Is your small business ready to take on the world? Every year, more U.S. small businesses enter the global marketplace, exporting their products into the hands of waiting buyers worldwide. When you consider the fact that more than 95 percent of the world’s consumers are located outside of the United States, with two-thirds of the world’s purchasing power in foreign countries, it’s easy to see the potential rewards of global expansion.
“Most small businesses start exporting by accident. They get an inquiry on their e-commerce site, take an order over the internet, and get a freight forwarder to ship those one or two products to their overseas destination,” explained Bill Houck, regional manager for the Mid-Atlantic region of the Small Business Administration’s Office of International Trade. “If you’re getting a few of those types of inquiries, it’s probably worthwhile to spend some time determining if there’s a greater opportunity.”
But, how do you take your business to that next level? What do you have to have in place before you take the international plunge? We asked our industry experts to weigh in with some guidelines to get you started.
Make sure your domestic house is in order.
“Although there are always some exceptions, before you expand beyond the United States, you should be a profitable business, with at least a year of solid domestic sales,” said Douglas K. Barry, deputy director, U.S. Commercial Service. “You want to have a product that’s demonstrated a certain amount of success in the United States.”
A solid balance sheet will also help you acquire the additional capital needed for international expansion.
Research the international market.
“You have to research the international marketplace to find out where you have the most opportunity,” Houck said. “For example, Germany is the biggest ‘dog’ country. They have 25 dog-related magazines in publication and a strong market for pet products. Look at the global marketplace to identify trends, and pay attention to inquiries on your own e-commerce site. If you’re getting interest from a certain region, look at the opportunities there. All of this will help determine where you have the greatest potential for sales.”
Follow this research with some fact-finding on your competition. Who are they, what do they offer and what do they charge? Do they already have expansive market share, or are they just starting out? How is your product or service better? If your product or service is new to an area, determine if and how it meets an unfilled market need.
Commit the time and resources.
“You have to answer this question honestly: Do I have the time and resources to devote to setting up my international business?” Barry said. “Am I willing to commit the effort to not only identify where the opportunities are, but to capitalize on those opportunities by building relationships, marketing and closing those deals?”
A realistic amount of time has to be allocated to these efforts, with pre-established response rates.
“Once you’ve decided to go international, you have to put a standard operating procedure in place to respond to inquiries from abroad in 12 hours,” Barry said. “As a small business, you have to be ready to pounce on opportunity. Part of that is being prepared financially, but another part of that is ensuring you’re willing to provide the same service levels to your international prospects as you do to your domestic customers.”
Most small businesses benefit from easing into exporting, starting with one or two countries as a proof-of-concept, then expanding as owners become more familiar with the nuances of selling to the international marketplace.
Create an export business plan.
“You have a domestic business plan, you need an export business plan that is equally as detailed, with defined goals, strategies and budget,” Houck said. “You’re going to have different expenses upfront, including new marketing materials, packaging considerations, and potential product adjustments. All of those factors have to be included in the budget.”
The good news is, the U.S. government has a wide array of resources to help you through this process.
The U.S. Small Business Administration offers a free Export Business Planner, a downloadable, customizable tool that includes worksheets, global research, financing information and a self-assessment to determine export readiness. The U.S. Commercial Service offers a variety of resources on Export.gov, including information on its U.S. Export Assistance Centers, located throughout the United States. Center personnel can provide export guidelines and connect you with experts who can help with plan creation, free-of-charge.
Research packing, labeling and shipping considerations.
“We encourage small businesses to speak with a freight forwarder to get educated on all aspects of shipping goods overseas, because someone who ships for a living is going to be the best source of information on everything from paperwork and packaging to getting your specific product to your target countries,” Houck said. “I believe shipping companies (including the brand names) offer resources for small businesses on international shipping options, with personnel who can explain the paperwork, customs forms, and delivery options. All of that factors into cost, timelines and go-to-market strategies.”
Know your export financing options.
You can’t export without being financially prepared.
“You’re going to have to spend money to make money, unless you’re willing to settle for one-off sales on your e-commerce site,” Barry said. “If you’re working with international distributors, you have to do what’s required to market your product, and get your inventory ready. At the same time, you have to be prepared to offer terms. Your best distributors are not going to be willing to prepay for your product.”
A variety of export financing options may be available through your bank, with a percentage of those loans guaranteed through either the Export-Import Bank or Small Business Association. Although neither of these organizations compete with financial institutions, their financial backing does encourage institutions to extend credit to small businesses that want to expand internationally by providing loan guarantees up to 90 percent, covering much of the lender’s risk.
For more information on export financing, click here.
For more information on payment options for exporters, click here.
Take advantage of government resources to capitalize on exporting opportunities.
“If there are two messages we want to send, it’s that you don’t have to be a large company to export successfully, and as a small business owner, you don’t have to figure out everything on your own,” Barry said. “Numerous government agencies, like the U.S. Commercial Service and the Small Business Administration actively help entrepreneurs expand sales internationally. Our embassies assist with everything from scoping the opportunities, to planning, to finding and vetting buyers to financing. Most of these services are free-of-charge.”
No question, taking your small business into the global marketplace takes research, planning and commitment, but the potential rewards are great.
“When you look at the numbers, the potential and the help that’s available to help small businesses get export ready, I think the only question left for entrepreneurs to ask is, ‘Why am I not vigorously pursuing this now?” Barry said.
A world of opportunity awaits.