If you’re a manufacturer or a business owner looking to grow, consider adding exporting to your distribution mix.
Why? Because roughly 95 percent of the world’s population and 70 percent of the world’s wealth is overseas. The fact that most small American manufacturing companies limit themselves to domestic distribution constitute a major missed opportunity.
Exporting brings many benefits. First and foremost is the potential for substantial growth in sales, revenue and profits. Adding export capacity diversifies sources of income, reducing dependence on the U.S. market and its ups and downs. It can blunt the impact of seasonality, and it can absorb excess inventory, eliminating the need to sell at a discount. In addition, it can increase productivity, improve competitiveness and spur innovation.
But exporting isn’t for everyone. It adds complexity, and it’s not risk-free. Deciding whether this is a viable growth avenue for your company requires a two-part analysis.
The first involves assessing how export-ready your company is:
- Can you allocate funds to research foreign markets?
- Can you increase production with the equipment you have? What about other production elements? Labor, warehousing and access to parts and materials?
- How easy would it be for you to obtain export financing?
- Trade has its intricacies- shipping, foreign exchange, communication with foreign buyers. Are you willing to learn what it takes?
The second part of the analysis focuses on externalities:
- Do you have a product or service that is in demand overseas? Would it have or technology advantages over products already available?
- How different is the business culture or political system in your target market?
- What about distribution networks? Labeling and packaging requirements? Tariffs? What other obstacles exist?
- All told are the challenges acceptable or overwhelming?
Becoming an exporter may seem daunting. But resources are available to companies interested in finding a way.
Yes, exporting can make an entrepreneur’s life more complicated. But help is available and if you investigate this option, you may find that the rewards are potentially great.
By Robert Saikali, Vice President of International Banking & Trade Finance for City National Bank.