In the New Year, learn about something possibly brand new to you: the power of exportation.
For many small-to-medium sized businesses (SMEs) the risks associated with selling overseas far outweigh any perceived benefit. If you are in this place, you are not alone. National statistics suggest that less than 5%, yes 5%, of U.S. companies export. Of that sliver of the U.S. economy, only 1% of exporters export to more than one country. A robust domestic economy only compounds the situation as most SMEs would rather focus on the proverbial low-hanging fruit and confine their sales effort to within the comfort zone of the U.S. economy.
In an effort to shed more light on what should arguably be an important part of a company’s business model, our organization in cooperation with Enterprise Florida and the U.S. Commercial Service is launching a monthly series of articles designed to educate and inspire the local business community to consider their role in international markets. Welcome to Volume 1, An Introduction to Exporting.
Why Export?
Many SMEs begin and end their research on selling overseas at this point and venture no further. If they were to talk with Florida exporters, these are some of the insights that would surface:
- In general exporters are 15% more profitable, pay 15% higher wages and they grow 15% faster than non-exporters.
- At one time, the U.S. market comprised nearly 30% of the global market; now the U.S. economy represents less than 20% of the global economy. Those companies not selling overseas are potentially ignoring more than 80% of their customers.
- Almost 90% of the world’s buying power lies outside the United States. Exporting puts your product in front of those consumers with the money to buy your product or service. In fact, the growth of the U.S. economy ranks out of the top twenty global economies.
- Economic uncertainty is a certainty. Rarely, however, is there a global recession. During the last economic downturn many economists viewed it as a European-United States phenomenon. A cursory review of global economies suggested that there were far more economies growing than shrinking during that same period. Exporters who had diversified their portfolio (were selling in multiple countries) weathered the uncertainly far better than non-exporters simply because they continued to sell in growth markets.
- Your company is already competing in the international arena; whether you know it or not. From day-one most overseas companies view the U.S. as their target market; we are consumer-based, price-conscious economy after all. Just like you, your overseas competition evaluates and assesses a market before entry. Whatever you manufacture, whatever you distribute, whatever service you provide; your overseas competition knows as much about the U.S. market as you do.
- There are and always have been a plethora of government resources to assist a company in making an informed decision about their role in international markets. Perhaps more so than any other business activity there are resources, many of them free, that can successfully guide a company through the export maze. There is quite literally a resource for virtually every situation an exporter may encounter.
Exporting Myths
If there are so many reasons to export, why aren’t there more U.S. companies doing so. Some of it can be contributed the fact that exporting lies beyond the comfort zone of many companies. There are also a multitude of fixed beliefs, exporting myths if you will, which keep a company from exporting:
- Exporting is the purview of large multi-national companies and beyond the reach of an SME.
- An exporter must be a manufacturer in order to compete overseas.
- Only high-tech, leading edge products and technologies have demand in overseas markets.
- Typical export sales are too large and beyond the scope of an SME.
- By exporting, a company exposes itself to unnecessary risk.
- A company must have a product to export.
- A company must be price-competitive in order to succeed overseas.
Exporting Facts
For every myth associated with exporting there is a reality that is in stark contrast to that myth. In the order of the myth presented above, consider these realities:
- Exporting is actually the purview of the SME. In Florida, for instance, nearly 70% of the state’s exports are generated by SMEs. Florida, in fact, is second only to California in the percentage of exporting SMEs.
- Companies representing manufacturers, sometimes referred to as an export management company, an export trading company or simply as a manufacturer’s representative are successful overseas. In fact, some overseas buyers prefer dealing with these types of companies and many overseas buyers, because of their limited size of their orders, are relinquished to partnering with an export intermediary.
- Florida exports sand and rocks to the Caribbean. There are companies selling ice makers to Greenland. Three years ago gold exports, in the form of used jewelry, were one of Florida’s leading export sectors.
- The average export sale is in the neighborhood of $10,000; arguably a manageable transaction ideally suited for an SME.
- To the contrary, exporting does not expose a company to greater risk. Exporter’s learn more about their competition; benefit from the business practices they employ and adapt their product to changing market conditions more easily than non-exporters. As Marlon Brand, as the Godfather, cautioned Al Pacino “Keep your friends close and your enemies closer”. Exporting offers companies a perspective not possible if but through understanding global trends.
- More than 30% of Florida’s exports are service exports. Engineering, accounting, design/build, educational and consulting services are in high-demand overseas.
- When a company sources a product or service from a U.S. company, the overseas company already knows that it is not buying the cheapest product. They already know where they can find cheap. Most often the overseas buyer has contacted your company because quality and service are more important to them than price. Think about it for a moment. If you are successful in selling to the most finicky and demanding consumers on the planet (it’s us) it speaks volumes about your company and its product. The overseas consumer realizes this and knows that every pound, dirham, rial, euro or peso spent on a U.S. product or service is an investment in quality.
Who Can Export?
By now you may be having a pretty fair idea just who can export:
- Manufacturers
- Manufacturer’s representatives to include export management and export trading companies.
- Service providers
Being in one of these categories of and by itself cannot guarantee your success as an exporter. It is crucial to realize that exporting is a business expansion strategy, not necessarily a business development strategy. Exporting is customarily not within reach of the entrepreneur or start-up company although there are always exceptions to the rule. There are other quantifiers and qualifiers that distinguish a business as a successful exporters and these will be discussed in subsequent newsletters. Also realize that a successful exporter is one who has a fire and passion for the unknown, the risk, the adventure and thrill that accompanies both success and failure.
In Closing
We hope that you have enjoyed this inaugural export newsletter. Our organization is pleased to have provided you with what we hope will be food for thought and a basis for further dialog between our organization and yours.
In newsletters to follow, one each month, we’ll be bringing your attention and focus to another aspect of exporting. Along the way you’ll be introduced to exporting resources; you’ll learn about getting paid overseas; how to ship to another country; develop a comprehensive export strategy and many, many other topics.
In our next newsletter we will focus on the export readiness assessment (EAS). The EAS is the crucial first-step in assessing your company and your company’s product/service overall readiness for export. This process will identify short and long-term objectives most successful exporters take to task and assess your company’s strengths and weaknesses. The EAS is fundamental to making an informed decision regarding exporting and one not every company takes the time to fully understand.
Stay tuned…
For more information about exporting or the newsletter content please feel free to contact us or our partners at Enterprise Florida and the U.S. Commercial Service:
Larry Bernaski Jorge Arce
Regional Manager Director
International Trade Development Jacksonville Export Assistance Center
Enterprise Florida U.S. Commercial Service
904.359.9350 904.232.1270
lbernaski@enterpriseflorida.com jorge.arce@trade.gov
Volume 2: The Export Readiness Assessment
Volume 3: Local Export Services
- S. Commercial Service
- Enterprise Florida
- Small Business Development Centers
Volume 4: Additional Export Multipliers
- AmChams
- World Trade Centers
Volume 5: Developing an Export Strategy
Volume 6: Export Financing
- Methods of Payment
- Ex-Im Bank Programs
- SBA Programs
- Florida Export Finance Corporation
Volume 7: Utilizing Trade Shows and Trade Missions
Volume 8: Internationalizing Your Website
Volume 9: Distribution Agreements
Volume 10: Shipping and Logistics
- The Role of the Freight Forwarder and Customhouse Broker
- INCOTERMS
- Cargo Insurance
- Documentation
Volume 11: Export Licensing
Volume 12: After Sales Service
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