Going Global: A Checklist for Exporters
“Going Global: A Checklist for Exporters”
Refresher: Go abroad only after you have made a solid game plan. Here is a short checklist.
Exporting offers a variety of rewards. For starters, selling abroad enables expansion without the danger of overexposure at home. “Many small businesses have products that require a certain mystique,” Wilfong explains. “And if companies put too much product in their own backyard, it may reduce exclusivity and demand.”
Drawing from more than thirty years of experience, including a stint as the Small Business Administration’s assistant administrator for international trade, Wilfong offers the following guidelines for getting ready to export:
Production. A business shouldn’t expand its current facility just to go overseas. The idea is to have surplus capacity.
Consider production sources close to the target market. Suppose a ski manufacturer in Seattle wants to sell in Europe. Shipping skis halfway around the world may not be the best option. Finding a manufacturer abroad who can make skis to specifications would not only save on shipping costs but also tariffs.
Shipping Needs. If shipping light (under 500 pounds per shipment), United Parcel Service is a good option because they take goods all the way to an international customer’s door. But if shipments run more than 500 pounds, the shipper needs to build a relationship with a freight forwarder—one that will work to keep shipping costs down.
Currency Fluctuations. When the U.S. dollar drops in value, it can be a big benefit to exporters. Yet currency values can shift radically, so it’s wise to develop a strategy, such as buying futures contracts to soften the blow. (Manufacturing near the target market avoids currency headaches.)
Sales and Distribution. Make sure to enter a relationship with the right representative. Among questions to ask: How will they communicate with you? Are they familiar with your target market? Are they capitalized properly? Make sure sales reps understand your marketing and distribution philosophy and work to duplicate it in their own country.
Important: In addition to safeguarding intellectual property, take care to check out brand and trademark protection. “Don’t just hand over your product to an international distributor who pops up at a trade show,” says Wilfong. He refers to one company that signed on an international distributor without registering its brands internationally. The distributor bought $200,000 worth of product the first year, $150,000 the second—and then registered the brand themselves and began production offshore. “And they may be perfectly within their rights,” Wilfong adds. It took the U.S. company a great deal of time, energy and money to reclaim its trademark abroad.
Duties and Tariffs. Get familiar with the various taxes, and remember, they aren’t set in stone. Wilfong was once a partner in a hiking-boot company that manufactured its product in Germany. The company was expanding because the duty on its classification was being reduced and the owners saw an opportunity. But suddenly customs officials decided to change the product’s classification. A tariff existed in the new category, one that wasn’t coming down. Even worse, the new duty was retroactive. “We had already sold and priced our product under a different level of duty,” Wilfong says. “All of sudden, we had to come up with thousands of dollars in duties.”
Sound overwhelming? Granted, exporting is no cakewalk. But consider this: During Wilfong’s tenure at the Office of International Trade, there were 210,000 U.S. exporters—with 202,000 being small companies and two-thirds having twenty or fewer employees.
“Have realistic expectations,” Wilfong says. “Similar to launching a new business, opening up an international market is a three-to-five-year effort. You’ll need a solid game plan and available capital. Doing less than that is foolhardy.”
Writer: T.J. Becker