Today, 95 percent of the world’s consumers live outside of the United States. Additionally, 98 percent of US exporters are small and medium-sized businesses. If a small business decides to forgo expanding its endeavors overseas, it is severely hurting its potential by only tapping into a small fraction of a market that, truthfully, is there for the taking in today’s global economy.
The thought of expanding a business overseas seems daunting, and legitimate questions arise regarding exchange rates, cultural barriers, legal differences and payments. However, for the small business that does decide to take that first step and enter into the world of international trade, there are copious amounts of resources available to guide them through the process, ease common concerns and help them reap the many benefits of exporting.
Herbert Ouida, director, Global Enterprise Network, Fairleigh Dickinson University, says that exporting is not simply a luxury. “It is indispensable to survival in today’s global economy. … Whether you want to or not, you are competing on a global basis,” he says. “You need to compete. If you don’t, companies that are making similar products to yours are going to compete with you anyway by coming [to the US].”
Susan Widmer, director, US Commercial Service Northern New Jersey, says, when done properly, “for a small company, there’s really no downside to diversifying overseas.” Much like diversifying an investment portfolio, by tapping into multiple markets a company can increase its worldwide foothold and allow itself to be more flexible when it comes to a certain market that may be inevitably struggling.
One of the best places that a small business can turn to first for assistance is the US Department of Commerce. Widmer and her office provide information and guidance to established small and medium-sized businesses that have done business domestically and are ready to take the next step internationally.
“We help them find the right markets, understand the process and how to get paid, and help them find distributors and agents overseas,” Widmer says.
Finding a way to enter initial partnerships and relationships overseas is a big hurdle, and US Commercial Service Northern New Jersey provides businesses with a service that locates and vets potential international partners in the country where they want to do business. “We also can set up appointments for companies, giving them a chance to fly overseas and meet face to face with vetted potential partners with a mutual interest,” she adds.
Solid relationships are the backbone of a strong business, and face-to-face interactions are an invaluable way to not only learn about cultural differences, but also to connect on a personal level with a future partner. Showing that you are making an effort – such as knowing the native language of a country you want to do business in – can go a long way in helping to foster a healthy and lucrative relationship.
Of course, just because a product has had success domestically doesn’t mean it will succeed in an international market. Being self-aware and understanding the culture and the economic and political climate of the country you decide to do business in is vital. For example, a country like Germany that has strict laws regarding e-mail marketing could present legal problems for a small business that is not fully aware of the local laws.
Rufiya Blank, vice president, new business development, Kompass-North America, says that companies need to do their homework regarding local legislation in foreign countries. “Entities such as the US Department of Commerce, the NJ Business Action Center and Kompass-North America provide businesses with the tools to do that homework,” she says. “Business owners need to keep an open mind and also be prepared to change if necessary.”
As one of the world’s largest customs brokers, UPS can aid small businesses by helping them navigate changing regulations, clarify trade intricacies and maintain compliance. They provide consulting in areas such as trade, tariffs and compliance, and can keep a business in-the-know on any changing regulations.
“[Companies] should try to gather a solid team of experts [bankers, lawyers and various export services] and bring them into the system,” Widmer says. “There are a lot of resources out there that small businesses might not know about. It is important to be well informed and have all the information you need.”
The Global Enterprise Network’s goal is to coordinate the many resources available for regional business development while providing “real world” experience and internships for Farleigh Dickinson University’s cadre of international graduate students. Additionally, it organizes and runs a number of seminars and programs such as, “Doing Business in China 2017,” “Doing Business in Vietnam and Singapore,” “Doing Business with the EU after Brexit,” “How to do Business with the UN and World Bank,” and many more.
“[With the seminars], we are whetting the appetite of people, and giving them a picture of the economic situation and major imports in a country,” Ouida says. “Once they are interested and want to take the next step, many of the services that they would likely turn to next are actually at our seminars.”
“Another cheap and simple way to do a market study without going to the market is by going to a trade show,” Ouida says. “Trade shows are an excellent vehicle for you to see all that is going on around you. You can get the lay of the land, get a tremendous education and make a lot of valuable contacts.”
Being armed with information is one of the best ways to go about tackling international trade, but it is not the only source of aid.
The New Jersey State Trade Expansion Program (NJ STEP) provides small businesses looking to export with sub-grants that can offset the costs of some of the paid services available from various organizations, and continues to be a great way to promote business growth in the state.
“The STEP program has helped to open eyes and show businesses that it is possible to expand overseas,” Blank says. “A lot of companies want to export, but they just don’t know how.” NJ STEP has helped kick start many businesses efforts in this regard.
Through the US Small Business Administration (SBA), the NJ Business Action Center (NJ BAC) receives funding for NJ STEP, and is administering grants through the NJ BAC’s Office of International Business Development & Protocol from September 30, 2016 to September 29, 2017 to eligible companies. Companies that want more information regarding NJ STEP and the application process can contact the Business Action Center with any questions.
In 2016, New Jersey’s exports totaled $31.2 billion, with its top two export markets being Canada (No. 1 at $6.3 billion) and Mexico (No. 2 at $2.6 billion). For newer companies or those that haven’t exported before, Widmer suggests that Canada and Mexico are great places to look first.
“It’s a good way to begin to understand the process,” she says. “There are a lot of nuances that people don’t even realize. They just see a big market and they get excited, or they think, ‘Oh, Brazil has so many people!’ … But taxes there are really high. There are challenges to certain countries, so I would say [generally speaking] look close to start and you can expand from there.”
Widmer adds that exporting is not for everyone, and a lot of the decisions come down to a case-by-case basis depending on the company and its product.
“It doesn’t happen overnight, it takes time. Some people don’t realize that it is probably going to take longer than it did to set up domestically,” she says. “[Exporting] has to be a vision of the company and there has to be a buy-in on all levels including upper-management.”
Another factor that will affect many small businesses decisions going forward is today’s political climate, especially with uncertainty at the federal level when it comes to worldwide trade agreements.
As for a future outlook, Widmer says, “I’m optimistic. I’ve been doing this for years and I’ve seen a lot of administrations come and go. At the end of the day, everyone wants the small businesses to succeed – they realize it is the key to the economy.”