Taking the Overseas Plunge: How to Make Exporting Pay Off
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"Taking the Overseas Plunge: How to Make Exporting Pay Off"
Exporting your products can be lucrative or disastrous. Avoid mistakes with a systematic approach to entering the global market.
OVERVIEW [top]You've pondered the benefits of making your business's products available overseas for some time. Perhaps you've read books on exporting, consulted some experts, and watched as competitors have started to tap overseas markets. You're growing restless. Yet as much as you're tempted to begin exporting, you don't want to do anything to jeopardize the domestic growth you've already achieved. The key is to lay the groundwork in a methodical manner. If you rush into exporting, you may wind up making costly mistakes, such as entering too many countries too soon or establishing relationships with the wrong distributors. In this Quick-Read you will find:- A systematic approach to exporting your company's products.
- How to reduce risks of exporting.
- How to assemble the right team to export successfully.
- Research the best overseas markets. Start by contacting the U.S. Department of Commerce district offices that provide trade guidance. Find the nearest offices of the DOC Bureau of Industry and Security (formerly Bureau of Export Administration) and International Trade Administration on the "Commerce Offices and Services Near You" Web site. ITA representatives will help you identify assistance programs, gather trade information from U.S. embassies and consulates, and obtain country-specific market research reports.
- Get guidance from other interested agencies. Contact your nearest Small Business Administration Office of International Trade Export Assistance Center, where you can get legal advice, training, and counseling on exporting issues. Your state's economic development agency may also offer export-development programs and even trade missions to countries you're targeting for export. Find it at the National Association of State Development Agencies Member Agencies Web site. Find other economic development program offices in your state in the DOC Economic Development Directory.
- Narrow your search.Armed with federal and state government data, you can determine where to export. Don't assume that just because your products sell in the United States that they'll fly off the shelves in Western Europe or another English-speaking country. Variables ranging from cultural preferences to foreign-exchange rates to availability of raw materials can affect sales abroad. You'll need to assemble a price structure that's customized for the countries you've targeted.
- Decide on distribution.In developing an export strategy, you may want to use a major distributor, commission representative, or trading house. One approach is to start with a distributor in a major market, such as England, that carries your product line and shepherds its introduction.
- Create a financial plan.You'll need to understand and predict several financial factors that can make or break your exporting operation:
- Transportation and warehouse costs.
- Costs for sturdy packaging for overseas shipments.
- Import licensing fees, tariffs, and taxes in the target country.
- Costs of documentation compliance, especially product labeling to comply with local laws and ISO 9000certification.
- Effect on cash flow of delivery and accounts receivable lag time.
- Costs of competing products in the target market.
- Exporting startup capitalization and time to profitability.
- A lawyerwho can draft and review distributor agreements and exclusivity agreements, interpret global regulations, and advise you on intellectual property protection if you're worried about your products being copied overseas.
- A bankerwho can structure financing, assess payment methods, and advise you of financial risks and how to offset those risks.
- A freight forwarder who'll handle shipping, insurance, and any licensing hurdles involved in getting your product from the United States to its destination.
- Once you identify a country as a candidate for exporting, contact that country's embassy or consulate in Washington, D.C. Its trade commissioners may provide research and guidance to help you do business in that country. Start at Embassy-Worldwide.com.
- Test an overseas market before you make a substantial investment. For example, if you're exporting to a wired country, such as England, use the Internet to introduce your product and generate interest among distributors and retailers.
- Before you expand into a new country, prepare to ramp up your production capacity. Some overseas buyers request surprisingly large bulk orders that can catch a smaller company off guard and unprepared. Determine in advance how you can fill export orders without hurting domestic sales.
- Use specific, compelling product descriptions to captivate overseas buyers. Consider using an informal focus groupof consumers, marketers, and distributors in your target country to get input on how you should describe your product.
- Survey your domestic customers to learn if they're buying your product for sale or shipment overseas. If so, ask them which countries show the most interest.
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