Exporting offers a growth opportunity for U.S. businesses interested in developing new markets. According to the U.S. Small Business Administration (SBA), two thirds of the world's purchasing power is outside of the U.S. One of the keys to success when going global, like with any business endeavor, is planning. (To help U.S. companies get started, the SBA offers a detailed Export Business Planner that includes worksheets for creating an export business plan.) These tips can help get you started off on the right foot.
1. Evaluate Your Business
The first step in developing an export business plan is to start with a realistic assessment of your current business, including both your market potential domestically and internationally. “A comprehensive review of your domestic market position will help you make good decisions as you think about expanding into new markets worldwide," says John Joyce, the SBA's New England Regional Export Finance Manager in Boston. “The process also will help you focus on what the operational and financial needs of your business will be as you grow."
2. Understand the Keys to Export Success
First and foremost, having a successful domestic business is de rigeur for companies thinking about exporting. If you have not been able to succeed in the U.S. market, chances are you may struggle in other countries as well.
—John Joyce, New England Regional Export Finance Manager, SBA
Going global also requires the willingness to invest time and money in the process. “You have to be willing to commit resources," says Joyce. “It could be some time before you begin to generate a profit or realize a return on your investment."
3. Do Your Homework
Your export business plan should include a comprehensive industry analysis from both a global point of view, and from the perspective of the specific foreign markets you are considering.
In addition to identifying international markets that fit your industry profile, it also is critical to ensure your products align with those markets. “It is important to determine which of your products or services offer the best fit for a specific market," says Joyce. “You also want to consider what your competition is doing. That includes identifying which countries your domestic competitors are exporting to, and who the local competition is in a particular target market."
4. Proceed with Caution
If your company is new-to-export, Canada and Mexico may be a good starting point. Both countries are logistically easy to reach, and there are few tariffs or other trade barriers to impede your market development efforts.
“Starting your export journey with NAFTA partners can help reduce your risk," says Joyce. “Plus, the U.S. also has free trade agreements in place with 20 countries. These agreements can have benefits for small businesses interested in those markets."
5. Understand the Risks
Doing business outside of the U.S. adds a level of political, legal and commercial risk beyond the normal perils of the domestic market. One way to get a perspective on commercial risk is to work with a bank or credit agency to assess the credit standards and risks in different markets around the world.
Certain products shipped from the United States are also subject to export controls. Before thinking about shipping products to a new market, it is important to ensure that your exports will comply with both U.S. regulations and the regulations of the partner country.
There are also potential tariffs that can dramatically change the cost equation related to exporting to certain countries. The World Bank provides an online tool for assessing local tariffs and taxes. “Remember," says Joyce, “if tariffs raise your prices too high, you may not be able to be competitive."
6. Determine Your Capital Needs
Your export business plan also should include a detailed financial analysis that includes both your financing needs and your risk mitigation strategies.
The SBA provides financial and business development consulting to small businesses at no cost. SBA also facilitates export financing through a loan guarantee program that is used by a network of commercial banks nationwide. “An SBA loan guarantee can be particularly helpful if your lender is unable or unwilling to make a loan on its own," says Joyce. “These loan guarantees support purchase order financing as well as the purchase of fixed assets to manufacture export products."
Another financing resource is the Export-Import Bank, which provides exporters with the financial tools to help with international expansion. For example, many companies use the bank's Export Credit Insurance on foreign accounts receivable as protection against buyer non-payment. This type of insurance also can be a marketing tool, enabling you to extend open account terms to attract new customers and increase sales to existing ones. Insuring foreign receivables also allows exporters to use those receivables as eligible collateral with a lender to increase access to capital.
7. Set Realistic Goals
Your export business plan should include realistic short- and long-term goals. Those goals should include plans for testing markets before going “all in." It also is important to establish sales and performance benchmarks to help assess your ROI.
Finally, supplement your export business plan with a marketing plan that is customized for every market you plan to enter. An export business plan will provide helpful insight for setting your marketing goals.
“Proper planning," says Joyce, “will enable you to move forward based on reality, not guesswork. Start with a realistic plan, and you'll be better prepared for whatever the future brings."
