Think your customers are only local to your small business? Well, think again.
Did you know that a 135-person technology company can sell its software in nine different countries without setting foot on a plane? Did you know that, by “informationalizing” its business, a small trucking company can do business in Europe without buying a single extra truck? Did you know that, despite the ubiquity of the term “made in China” throughout the world, “American made” has enormous cache in emerging markets, including China? If you’re a successful small business owner, you should.
The time may be ripe for considering a global expansion for your business. Two-thirds of the world’s purchasing power is in foreign countries and demand is growing as the world economy continues to improve. Additionally, the U.S. has active free trade agreements with 17 countries, including Australia, Canada, Chile, Costa Rica, Dominican Republic, Guatemala, Israel, Jordan, Mexico, Peru and Singapore, and pending agreements with Columbia, Panama and South Korea.[i] And emerging economies, like China and India, represent an enormous untapped market as the dollar declines, incomes rise and demand for authentic niche goods blossoms. American small businesses that are overly reliant on domestic markets, or that struggle with seasonal downturns in demand may be particularly well advised to consider tapping overseas markets.
Small business owners seem to be getting the message. The number of small businesses exporting goods and services has tripled since 2001, reaching 250,000 companies and $500 billion in sales this year, according to the U.S. Small Business Administration. A report from Intuit and the California think tank Institute for the future predicts that, by 2018, half of American small businesses will be involved in international trade.[ii] And the Global Entrepreneurship and Development Index (GEDI) from the U.S. Office of Advocacy ranks the United States as a world leader in startup skills and competition, and first in new technology development.
Ambassador Ron Kirk of the Office of the United States Trade Representative predicted: “Exports from smaller businesses have experienced incredible growth over the last decade. With the right help, they can continue to expand for the next ten.”[iii]
If you’re ready to expand your small business overseas, the following tips will help you get there successfully:
- Maximize the functionality of advanced e-commerce technologies, such as social networking, merchant payment services, buyer/seller matching technology, currency translators and language sub-domains.
- Invest in website translations for each of the foreign markets with which you do business. In order to avoid confusing American jargon and country-specific idioms, translate text into the new language and then back into English again.
- Micro-specialize your business to fit a very specific niche that isn’t being filled overseas.
- Focus on locations that already have an advanced digital infrastructure, so you can hit the ground running.
- Familiarize yourself with new government programs such as the National Export Initiative, the Export Working Capital Program, and the Small Business Jobs Act.
- Remember that technology is no replacement for human relationships. Forge good ones with local distributors, agents and promoters.
- Hire the best possible support from business consultants, tax lawyers and bankers with international expertise and on-the-ground contacts.
- Educate yourself on the latest financing, insurance and grant programs, as they can help you capitalize your overseas transactions, keep your exports flowing seamlessly and remove as much risk as possible from the equation.
Traditional Bank Loans are basic term loans for financing an expansion into overseas markets. They range from intermediate-term loans that must be repaid in less than three years to long-term loans, which allow from three to 20 years for repayment.
SBA Express Loans are the fastest and easiest government loans to procure and are geared toward companies with less than $25 million in revenue. Banks use their own forms and procedures, and the SBA provides an answer in less than 36 hours. Loan proceeds, which take the form of a term loan or revolving line of credit, can be used to finance export orders, expansions, equipment purchases and real estate acquisitions.
International Trade Loans are designed to put small businesses in a better competitive position, so the funds must be used for long-term fixed assets, including construction and renovation of physical structures; modernization of manufacturing facilities; and expansion of existing operations.
It’s clear that the need for small businesses to consider overseas expansion has never been greater. There is a presidential mandate (the National Export Initiative) to double U.S. exports over the next five years. “America’s small business exports…still represent only about 30 percent of our export revenues, and more than half of small-business exporters only ship to one country,” said Administrator Karen Mills of the Small Business Administration.[iv]
So, as you consider the future viability of your company, remember the words of former U.S. Commerce Secretary Carlos Gutierrez: “We simply cannot afford to be stagnant: standing still in the global economy is essentially walking backwards…. Entrepreneurs…across the country can win in world markets if given the chance to compete.”[v]
[i] (Opening Shop on the Global Main Street (February 2009). Business Credit (National Association of Credit Management), Vol. 111, Issue 2, p. 66.