. "Our collaboration is truly stellar," she says. "We trade leads, and we really work well together."
When a company is ready to take the next step, it can sign up for "Gold Key Service," a fully planned customized sales trip. The U.S. Commercial Service sets up a schedule chock full of meetings with prospects and handles all the details that can make international travel intimidating, including recommendations for hotels, translators and drivers. The cost for a simple contact list is usually a few hundred dollars; a trip involving two days of meetings costs $1,000 to $3,300, depending on the size of the company.
Another way to gather overseas leads is to join a trade mission, where leaders of companies within the same industry travel as a group to investigate a promising market. North Dakota, home to a number of agricultural equipment manufacturers and distributors, organized a trade mission to agriculture-heavy Russia, Ukraine and Kazakhstan in 2006; Ranck says contacts made then are still paying off today.
But such success stories only happen if the company that has been set up with potential foreign clients has thought through what happens once that first sale is made. "So much depends on how companies follow up," Ranck says. "You can lay everything out for them, but nothing ends up happening. If a company is serious about exporting, they have to put a specific person in charge of it." Often, that responsibility starts out with the owner, but companies should be prepared to hire a dedicated person to oversee exports as sales grow.
Companies that are not quite ready for the full commitment of selling overseas can always investigate their options by checking out the U.S. Commercial Service’s market research library at no cost. You can search by industry and country to see what analysts say about growth opportunities and the leading companies in that sector.
If, one day, you decide to get serious about exploring foreign markets, remember that there are people ready and eager to help smooth your way.
"U.S. companies tend to look at exporting as icing on the cake, rather than as a necessity," Ranck says. "They wait for the apple to fall from the tree. I try to push the branch down so the apple is closer."
This article was republished with permission from TheStreet.