Small- and medium-sized enterprises (SMEs) accounted for $460 billion of the known export value in 2019. Yet, e-commerce skyrocketed in 2020, providing more chances for international sales. Global growth offers many benefits. It could even give a lifeline to small businesses in rural areas.
But selling products globally isn't without risk. It requires research and a plan. Below are answers to the top questions U.S. small business owners ask about exporting. Plus, you'll find an array of resources to help you sell and ship around the world.
What are the benefits of exporting for small businesses?
The U.S. Small Business Administration (SBA) says, “Two-thirds of the world’s purchasing power is in foreign countries.” International trade helps small businesses access new markets and consumers.
U.S. exporters, on average, grow faster than non-exporting businesses. They also benefit from market diversity. Indeed, investing in foreign markets may reduce dependence on the U.S. economy or any single region.
Exporting goods and services give small businesses several benefits:
- Expand your customer base: The United States represents only 4% of the world population. Targeting international markets helps companies access the other 96%.
- Reduce risk to your company: Broad geographic reach insulates small companies during an economic downturn, political unrest or natural disasters.
- Build resilience: Small businesses that export are “8.5% less likely to go out of business than non-exporting companies.”
- Increase profits: Exporting is a crucial part of any company's growth strategy. It boosts revenue and creates jobs.
- Extend product life cycles: Companies time product rollouts to increase their life cycles—launch, growth, maturity and decline.
- Decrease production costs: Growing businesses order higher quantities of materials and supplies, leading to cost reductions.
Are there risks when exporting internationally?
Global expansion isn't without its challenges. Regulations, freight networks and other factors expose small business owners to risk. Moreover, tariffs and logistics delays worry entrepreneurs. Other barriers encountered by small businesses include:
- Developing a tech stack that supports customers and payments across the world.
- Adjusting to cultural differences and language barriers.
- Securing financing for exporting worldwide.
- Estimating transportation and shipping costs.
- Navigating problems with global freight networks.
- Adhering to local and international laws.
- Complying with trade agreements and regulations.
- Finding foreign partners to address local commerce issues.
- Learning how to advertise and market internationally.
- Staying abreast of international disruptions.
- Understanding individual markets and demographics.
What goods or services should I export?
Many countries allow U.S. small businesses to export most goods and services. But there are exceptions. Certain regions may limit or prohibit sales. Others aren't financially workable. However, almost “40% of the known export value of SME exporters” stems from merchant wholesalers selling durable and nondurable goods, according to the U.S. Census Bureau.
Before choosing products to export:
- Read through U.S. business export regulations on the International Trade Administration's (ITA) site. Doing so will give you an idea of the rules and methods involved.
- Contact the U.S. Department of Commerce's Bureau of Industry and Security to see if your small business needs an export license.
- Learn about your intellectual property (IP) rights when exporting to foreign countries on STOPfakes.gov.
- Perform international market research at Export.gov to determine market viability.
- Use the SBA’s Trade Tools for International Sales to develop an export plan, including product selection.
What country or countries should I export to?
Certain areas have greater trade or market-related barriers, and picking the right market can make the difference between exporting success or failure. An estimated 45% of American SMEs do business in 11 or more countries. Nearly 13% export to six to 10 and just over 19% sell goods and services in two to five countries.
Start your search by using the U.S. Census Bureau's interactive Global Market Finder. Next, explore the ITA's Country Commercial Guides. Here, you can learn about business customs and market conditions.
Often, small businesses begin with international markets covered under Free Trade Agreements (FTAs). There are 14 FTAs comprising 20 countries, including Australia, Mexico, Canada and Singapore. Exporting to countries that fall under U.S. trade agreements may reduce business export barriers and costs. Accordingly, in 2019, 43% of U.S. exports went to Mexico, Canada, the United Kingdom and Japan.
Once you put in the work, nearly any small business can be competitive overseas.
How can a small business reach foreign consumers?
Pre-pandemic, "average monthly online sales represented 37% of total revenue," according to American Express. By February 2021, this number rose to 57%. Thanks to the internet, a U.S. small business has many ways to connect with people worldwide. Large marketplaces, such as eBay, Etsy and Amazon, also offer U.S. trade opportunities.
Increase export sales by using free and low-cost services, such as:
- The Single Company Promotion (SCP): The SCP helps U.S.-based small businesses increase brand awareness through a promotional event.
- Think with Google: Use Google’s free tool to discover potential markets and get tailored recommendations.
- Trade specialist: Find your local U.S. Commercial Service office or U.S. Export Assistance Center for help selling online to overseas customers.
- Website Globalization Review (WGR): Use the WGR Gap Analysis service to assess your e-commerce channels and improve search engine optimization (SEO).
- State Trade Expansion Program (STEP): Leverage STEP to access website assistance, design marketing campaigns and explore foreign trade shows.
Can small- and medium-sized companies get export financing?
U.S. banks are wary about lending to exporters, but the Small Business Association offers several export loan programs. Your local SBA Export Finance Manager or the SBA's Office of International Trade can go over your options and help you take advantage of resources, which may include:
- Export Express loans, which may be approved in about 36 hours for up to $500,000.
- Export Working Capital loans, which take roughly five to 10 days for up to $5 million.
- International Trade Loans, which provide access to up to $5 million for fixed assets, working capital financing and debt refinancing.
How will I ship my product overseas?
Shipping and logistics can be simple for some entrepreneurs. The U.S. Postal Service or third-party shippers such as DHL or FedEx provide shipping tools and resources. But certain exporters may need extra support.
Federal agencies provide information about the international shipping process. Details may include shipping options, export documentation protocols and insurance. Since shipping costs can eat away at your profits, small businesses should compare figures and price products accordingly.
Can a small business be competitive overseas?
Once you put in the work, nearly any small business can be competitive overseas. However, success depends on your strategy and market choice. Furthermore, picking the right mix of technologies is essential.
An estimated 66% of small business owners believe technology can help subdue the top three barriers to exporting, according to a report by Google and the U.S. Chamber of Commerce. Digital tools assist with:
- Communications challenges.
- Finance and payment collection.
- Tariffs and customs issues.
Sell your product and service around the world
International trade could be the key to overcoming challenges in today's economy. Moreover, it could help small businesses that live outside major cities. In fact, exports increased 5.6% during the first quarter of 2021. Almost 98% of exporters are small- to medium-sized companies, so selling goods and services worldwide is an excellent way to create a sustainable business model.
Take advantage of support from your local SBA office and invest in digital technology to access international consumers and markets.
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