How to Take Your Small Business Global
Jun 20, 2006 5:00 AM PT
Think taking your small business global is mission impossible? Think again. Communications advances are making globalization a reality, and it's the small business owners of the world who are busting borders and realizing greater growth potential.
So says Laurel Delaney, CEO of GlobeTrade.com and author of Start and Run a Profitable Exporting Business. The way she sees it, never in the history of the world has the entrepreneurial and small business spirit been more alive. That spirit is manifesting in the global marketplace.
Consider the statistics. Nearly a quarter of a million U.S. small businesses are exporting goods, according to GlobeTrade.com research. What's more, small businesses with fewer than 500 employees export roughly US$182 billion a year, or 29 percent of all exports. Exports mean new customers, since more than 95 percent of the world's consumers live outside the U.S.
"The fight-for-your-life attitude caused by extreme uncertain times along with the explosive growth of the Internet has leveled the playing field and emancipated the entrepreneurial and small business process," Delaney told the E-Commerce Times. "There is no end in sight. Rather, a beginning to realizing the world is your market."
What does it take to succeed as a small business in the global economy? Why do some small businesses succeed where others fail? Often failure boils down to the lack of a clear value proposition, according to Edward Wes, a corporate partner with international law firm Perkins Cole.
Simply stated, your unique value proposition differentiates your products and services from the competition's products and services. It could be based on factors like technology, price or quality. Since competition is more diversified on a global scale, identifying that value proposition is even more critical -- and perhaps more difficult -- in international markets.
Once the value proposition is identified, it needs to be clearly communicated. "Companies need to educate their potential customer base. Unless potential customers know about a product or service, they will never purchase it," Wes told the E-Commerce Times.
Patience: A Global Virtue
Even with a competitive product, global success requires patience because international business is typically slow to develop, noted Gerhard Kautz, author of Take Your Business Global and president of GWEM Systems Limited, an international marketing consulting company. "Most failures are due to a lack of staying power," he said.
"Also, the American company must select a new market area very carefully. For example, it would not be wise for an American company to try to sell products in Iran these days," he added. "On the other hand, Kuwaitis love American goods and services."
Market selection is certainly among the most critical considerations. There are many others. Small businesses that have the guts to go global have to define a business plan for accessing global markets, determine how much they can afford to invest in international expansion efforts, build a Web site, conduct market research, find customers, and a whole host of other considerations.
Delaney offers a quick, bullet-style list of actionable advice: "Prepare pricing and determine landed costs. Be ready to test out your price on your customer. See what reaction you get and then negotiate from there," Delaney told the E-Commerce Times. "Set up terms, conditions and other financing options. Agree on terms of payment in advance, and never, ever sell on open account to a brand new customer. No ifs, ands, or buts. Just don't."
Delaney also suggested brushing up on documentation and export licensing procedures. If you find it too time-consuming, you can hire a freight forwarder who can fill you in on the spot. Your product may also be subject to export controls. For example, you may not be able to export security software with encryption due to national security concerns. The U.S. Chamber of Commerce can offer additional guidance on regulatory issues.
"Shipping, taxes, and even getting paid are the least worry, because there are procedures and services available to look after these issues," Kautz said. "The key consideration is making the sales and/or obtaining the contracts. The next key consideration is to make sure the product is delivered on time and meets the buyers' expectations."
Where there is opportunity, there are always challenges. Some of the key considerations analysts pointed out are indeed challenging. Getting customers, however, is the core of the matter because without customers there is little else to consider.
Getting your product in front of the right customers can be a costly challenge. If you don't advertise enough, you may not reach your target audience, Wes noted, but if you advertise too much you could be wasting money. The challenge is magnified, he added, when customers are thousands of miles away and speak different languages.
"For a small business, a far less risky approach to selling goods or services to a distant market is to work through local partners who understand the market and often have built-in distribution channels," Wes suggested.
Getting goods ready for export can also be an ominous task, especially for the novice. Not to worry, Delaney says, a good freight forwarder or UPS.com can walk you through the transport process and ensure your goods are properly labeled, documented and in the ready-state for transport. They will also transport the goods when they are ready for movement. You can find a list of freight forwarders in the Yellow Pages.
To ignore the potential pitfalls of global expansion would be foolish. Doing your homework in advance by searching on the Internet at places like BuyUSA.gov and the U.S. Chamber of Commerce can give you a quick education that can save you lots of headaches.
"Doing your homework will enable you to find out where in the world your product will be in greatest demand and how much you will be able to sell over a specific period of time," Delaney remarked. "Market research is a powerful tool for exploring and identifying the fastest-growing, most penetrable market for your product."
Typically, most customers pay attention to packaging first, quality next and price last. Set your priorities accordingly, Delaney says. Create a package design or service concept that speaks for itself, and quality that leaves no room for competitive comparison. From there, it's only a matter of details to get and wrap up a sale.
Adapting Your Product
Failing to adapt the product to the international marketplace is one of the biggest mistakes of all. You must tailor your product to meet the needs of the customer, experts said. "Trying to force a customer to buy what you have available, with little or no willingness on your part to make improvements, is not only insensitive, but downright hostile," Delaney insisted.
Another potentially fatal flaw in global strategies is the refusal to accept cultural business differences, Kautz explained. "Each country has its own way of doing and/or controlling business, and the only way to deal with this is to contract with a suitable local agent or representative who will sort out these issues and look after the company's interest, as well as sell the company products," he remarked. "Failure to immediately associate with a suitable agent or rep is also a common mistake."
Words of Wisdom
The bottom line is you should plan your foreign market entry with great care. Canada is a good place to get your feet wet, Kautz said, because it is similar to the U.S., yet with its own unique differences. Katz reemphasized the importance of patience with global ventures. Delaney agreed.
"Selling to the world does not happen overnight. It is a slow process that requires thought, discipline and lots of hard work. Entrepreneurs have always been known to combine a vision of the seemingly impossible with a plan to make it happen," Delaney said. "Go global today, and you could fulfill your own version of the American dream."