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Myth-Busting Fears About Exporting

Myth-Busting Fears About Exporting


by


Entering international markets has historically been a smart way for small businesses to increase their size and market share. Nearly 96 percent of the world’s population and more than 70 percent of the world’s purchasing power are found outside of the United States, according to the U.S. Department of Commerce. 

And yet, only about 1 percent of American companies currently export products and services abroad. Of those, 58 percent export to only one country.

So what’s holding so many businesses back? It may be some common misconceptions. Let’s look at three of them.

It’s tough for a small U.S. business to compete in the global marketplace.

Not necessarily. The reality is, most small businesses are already competing against foreign companies who are doing business in the United States today. No matter where you do business, nationalism can sometimes play a role in a buyer’s choice. But in most cases, international customers—like those down the block—are looking for the best quality goods and services at the best price, regardless of their origin.

Competing in international markets can open your eyes to efficiencies and innovations you may have never previously considered. Foreign customers sometimes test your assumptions and inspire you to find solutions that can benefit your business both abroad and back home. Sometimes you can achieve better profit margins when you export.

It’s tough to get started doing business internationally.

Languages, currencies, cultures, different business practices, customs regulations, and product certifications may all seem like daunting obstacles that could easily deter you from looking to sell your products internationally. The good news is, you can almost always overcome—or at least learn to navigate—these topics. The key is to identify experienced partners who can bridge your gaps in knowledge.

A bank that is experienced in international business will typically have a network of resources you can tap into, including logistics and freight companies; international attorneys; trade associations; local, state and federal programs; international trade shows; research and data on other countries; and other small business exporters you can learn from. There also are very strong university and college programs that you can tap into for interns and research projects. There are government agencies whose sole purpose is to grow jobs through exports and to promote U.S. companies overseas.

There’s a greater risk of not getting paid when selling internationally.

There is no question; moving money safely from one country to another is not simple. The Asian Development Bank organized a study to gather data from banks on the default rates of trade transactions. The reason for the study was obvious: there is a perception that you run a higher risk of not getting paid on an international sale.

The data did not support that perception, because only 0.003 percent of all cross-border trade transactions end in default or nonpayment. There are many tools at your fingertips to help you mitigate risk: credit reports, trade credit insurance, letters of credit, documentary collections, etc. They can all serve to help you minimize risk while maximizing sales opportunities.

There is a broad network of resources available to bolster your peace of mind as you venture into foreign markets. For many small businesses, the fears associated with international trade are really fears of the unknown. Get past them and you may find a whole new world of opportunity.

Written by

Brian Gordon is senior vice president and manager of the international banking group at Commerce Bank.

Categories: Expansion, Exporting

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