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Is exporting right for your company?

February 21, 2012

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When it comes to a potential customer base, many manufacturers are just scratching the surface. The International Trade Administration estimates that less than 1% of 30 million U.S. companies export their goods worldwide, with small businesses making up more than 70% of U.S. exporters. This means most companies are missing out on a bevy of customers: Two-thirds of the world’s purchasing power is outside the United States, according to the U.S. Small Business Administration.

With an unsteady economy making domestic sales more challenging, tapping into overseas markets can boost your bottom line and make you less dependent on U.S. consumers. But before you decide to export, there are several issues to consider.

Applicable market places

If you’re thinking about exporting, you need to figure out where to sell. Finding the best markets for your product is essential — after all, you wouldn’t sell snowshoes on Caribbean islands.
Several government websites, including BuyUSA.gov (http://www.buyusa.gov), Export.gov (http://export.gov) and Trade.gov (http://trade.gov), provide useful information that can help you find the right markets. English-speaking countries, such as the United Kingdom, Ireland, New Zealand and Australia, are often easy to work with because of minimal language and shipping barriers.

Exporting methods

In addition to researching geographical markets, consider the exporting method that works best for you. Manufacturers have multiple options for exporting, including setting up sales offices in foreign countries, fulfilling orders from the United States or working with local distributors. You’ll need to consider the costs involved in each method, such as transportation costs, wages for workers abroad and applicable taxes.

The Internet has made doing business abroad exponentially easier, but only if consumers can find you. Setting up a user-friendly website is the best way to get your message out to potential customers and distributors.

Developing contacts

Whether you partner with local distributors or sell directly to local consumers, you’ll need to network to make your exporting venture successful. Attend industry trade shows and make contacts with industry insiders to find out who’s shopping in your chosen markets.

Organizations such as chambers of commerce in foreign countries, U.S. embassies abroad and consulates in the United States also may know contacts who are interested in establishing connections with American companies. If they have an existing network you can tap, they’ll also be able to share company background that can help you decide whether to work with a particular business.

After you’ve identified possible contacts, develop a mail and online campaign. Write letters and e-mails to each potential partner, telling them about your background and your products, and ask for the names and addresses of appropriate distributors or stores to contact.

If you receive names in response, get in touch with those contacts to introduce your company and learn more about their own companies to see if you’re a good match. You’ll want to know:

•    What they import,
•    How many branches they have and where they’re located,
•    More information about their operations, including expected future growth and their assets and liabilities, and
•    What kinds of products they’re interested in, how they distribute products and what terrain they cover.

Request a catalog or other distribution materials, if the company has them. You also may want to develop a questionnaire if you’re planning to contact multiple firms.

Export tariffs

When you’re ready to start exporting your products, you’ll need to know how much you’ll pay in export tariffs.

Export tariffs are taxes that certain foreign countries collect when your product crosses their borders. Businesses traditionally have had to slog through complicated agreements written by various governing bodies to determine the tariffs they must pay. In some agreements, the tariff schedules alone would number nearly 1,000 pages.

The Fair Trade Agreement Tariff Tool eliminates this headache — companies can learn exactly how much they’ll pay in tariffs by visiting the export.gov site and using the “FTA Tariff Tool” (http://export.gov/FTA/ftatarifftool/index.asp). The tool has some limitations, however. It covers “industrial good” products, but not agriculture or textile goods. And it includes only trading partners with which the United States has a trade agreement. Furthermore, product descriptions for tariff schedules not published in English are in a foreign language. Talk to your financial advisor if you need help determining the tariff for a particular country.

A global game plan

For manufacturers with a solid exporting strategy in place, it’s a great time to enter the global market because a large percentage of the world’s purchasing power is outside the United States. Your financial advisor can help you crunch the numbers and come up with a game plan to achieve export success.

6 questions to consider before you export

Whether you’re considering exporting to improve profitability and growth or simply to capitalize on a new opportunity, assessing your goals is an important first step. Consider these questions:

1.    Are you able to research international markets and risks thoroughly?
2.    Can your current staff manage international marketing efforts?
3.    Do you have the necessary resources to handle exporting, such as reliable transportation?
4.    Are you willing to be flexible when it comes to modifying your products and marketing strategies to fit different markets?
5.    If the country you’re entering speaks a different language, will you be able to communicate?
6.    What type of international business experience do you have, and can you use it effectively to make exporting successful for your business?

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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