International business may not be for everyone, but are you sure it’s not for you?
There are 259,000 exporters in the United States. Seventy two percent of them have fewer than 20 employees. Compare that to 19 years ago when those numbers were 108,000 exporters and 59 percent with fewer than 20 employees, small business has been leading the charge for exporting from our country.
The biggest cause for this dramatic change is the ease of travel and communication. In the 90’s you had to travel abroad or employ someone overseas to conduct business. Now with the convenience of e-mail and video conferencing you can bring your customer to your computer monitor.
I think we assume the typical international business is one where a mega-manufacturer assembles a product and ships it overseas where a mega-distributor buys it and sells it to their local market. However, a local, “mom and pop” service provider, like a bed and breakfast, can conduct international business quite easily if they advertise in another country. When tourists come to America and stay at that bed and breakfast a service has just been exported.
Last week Dennis Chrisbaum, Regional Manager of the SBA’s Export Solutions Group, who provides assistance to small businesses that want to get involved with conducting business internationally, visited Colorado Springs. I had the chance to visit with him and pick his brain about small businesses conducting business in other countries. He shared with me reasons to begin conducting business internationally and reasons to avoid it. Here’s the summary of our conversation.
Reasons to go international:
1. Demographics – Is there a growing market for your product or service overseas? If the nutritional supplements you sell are perfect for the aging population, look to countries like Egypt, who’s median age is expected to increase from 23.9 years in 2010 to 32.8 years of age in 2040.
2. Seasonality – An endless summer of golf isn’t a dream. When it’s snowing sideways here in Colorado, places like New Zealand, Australia and South America are enjoying their summer. This is a great time to have the opportunity to fulfill orders for your golf apparel and instructional DVD’s.
3. Economies of Scale – If you can buy goods at $10 a unit with your current volume, how much more efficiently would you be able to purchase goods if your volume increased by 50% or more? Apply that same line of thinking to staff, warehouse space and other fixed expenses.
4. Product Life Cycle – In America, we’re used to getting things when they are brand new on the market. However, in other countries there is a delay in getting what is new. Just because your customers here in the states are demanding your database management system be upgraded with all of the latest gadgets, you may find an extended life for your software systems overseas. While you are developing the new product here and sales are slowing while clients wait for the new release, your international markets may be anxious to buy what your domestic clients have been using for years.
Reasons not to go international:
1. Money – If you can’t come up with the financing for this option, you’ll be forced to wait. The SBA has some great international products that act very similarly to the SBA loans you may be familiar with already. It still may not be possible, but don’t take the first “no” as the final “no.”
2. Fear of Commitment – If you’ve been dating the same girl for 11 years and still haven’t proposed, you may not like the prospect of a long term relationship. International business relationships are not a get rich quick scheme. You should count on them becoming part of your long term strategic plan and not a one night stand.
3. Don’t Like Travel – Many products and services will require an initial investment as much as $25,000 to travel to a foreign country, attend a trade show and prospect for potential buyers. Certainly the bed and breakfast example I gave earlier wouldn’t require this, but software or other B2B products and services might.
If you are thinking to yourself “This could be a great idea for my business”, then I suggest you contact Angela Joslyn, Director of the International Development Office, a Division of the Chamber of Commerce’s Division of Governmental Affairs Office.
“Our responsibility is to help Colorado Springs businesses make sense of, and connect with the necessary resources to successfully conduct international business as well as promote Colorado Springs as a great place for international business.” Joslyn said.
Regardless of what type of business you have or how you think you might be limited to conducting business internationally, I’d encourage you to contact Angela at ajoslyn@cscc.org or 719-575-4314.
Matt Barrett is the director of the UCCS Small Business Development Center. Send small business questions to him at matthew.barrett@uccs.edu.
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