When the value of the dollar dropped in 2008, Mr. Siegel noticed a boom in
calls and Web visits from abroad. He began marketing with Internet ads and
country-specific Web pages aimed at consumers in Britain, Australia, Finland and
Canada.
In the last 18 months, international sales at Orb Audio, which brings in more
than $5 million annually, have risen to 35 percent of total sales from 10
percent, offsetting a 10 percent domestic slump in 2009. Total sales in February
were up about 75 percent over last year, almost exclusively on foreign orders
from as far away as Zimbabwe, Nigeria and — three times in the last six months —
Easter Island.
“Somehow, 10 percent of our business is in Finland because a couple years ago
someone got our speakers and wrote a nice review in an Internet forum,” said Mr.
Siegel, 39.
For many small companies, and
President
Obama, Mr. Siegel’s experience is one to be emulated. During his
State
of the Union address, the president announced the
National
Export Initiative, a program aimed at doubling American exports in five
years. As part of the initiative, the Obama administration increased the budget
of the Commerce Department’s International Trade Administration by 20 percent to
$540 million to help advocate for American businesses abroad and called on the
Export-Import Bank of the United
States— which provides export financing when private banks cannot or will
not — to increase financing for small- and medium-size businesses to $6 billion
from $4 billion over the next year.
Today, although the United States exported $1.55 trillion in goods and
services last year, it is still isolated. Fewer than 1 percent of America’s 30
million companies export, a significantly smaller percentage than those of other
developed countries. Of the companies that do export, those with fewer than 20
employees, like Mr. Siegel’s, represent 72 percent of the exporters and 14.2
percent of the value of goods exported.
Here are some ways to take advantage of the opportunity.
CHOOSE A MARKET “You can’t do a thing until you find
customers,” said Laurel Delaney, founder of
GlobeTrade, an export consultancy based in
Chicago.
But most small businesses do not know how to do that abroad, so exporting
often comes from serendipity: an entrepreneur makes a chance friendship with an
overseas importer or someone calls from abroad with an order. “It sometimes
works out,” said Cliff Paredes, director of the
International Trade
Center at the University of Texas at San Antonio. “But the first contact may
not be from the right market or from the right partner. If you’re reactive,
there’s a risk.”
To be proactive, direct-to-consumer sellers can follow the model of Mr.
Siegel, who used
Google
AdWords, the Internet advertising platform, to direct keyword ads to people in
specific countries. For products that go through a foreign distributor, Mr.
Paredes advises exporters to classify their products under the internationally
standardized Harmonized Commodity Description and Coding System, then look at
trade data to determine which countries are importing those products.
Once that has been done, industry trade shows are often a good place to find
foreign importers eager to carry products in the exporter’s country of choice.
The Commerce Department’s
U.S. Commercial Service and the
Small
Business Administration’s network of
Small Business
Development Centers also help small businesses find markets and customers.
BUILD RELATIONSHIPS While Americans are used to getting
straight to business — often over the phone — most foreign countries require
serious relationship-building.
“Relationships are the holy grail of cross-border businesses,” said Duncan J.
McCampbell, president of
McCampbell Global, a Minneapolis
small-business export consultancy. “As Western business people, we’re the
product of a stable legal system. Someone cheats you, you sue them, you get your
money. It’s not like that in other countries. If you don’t spend time with
people, you will fail.”
About five years ago, Glenn Williams, president of
Bell
Performance, a 17-employee fuel additive company in Longwood, Fla., began a
big push into overseas markets. Attracted by opportunities in China that he had
discovered through
Alibaba.com and the Commerce Department, he
went to Asia to meet potential customers in 2000 — but not before enlisting a
friend who was familiar with Asian markets.
“He said, ‘Whatever’s put in front of you, eat it with a smile.’ I ate eel,
fish eyes, pickled heart of monkey, or something like that. We learned to use
chopsticks before we left, though I probably lost a few pounds from food jumping
out of my chopsticks,” said Mr. Williams, 34. “And we learned that in Japan
you’re supposed to introduce yourself to the top person first and then move down
the line.”
Today the company is in almost 30 countries, and last year 40 percent of its
revenue came from exports.
CUSTOMIZE YOUR PRODUCTS Not every product has a market
outside the United States. Those that do meet certain criteria.
“They’re targeted to a narrow segment of the market that no one’s serving and
that pays a premium and isn’t subject to local low-wage competition,” Mr.
McCampbell said. “The first thing you got to ask yourself is, ‘Can someone make
it cheaper in China, India or Vietnam?’ ”
Even then, exporters need to do thorough market research to modify products
to fit local norms. When Peter Cole took over
Gamblin Artists Colors, an art-supply
company in Portland, Ore., in early 2007, international sales accounted for less
than 5 percent of revenue. So, flying about 80,000 miles in 2009, Mr. Cole built
relationships with stores and distributors in Israel, Australia, Mexico, Britain
and Spain. And he found he had to tailor his products. “In Australia they want
larger sizes of paints — sizes we haven’t contemplated for the U.S. market —
particularly for printmaking inks,” Mr. Cole, 37, said. “People tend to paint
bigger, and thicker.” International sales at the company, which brings in almost
$5 million annually, rose to 10 percent of revenues last year.
For Kyle Schroeder, president of
the Cremo Cream Company, a Los Angeles shaving
cream start-up, customization occurred for legal reasons: To sell in Canada, he
needed to put his tubes in a box so that he could include the required French
documentation.
REMEMBER TO MAKE A PROFIT Because of shipping costs, import
duties, compliance requirements and added middlemen, profit margins are usually
lower in exporting. In Mr. Schroeder’s case, adding a box increased his cost by
more than 20 percent.
New exporters often make the mistake of signing a contract before they
understand market regulations or nail down how and when they will be paid. For
protection, it can be helpful to demand advance payment for small transactions
or, for larger ones, to draw up a letter of credit — a contract that requires
payment before the delivery of goods — between the buyer’s bank and the
seller’s. And it is essential to bone up on
Incoterms, the
internationally standardized system that defines when a product passes from the
exporter’s possession to the importer’s and who has to pay for what part of
shipping.
The lag time between export orders and payment can tax a small business. To
handle this, the Export-Import Bank offers financing that allows small
businesses to borrow against their receivables as well as receivables insurance
that lets them offer payment terms to foreign clients.
Source: New York
Times
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