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