Home / Commentary / Commentary: Aiming overseas?

Commentary: Aiming overseas?

Mark Klipsch of the St. Louis Bi-State Region of SCORE shares considerations for small businesses targeting international customers.

In today’s global economy, companies of all sizes are establishing operations in foreign markets. This type of expansion can provide several advantages, including greater opportunities for market growth and diversification. The trend of Americans going global also is likely to continue. A 2016 survey by Wells Fargo found that 87 percent of U.S. firms believe international expansion is necessary for long-term growth.

Consider that nearly 96 percent of consumers live outside the United States, and two-thirds of the world’s purchasing power is in foreign countries. If you’re a small business owner, looking to grow your business, it might be time to consider tapping into the global marketplace.

According to the most recent International Trade Association data available through the Small Business Administration, small businesses represent 97.7 percent of the U.S. firms that export goods to other countries. In fact, they account for more than one-third of the United States’ known export value.

While globalization has created opportunities for small businesses to sell their goods and services in new markets, not many small businesses are taking advantage of these international opportunities. In fact, according to the U.S. Department of Commerce, only 266,457 of the approximately 27 million small businesses, or less than 1 percent, currently sell their products to foreign buyers. With small businesses being so essential to the U.S. economy, numerous resources have been created to help you take advantage of all potential opportunities, including those in foreign markets.

As a small business, you face particular challenges in exporting. To start, connecting with foreign buyers and understanding other countries’ rules and regulations takes scarce time and resources. Further, it can be difficult for small exporting firms to secure the working capital needed to fulfill foreign purchase orders, for instance, because many lenders won’t lend against export orders or export receivables.

With business technology ever-evolving, expanding our collaboration and communication capabilities, we can assume that more small business owners will want to seize opportunities to extend their customer base beyond U.S borders.

And, while the U.S. market is big enough for most small businesses to expand almost indefinitely, entering the international arena can protect you against the risk of decline in domestic markets and, most important, significantly improve your overall growth potential.

Opportunities and Risks of Doing Business Globally

If you’re considering doing business internationally, there are numerous opportunities:

  • A chance to conquer new territories and reach more new consumers, thus increasing sales
  • Diversify assets and protect your company’s bottom line against unforeseen events
  • Introduce unique products and services, which can help maintain a positive revenue stream
  • Access to new talent pools
  • Access to new technologies and industry ecosystems, which may significantly improve your operations
  • Benefit from lucrative investment opportunities and incentives that many governments around the world offer for companies looking to invest in their region

Of course, these opportunities also are accompanied by risks. Business owners must pay attention to issues they don’t normally have to consider when providing goods and services within the U.S.

  • Protection of Intellectual Property Rights
  • Logistics of getting paid
  • Taxes and tariffs imposed by other countries
  • Undependable postal and delivery services in other countries
  • Countries’ diverse rules, restrictions and license requirements for shipping products to them
  • Increased shipping costs to send products overseas
  • Cultural expectations in doing business
  • Trust issues when working with far-away partners or agents
  • Language barriers

Fortunately, several resources exist to help business owners understand what’s involved and how to move forward.

Resources That Offer Information and Programs in Support of International Trade

SBA’s Office of International Trade

This office works with other federal agencies and public and private groups to help small businesses compete in the global marketplace. The SBA offers an online course called “Take Your Business Global.” You can find it here.

U.S. State Department’s Direct Line to American Business program

This program gives small businesses direct access to ambassadors and economic and commercial experts at more than 260 embassies and consulates in more than 190 countries. The State Department also operates the Business Information Database System, a portal to help U.S. companies learn about international projects that may offer business opportunities.

U.S. Commercial Service’s Gold Key Matching Service

This service can help small businesses by connecting them with pre-screened representatives, distributors, professional associations, government contacts, joint venture partners and other individuals and organizations.

Export.gov

This site provides links to information about doing business in specific countries. It offers insight and data about various countries’ cultures, business climates, market research, service providers, trade events and other information.

Because of the added complexity involved in expanding a company’s reach to other nations, it’s helpful to seek guidance of attorneys and accountants that specialize in international business for legal and financial direction.

As you develop your business plan for selling your products into the global marketplace, you can also gain insight and feedback from an experienced SCORE mentor.  You can find them by clicking here.

Since 1964, SCORE “Mentors to America’s Small Business” has helped more than 10 million aspiring entrepreneurs and small business owners through mentoring and business workshops. More than 11,000 volunteer business mentors in more than 320 chapters serve their communities through entrepreneur education dedicated to the formation, growth and success of small businesses. For more information about starting or operating a small business, call 1-800-634-0245 for the SCORE chapter nearest you, or visit SCORE at www.score.org.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

*