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Exporters: Plan for the Year Ahead

The past year has been a roller coaster for all kinds of businesses, as the U.S. economic recovery continues at an anemic pace. Still, exporting remains a great option for businesses of all sizes, including smaller businesses with 10 or fewer employees.

In fact, “over the past few years, U.S. small businesses have begun exploring to export markets in earnest,” says Leila Aridi Afas, director for export promotion, U.S. Trade and Development Agency, headquartered in Arlington, Va. She believes that in the coming months, exporting will continue to be an area of strength.

However, U.S. small businesses may not be taking full advantage of the exporting opportunities abroad. Small- and medium-sized businesses make up 98 percent of U.S. exporters, yet they “represent less than one-third of the known value of U.S. goods’ exports,” according to the U.S. Department of Commerce’s International Trade Administration (ITA). And of America’s 30 million companies, less than 1 percent export — which is “significantly lower than all other developed countries,” according to the ITA. In addition, 58 percent of these U.S. businesses are only exporting to one country.[1]

Exporting remains a great option for businesses of all sizes, including smaller businesses with 10 or fewer employees.

Here are some tips to ensure a small business is making the most of export opportunities.

Consider New Kinds of Countries

According to Afas, in the past, “U.S. companies could rely upon a very strong domestic demand in the U.S. They’d say, ‘No, I don’t want to deal with shipping or customs.’”

But the current state of the domestic economy has prompted U.S. companies to extend their reach to alternative foreign markets. “With the financial crisis, that domestic demand was completely decimated,” she says. “They’ve had to start looking overseas. They’ve started identifying these other markets beyond Canada and the EU.”

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When exploring export opportunities, Afas recommends that small companies “keep looking at the emerging markets” as potential customers. “In addition to the BRIC economies — Brazil, Russia, India and China — I recommend that U.S. firms look into other emerging markets, which offer significant opportunities, such as Mexico, Colombia, Panama, Turkey, Romania, Morocco, Ghana, South Africa, Nigeria, Kenya, Vietnam, Indonesia and the Philippines,” Afas says. The U.S. is still recovering from an economic downturn, and Europe “as a whole, it’s not a very rosy forecast,” she says.

Furthermore, Afas advises that companies look beyond large emerging markets to lesser known but strengthening economies, such as Vietnam, Romania and Turkey. It’s important not to write off markets based solely on conventional wisdom, she says. 

For example, North Africa often gets a bad reputation because of security concerns, but “Morocco has been largely unscathed,” Afas says, and is booming in solar energy development. “In order to tap into its vast renewable energy resources and thus decrease its reliance on imported energy, the government of Morocco launched the national Moroccan Plan for Solar Energy in November 2009, which calls for developing a minimum of 2GW of solar power generation capacity by 2020. Morocco is deeply committed to the development of renewable energy sources and is moving quickly to implement its plan for solar energy.”

Let Sound Strategy Be Your Guide

Mark V. Brimelow, president and chief executive, International Business Marketing, a trade consultancy based in Vancouver, Wash., cautions companies against jumping at the first export opportunity.

Many business owners are tempted to enter into an agreement with the first foreign company that expresses an interest in selling its products or services, Brimelow says. However, this specific company and that international market may not be an ideal match for the exporter.

International business owners can weed out poor prospects by establishing a clear idea of the types of customers they’d like to serve. In Brimelow’s experience, exporters tend to see more benefits when they set their sights on large-scale, well-established customers. “You want to try and go for the big fish,” he says. “Generally, it’s the same amount of work involved for a small fish as it is for a big fish. You might as well try and recoup your costs as quickly as possible, and go with a large-scale retailer or distributor in that country.”

If an export business doesn’t have enough cash flow to target big retailers, the business owner may want to consider “unique distributors,” where their products can fit into a niche market. “It’s very important to manage your cash flow carefully,” Brimelow stresses.

Finally, companies must stay abreast of changes in currency value, which can have a big impact on businesses’ bottom lines. In addition, working with a trusted online foreign exchange service that provides valuable resources, actionable insights and guidance can also help international businesses save when sending money overseas and receiving foreign payments.

“It’s prudent to put this clause into the contract agreement: If the U.S. dollar or their's fluctuates from here to here, the price changes, so you have it all upfront and very clear,” Brimelow says. “You don’t want them coming back to you saying, ‘Hey, why is your price going up 5 cents an item?’ You think about that beforehand so you cover your costs.”

In today’s uncertain economy, international business owners face numerous risks to their bottom lines. But if they develop a sound exporting strategy and focus on new prospects within emerging economies, business owners can gain a competitive edge within the marketplace and seize important opportunities for growth.

[1]“Exporting Is Good for Your Bottom Line,” U.S. Department of Commerce International Trade Administration

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