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Issue Date: February 2008, Posted On: 2/1/2008


Leaving the Country

By Laurel Delaney

Small businesses play a big role in global trade. According to the U.S. Small Business Administration, small business exporters have historically generated approximately 29% of the US export sales in a given year, and in 2005, they accounted for  nearly $300 billion of the $906 billion generated by all US exporters.

 

But despite these healthy numbers, small- and mid-sized enterprises (SMEs) have not yet realized their global trade potential — and confusion about handling international shipping may be one reason why. The recent UPS Business Monitor United States survey found that most SMEs have failed to explore sales opportunities outside the United States for a myriad of reasons, including not understanding customs regulations.

 

How extreme is the unwillingness of small businesses to go global? Of the 600 interviewees surveyed in the Business Monitor, a whopping 67% indicate they do not participate in any global trade. Not surprisingly, however, the larger the company, the more likely it is to trade globally. For example, 23% of small businesses with revenues of $20 million to $50 million sell internationally, compared to 11% of companies with revenues between $250,000 and $1 million.

 

Among small business decision-makers who either import and/or export, Canada and Mexico are seen to be the countries with the greatest opportunities, according to the Business Monitor. India and Russia offer the least potential for global growth, survey respondents say.

Why the Reluctance?

The UPS Business Monitor reveals that small businesses are less likely to go global for several reasons, including a perception that international business is too risky, a lack of knowledge about international markets and unfamiliarity with customs regulations.

 

Robert Johnson, International Business Manager of Norcross, Georgia–based Micromeritics Instruments Corporation, explains, “The size of the US market allows many small businesses to make a good living without looking beyond [its] borders. As a result, companies wait too long before looking at the potential international markets for their products.”

 

Why Bother Going Global?

Small businesses that don’t consider going global stand to dull their competitive edges. Going global is an essential way for SMEs to: find new customers; increase sales; generate economies of scale; raise profitability; insulate seasonal domestic sales; create jobs, productivity growth and wealth;  encourage the exchange of views, ideas and information.

 

“Our decision to trade globally was initially due to customer demand,” Johnson says. “Not simply content with selling to those international customers who sought us out, we established an international sales department staffed by one person and one assistant within a few years after we made our first exports. After we developed an international sales plan and executed it, our export sales grew steadily. We now enjoy international revenues which represent approximately 70% of our total business.”

 

One common question that I often hear small business owners ask is, “How do I handle my international shipping?” My advice is to choose a good shipping partner. While business owners certainly don’t have to become shipping or customs experts, there are some general things they should know they can expect from a good shipper. These are some key questions that small businesses can ask to help them find the right shipping partner.

1. Are you familiar with my industry and the markets where I want to do business? You should pick a shipper with a strong presence in countries and cities where you want to do business so you will have the greatest expertise and flexibility. Any gaps in the supply chain can cause important details to fall through the cracks. Also, choose a shipper who has worked with other companies in your industry — especially if your products require special handling.

2. Can I speak with any of your customers? Referrals are always the best barometers of a shipper’s performance. Talk to the shipper’s customers to find out about the company’s service and reliability. Asking other small business owners you know whom they rely on is also a great way to find a good shipper.

3. How would you ship my products?  Find out what choices a shipper offers you. For many businesses, a mix of air, ground and ocean shipping provides the flexibility to prioritize shipments. The quantity, value and perishability of your products, your customer’s location, how fast the shipment is needed and how much are you willing to spend will all determine which method of transportation you should use.

4. How long will my shipments take, and how much will they cost me? It is vitally important to find a company that offers safe, reliable, quick and cost-effective transportation services. Tell a prospective shipper what your needs are, and they should be willing to work with you to cut down time in transit where possible and find ways to trim costs or add value.

5. How will I know where my shipments are? Visibility into your supply chain is critical to avoid unwelcome surprises. You should be able to track shipments electronically. Better yet, find out if a shipper has a way to let you know automatically if there are any delays in customs. Your success depends on getting your products to your customers on time.

6. Can you collect my payments from international customers? Making sure new international customers will pay them is one of the most nerve-wracking issues for small businesses when they go global. Some shippers will accept Cash on Delivery on your behalf or use another financial settlement tool to make sure that you will get paid when your customers receive your goods.

7. What will you do for me when things go wrong? Even with the best of intentions and efforts, things can go wrong in the shipping process. Ask a shipper for an example of something they’ve done for another customer when things haven’t gone according to plan.

Remember, while growing globally it isn’t always smooth sailing, the benefits of reaching new markets and earning new profits are well worth the risk.

 

Global business expert Laurel Delaney is the founder of GlobeTrade.com and is also the creator of the e-newsletter “Borderbuster.” She can be reached at
ldelaney@globetrade.com.

Comments:
Wednesday, December 22, 2010 9:13:35 AM by applied psychology graduate program
I believe the online world makes global trade much more applicable for smaller businesses.
Wednesday, February 29, 2012 1:22:01 PM by Physical Therapy Degree
Online commerce is probably the only way for small business to present themselves globally. Although nowadays even this type of expense could be overwhelming for small busienss.

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