Want to tap into the big business in other countries? Follow these three steps to take your small business from local to global.
The international trade consists of 30 percent of the U.S. economy. Exports of products and services reached a record $2.3 trillion in 2014.
But, the pace of export growth has been continually slowing ever since, according to a 2015 report from the Small Business Association Office of Advocacy.
Many small businesses, typically defined as firms with 500 employees or less, find it very challenging to compete in the international marketplace, citing issues of high tariffs and financial risks among top challenges, in addition to stark competition.
I’ve experienced this firsthand building a telecom distribution company and a smartphone brand in Latin America, spanning sales and operations in over 20 countries and five continents around the world, including the United States, Europe, Africa and Asia-Pacific.
Growing your business across borders is no easy feat, and yet more than 95 percent of the world’s customers are living outside of the United States, as indicated in remarks made last spring from the Office of the United States Trade Representative.
Fewer small businesses, roughly five percent of the six million small- and medium-sized U.S. companies, are exporting product or services as a result of difficulty and costliness in selling to international markets, as reported by The Hill.
Related Article: Going Global: Building an International Footprint as an SMB
The impressive nature of small businesses is the flexibility to adjust to an international business model and stand out from an already saturated domestic marketplace in the U.S. and reach a wider customer base.
Reinventing your business identity and improving your potential for international expansion in today’s challenging U.S. economy has many benefits and can outweigh the risks of staying as a pure domestic company, especially when opportunities from many emerging and expanding global markets, which are thirsty for everything American.
To help grow your business internationally, follow these three principle steps:
Bare a Flexible Corporate Mindset
Unlike traditional standards of corporate practice, your organization has to be set up and prepared to quickly adapt to the shifting market conditions and local government regulations, with your legal and finance teams embodying this as part of its corporate DNA.
Try to hire people who are familiar with the culture and the language of the target market while creating a reduced bureaucracy within the company and operating as a “flatter” organization to allow the business to more quickly and more easily adapt to each international market.
Before taking the leap, take the time to conduct foreign market research with local competition and identify your most practical international markets where your product or service will fill a need.
The U.S Department of Commerce is a useful means to gather more of a general understanding into foreign markets for U.S. goods and services. Initially, try to go for markets with easier barriers to enter before exploring more challenging markets.
Trust in Cultural Immersion
Aside from immersing yourself fully into the local news, politics and influencers of your target market and the happenings on the ground for yourself, explore hiring local business ambassadors who can advise you and your business on every detail to better understand and grow your business.
Business changes quickly in the U.S., but you must remain cognizant of the business pace to win in other markets. Having a local presence within your target market will guide you through all of the changing dynamics and laws.
Like any new market, there are different tax codes and compliance issues that you must abide by, as well as special reporting requirements on income. Also, labeling and packaging standards rank as other hurdles you may need to account for depending on your product or service.
Every country and region has its own distinct set of rules and procedures and those change often, so there is no other way to stay abreast of these changes other than hiring or contracting locally.
Rethink Your Source of Financing
Financing your international expansion can be challenging. Don’t count on foreign banks as a source, as they often require a local “presence”, are more expensive and can be riddled with risk. Instead, try working with your existing U.S. bank and borrow against your foreign receivables.
Banks will often entertain this type of lending with slightly lower advance rates compared to domestic receivables, as long as you get the foreign receivables insured in advance though companies such as Euler Hermes, FCIA or AIG.
Another back-end alternative could be available if you are dealing with a name brand customer in that receivables from the customer could be factored and turned into immediate cash by local in-country financing companies for relatively nominal rates (with recourse).
In 2016, small businesses should be planning to take a leap of faith and reinvent their business models to grow beyond U.S. borders. Small businesses have just as much potential as multi-national companies to embark on the adventure of being part of the globalized economy and creating a positive impact to the bottom line.