30 September 2010

Is Exporting the Best Way for Small Businesses to Expand

USA Today

Dozens of international explorers gathered recently at a hotel here. But they didn't want to talk about climbing Mount Kilimanjaro or biking through Namibia.

Instead, the group wanted to figure out how to expand their products and services to foreign markets — how to take their businesses global.

"We're a small, financially sound family-owned business, and we're treading water during these (tough economic) times," said David Newton, president of Newrent, a trailer sales and rental firm in Kearny, N.J. His U.S. sales are on the decline, and he thinks there might be a market for selling refrigerated trailers overseas. But he is at a loss about what to do.

"Who do we call? Who do we talk to?" he said.

Newton knows that new revenue streams — partially from foreign markets — could help keep alive the company that his father founded as a trucking firm. So he headed to the "matchmaking" summit, the first in more than 15 years sponsored by the U.S. Small Business Administration. It offered exporting financial advice, as well as tips on shipping, product compliance and cross-cultural business practices.

"I'm just walking around here asking guys questions," said Newton, who was among more than 150 attendees.

Newton was sheepish about his lack of exporting knowledge, but government officials are thrilled that he and other businesses owners are considering the practice.

During a Sept. 16 meeting with his newly founded President's Export Council, President Obama said that boosting exports was a top priority. "The more American companies export, the more they produce," he said. "And the more they produce, the more people they hire — and that means more jobs." He also reiterated his goal of doubling U.S. exports during the next five years through a new National Export Initiative.

In 2009, the U.S. exported about $1.57 trillion in goods and services such as food, technology and health equipment. The goal: at least $3.14 trillion by 2015.

About 280,000 — or just over 1% — of U.S. small businesses currently export. Of those, 59% export to just one country.

"We think businesses can do more," Joseph Hurd, Department of Commerce senior director of export promotion and trade policy, said last Monday.

With nearly 96% of the world's population and two-thirds of purchasing power outside the U.S., Hurd and other government officials want small and midsize businesses to think beyond U.S. borders.

Jennifer Schroder says her employer, Galison, has had success with foreign sales. "Our international business has been growing much faster than our U.S. business," she says. The firm produces stationery under its company name and educational games under the Mudpuppy label.

But she and colleague Lisa Ann Frisone came to the SBA summit in search of partners who could help them streamline their exporting strategy.

Exporting to foreign markets comes with an array of issues, such as completing mounds of paperwork and deciphering often-complicated customs rules.

"You have to understand all the nuances of exporting to other countries," says Luz Hopewell, director of the Small Business Administration's Office of International Trade. "Sometimes if (a firm) doesn't get the right license or doesn't have the right paperwork, the product can be returned from the shipping docks."

It's not that easy

For smaller firms that don't have many resources, the idea of sending goods overseas can be daunting.

One in three small-business owners say fears about not getting paid prohibit them from exporting, according to a 2010 survey among exporting and non-exporting members of the National Small Business Association and the Small Business Exporters Association. Nearly the same proportion said exporting would be too costly.

Amit Roy, who founded the information technology firm Proviatek in 2004, is well aware of exporting hurdles. His company started doing IT work but in 2008 began to export biomedical equipment to India and Singapore.

Since then, he has hit one stumbling block after another. For instance, some of his exported products must be kept at -5 degrees Celsius while in transit. At first, Roy thought he could do this by using dry ice but soon discovered that in some international areas, dry ice is considered a hazardous material. He then had to opt for more expensive gel packs to keep his products cool.

"The learning curve has been expensive," he says.

Hurd, Hopewell and other speakers at the summit spoke openly about the troubles that budding exporters face.

"We don't make it easy to export," Hurd admitted.

Government officials at the SBA, Department of Commerce and other agencies hope to change that with more conferences like the one in Jersey City.

Those groups are also promoting resources such as the country's 19 export assistance centers, websites such as www.export.gov and the 800-USA-TRADE (800-872-8723) help line as tools that can help entrepreneurs export.

"Business can really be totally ignorant about exporting," Hopewell says. Her goal is to "prepare the business ... and make certain that they are well informed of the benefits as well as the risks" of exporting.

"A business is not by itself on the road to become an exporter," she says.

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