Last Updated Mar 3, 2011 7:21 PM EST
Easier said than done. Small companies face numerous hurdles trying to get into international trade, from financing to payment guarantees to managing international employees that are used to different work cultures. Here's how four companies managed to overcome common export problems and grow their businesses abroad.
1. Get outside help
As the U.S. economy started to tank, VSD, a consulting company in Virginia Beach that develops training and simulation services for corporations and militaries, knew that it needed to expand its business abroad. But the company didn't want to make the leap without expert advise. To get started, VSD joined the Virginia Leaders in Export Trade Program, a two-year, state program that gives companies capital resources and tools including legal and translation services to help them expand abroad. Advice about which markets to expand to really helped the company move quickly, says Communications Director Jessica R. Bertsch. As part of the program, VSD participated in a group trip to Saudi Arabia, where they were able to lay the groundwork for long-term business partnerships.
Two years later VSD has grown its workforce 130 percent to 103 employees and tripled its sales. Approximately 60 percent of its revenue comes from projects abroad, including training programs for the Egyptian military, and the company plans to open its first office in Saudi Arabia later this year. So far, VSD has clients in Saudi Arabia, Iraq and Egypt, and plans to target Kuwait, Lebanon, and United Arab Emirates next.
2. Negotiate your shipping costs
Shipping products to foreign countries is expensive -- sometimes the fees cost as much as the merchandise itself, as Michael Katz learned when he started shipping his portfolio and art cases overseas. And once a customer receives a package in the mail, she must pay import duties, an extra cost that's not always expected, or predictable.
To mitigate the extra expenses, Katz negotiated a discount with UPS, cutting shipping costs to 50 percent of the list rate. The shipping giant offered Katz the discount plan (which is based on a company's average weekly shipping bill) to get his business back after he started using FedEx instead. "The threat of taking your business to the competition can be the quickest way of being offered the lowest possible pricing," he says. A year ago Katz also added a shipping calculator to the site, which helps customers figure out how much shipping will cost based on UPS rates, and how long it will take for the shipment to arrive. As a result, Katz says he's seen an uptick in international orders, and the company has spent less time preparing shipping quotes.
Ten years after he started selling overseas, about 5 percent of his business comes from exporting, mostly to English-speaking countries, including Australia, which does not impose import fees on small orders.
3. Work with other small businesses overseas
Matthew Griffin, CEO of the bakeware company The Baker's Edge, in Carmel, Ind., first decided to export his product because of "demand, plain and simple," he says. The company had already had some success in the U.S. with its Edge Brownie Pan, which has a unique shape designed so that every brownie has chewy edges. Unfortunately, the combined cost of duties and shipping make it almost impossible to work with big brick-and-mortar retail chains that require large profit margins to keep up with overhead. For example, the brownie pan retails for $34.95 in the U.S., but in the U.K. it costs $49.99. The price is too high compared to other bakeware products the big retailers sell, and most customers won't pay the difference.
To get around the problem, Griffin works with small retailers and businesses. "They, like us, are more able to bend their margins, and can operate with a higher risk tolerance," he says. Smaller shops may not have the same vast distribution network or order volume as the big chains, but they've allowed Griffin to expand to the U.K., and he's been in talks with retailers in Italy, France, Australia, New Zealand, South Africa, and Japan.
4. Find trusted partners on the ground
Brothers-in-law Mark Aselstine and Matt Krause first came up with the concept of their wine distribution company, Uncorked Ventures, over pisco sours at a family wedding in Peru. To differentiate their company, the two decided that part of their business should include exporting wines to Latin America customers. They have family connections there, and they knew that Latin Americans couldn't easily find American wines. "We saw an opportunity for a new business both in terms of less competition, but also in a readymade market for American products," says Aseltine.
For help, the brothers-in-law contacted both foreign embassies in the U.S. and U.S. embassy trade representatives, but little came of that strategy. After discussions with different wine brokers around the world, they decided to turn to the one person they knew on the ground in Peru, their sister-in-law, who conveniently has an MBA from UC Berkeley. "Our sister-in-law has been able to set appointments and gather more information in a matter of weeks than we were able to in months based largely on location and the ability to meet face to face," Aseltine. The company plans to export first to Peru, and then expand to more countries in Latin America, and then eventually to Europe and Hong Kong.
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