The typical entrepreneur always has his or her eyes open, scrutinizing every situation for ideas and watching for subtle shifts in the market that might spell opportunity. But sometimes the greatest opportunities lie outside our normal scope of vision and beyond familiar territory. So while it's vitally important for small business owners to be on the lookout for opportunities around them, it also pays to step back and see things with a little perspective. For many small businesses, that can mean stepping back to consider exactly where the market and potential customers really are. And a little perspective may reveal that there's an entire world out there -- literally -- with customers looking for new products and services. In fact, according to the Small Business Administration (SBA), 96 percent of the world's customers live outside the United States, and two-thirds of the world's purchasing power is in foreign countries.
The international market is a territory rich with possibilities for those willing to take on the challenge. And the chances are, there are potentially profitable customers waiting for many small businesses. Finding a way to reach them and still turn a profit, however, is the real challenge. Before tackling the prospect of new markets for products and services overseas, small business owners need to make sure they're prepared for the challenges of international commerce. Below are a few tips that will help businesses understand what to consider before doing business abroad.
Make A Plan And Stick To It
Starting a business overseas requires a solid business plan, just as it does in the U.S. In fact, with unfamiliar markets and new concerns that come with doing business internationally, a business plan is even more critical when expanding abroad. Businesses will need to start their plan with some basic questions about the decision to do business overseas: how important is, what the goals are, and how committed the company is. Putting the answers to these questions on paper is essential to clarify the potential payoff of an international strategy. Other important considerations include potential export pricing, narrowing the focus to the most promising markets and customers, and tactics for entering a new market. In addition, businesses should estimate export costs and revenue, along with investigating legal requirements, transportation logistics, financing, and the need for partnerships or foreign investors.
One possible resource business owners can turn to while planning is their local Small Business Development Center, some of which offer training, programs, and other resources for international business development. The SBA also offers resources (www.sba.gov/category/navigation-structure/starting-managing-business/managing-business/exporting-importing) for businesses looking to expand overseas.
Prepare For International Payments
Doing business overseas means being prepared to deal in foreign currencies. Once the domain of large corporations, even small businesses now have access to foreign currency transactions, which can bring real advantages when dealing with vendors and customers abroad. Small businesses may, for example, be able to take advantage of favorable exchange rates by paying overseas vendors in foreign currency. Also, wiring foreign currencies to destinations abroad may be less expensive than wiring U.S. dollars, depending on the available exchange rate and applicable transactions fees. Transactions in foreign currencies, however, also come with risks. The same fluctuations that can help businesses can also hurt them. In 2010, for example, the euro's value fluctuated as much as 16 percent. That kind of variation makes it necessary for businesses to monitor exchange rates closely and to work with an experienced foreign currency transaction partner.
Although there are risks, there are also techniques and tools businesses can use to help keep them in balance. Some businesses limit risk by aggregating payments, meaning that multiple payments in the same currency are processed together, which may qualify the transaction for a better rate of exchange. Some services that allow businesses to send and receive payments overseas make these techniques available to small businesses and help them make the most of foreign currency transactions.
Know Before You Go
Just as with foreign travel, there's nothing that beats proper preparation when reaching out to overseas markets. Foreign travelers are often bewildered by local customs, confused by language barriers -- sometimes even when the local language is English -- and don't know where to turn to buy the things they need. Small businesses can expect exactly the same -- and more -- if they don't go prepared.
Every business will encounter growing pains and unexpected curves when venturing into international markets, but proper research can greatly simplify the process. Businesses should understand as much about the market as possible before initiating a plan. One good place to start is www.export.gov, which brings together information from a variety of government agencies to help companies do business abroad. In addition to providing basics for creating an export plan, the site offers many resources, such as general guides on doing business in a particular country, and market research tools for specific industries. It also provides resources on legal issues related to doing business overseas and more. Businesses can also look to the site for U.S. Customers and Border Protection (www.cbp.gov/xp/cgov/trade/trade_outreach/diduknow.xml) for more information on getting goods out of the U.S. and to customers abroad. There are various licenses that may be required, for example, as well as U.S. and foreign regulations, certifications, tariffs, and more to be aware of.
Don't Go It Alone
Doing business aboard will require a variety of vendors and partners. Fortunately, there are many ways of making contacts with potential vendors and partners, not to mention potential customers. The U.S. Chamber of Commerce maintains offices in major cities around the world and is a good starting point for local contacts. For businesses seeking distributors or other partners, foreign chambers of commerce operating in the U.S. are also a good resource. The U.S. Commercial Service Gold Key Matching Service (www.export.gov/salesandmarketing/eg_main_018195.asp) also offers a variety of services for matching businesses with potential overseas agents, distributors, sales representatives, and business partners.
Industry trade organizations -- perhaps ones you already belong to -- are also a good resource, since many host trade missions that introduce businesses to a foreign country or region and facilitate introductions to local businesses and even potential customers. Another possibility is to attend international shows held in the U.S. to meet contacts from abroad. If time and budget permit, industry-specific trade shows in the target country or region are an important option worth considering.
Expanding overseas is not for the faint of heart, but neither is entrepreneurialism. With a careful plan founded in meaningful goals and solid research, small businesses will have a solid start to opening up new markets. And with some legwork here in the U.S. as well as abroad, proper contacts for manufacturing, shipping, warehousing, and other concerns are within reach. In short, for small business owners who are willing to dream as well as plan, the world is full of possibilities.
Rob Ciccone, Vice President, American Express OPEN, works with FX International Payments, a service that allows small business owners to send and receive payments to and from overseas parties.