Firms Face Hurdles Overseas

 

This summer has been all about overcoming hurdles – personal, economic and those erected by nature. Having just this week survived an earthquake and hurricane Irene, I submit that most hurdles are surmountable with a little luck, perseverance and lots of preparation.  That’s why when I saw the article below I yawned  and shrugged of the premise of the piece. It is another article that talks about difficulties that small companies face in trying to expand abroad. Even though we all may know that doing business abroad is tough and expanding in a new market requires significant resources, this article provides an  insightful view that is supported by objective facts as to the benefits of doing business abroad.

Yet, one key point is missing.  As long as U.S. companies will continue treating business expansion abroad as an afterthought, they will continue to face significant hurdles.  Today, help and significant resources, some available at very nominal cost or even free, are available to any small and mid size business seriously committed to international expansion. Granted there are a number of businesses that accidentally fall into international business – they meet a potential customer at a trade show, know a friend of a cousin who has relatives in a foreign country, or by some other unscientific method. Yet regardless of whether the international expansion is accidental or systematic, doing business abroad requires commitment, perseverance and lots of preparation. No self-respecting citizen thinks of risking going out unprotected and unprepared into the hurricane, why would the same person venture into international business unprepared and without proper guidance. Commitment, perseverance and knowledge will prevail every time in the face of limited resources and a competitive market.

Small Companies Seek Growth Abroad, but Lack Resources of Bigger Rivals

By ANGUS LOTEN    Wall Street Journal, August 25th, 2011

When Nancy Simmons was contacted by customers in Brazil about buying refurbished aerospace parts from her Orlando, Fla., plant, she wasn’t sure how to handle the language barrier.

None of her eight employees spoke Portuguese, and she didn’t have the resources to pay for a local team in Brazil. She wound up turning to a Portuguese-speaking neighbor to help negotiate the deal.

SB_story

Steve Dininno

Spurred by lower demand at home and a cheaper dollar, a growing number of small-business owners are looking for new customers outside the U.S. But overseas expansion is often harder and more complicated for small businesses, which lack the deep pockets and expertise of larger firms.

U.S. exports rose to more than $170 billion in June from $151 billion a year earlier and $128 billion in June 2009, the Commerce Department reported this month.

Small businesses helped fuel those numbers, according to Fred Hochberg, chairman of the U.S. Export-Import Bank, which finances U.S. exports. The agency said earlier this month that since October, it has approved a record-high $24.5 billion in export financing for companies of all sizes, including some 2,142 small businesses, up from 2,036 last year and less than 800 in 2006.

“For years you didn’t see a lot of exports from U.S. businesses because local markets were so robust,” says Mr. Hochberg. “That’s changing.”

According to the Small Business Administration, businesses with fewer than 500 workers account for about 30% of total export revenue, or about $500 billion in annual sales.

Still, only about 1% of the nation’s roughly 30 million small businesses sell overseas, according to U.S. Census data. Those that do usually work with no more than one foreign market—typically Canada, Mexico, the United Kingdom, Germany or China, Census data show.

Tres Roeder, president of Roeder Consulting Inc., a Cleveland, Ohio, project management and training firm, says he’s looking for clients abroad for the first time in the company’s 10-year history.

“The overall tide isn’t rising here. But I look at foreign markets and they’re growing,” says Mr. Roeder.

While American corporate clients have been cancelling training sessions, more international participants have joined the company’s monthly webinars, Mr. Roeder says. He’s now looking into offering full-time training services in India.

But the process has been challenging. Trying to find business advisers with country-specific knowledge and skills has been time-consuming and costly, Mr. Roeder says: “We don’t have a business-development team down the hall to take care of all this.” The company has less than a dozen full-time employees.

According to a survey by the National Small Business Association, a Washington lobby group, one of the biggest fears among small exporters is that foreign customers won’t pay their bills. Other concerns include dealing with confusing trade rules or unfamiliar business practices, along with the overall costs of getting export operations off the ground.

Ms. Simmons says an unexpected cost for her firm, Aero Industries of the Space Coast Inc., was the need for extra training for her workers.

“They were afraid of languages differences, currency differences, religious differences, you name it,” she says. She enrolled them in a training course offered by Florida’s Department of Commerce at a cost of $95 per employee.

While small firms often have many of the same costs as larger exporters—such as additional employees to oversee foreign operations, or permit and licensing fees charged by foreign trade authorities—they don’t always have the same access to capital, Ms. Simmons says.

Paul Wickberg, chief executive of SOL Inc., a Palm City, Fla., manufacturer of solar-powered outdoor lighting, says about 30% of his company’s business is now outside the U.S., up from just 5% before the recession.

The company, which supplies street and pathway lighting to local municipalities, lost about 30% of its sales when infrastructure funding from the economic stimulus program expired last year, he says.

“Now we’ve got to find places where there’s high demand and more money,” Mr. Wickberg says. The company already does business in South America and Africa, among other regions, and is currently working on a deal in Australia.

Mr. Wickberg says the biggest obstacle he faces are taxes charged by foreign governments on imported products. Higher import duties can make it difficult for smaller U.S. firms to be competitive in a regional market, he says.

Last month, Rep. Sam Graves (R., Mo.), the chairman of the House Committee on Small Business, urged Congress to push through pending free-trade pacts with Colombia, Panama and South Korea, saying small U.S. exporters were “at a competitive disadvantage with foreign firms.”

Mr. Hochberg of the Export-Import Bank says the shift toward exporting is likely a permanent change in the way many small American firms are now doing business. “Once they start selling abroad, they’re selling abroad,” he says.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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