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Fear of the unknown keeps many companies from exporting, but they should be more petrified of the opportunity costs of letting their sales stop at the U.S. border, executives said at the American Express Grow Global export forum in Atlanta.
According to a study by Dun & Bradstreet and Amex, just 17 percent of U.S. middle-market companies (those with sales between $10 million and $1 billion) trade internationally. Many are deterred by concerns about missed payments, foreign exchange risk, costly upfront investments and tales of cross-cultural blunders, the study found.
“They saw that middle-market companies hit it out of the park domestically but didn’t achieve that internationally,” said Ed Marsh, export adviser for Amex.
Some 3,500 of those middle-market companies are located in Georgia, and those that fail to export are missing out on a sales opportunity worth nearly $928 billion over the next decade.
With more resources now available to help companies get over the exporting hump, they now must distinguish the real hurdles from those that are based on faulty or out-of-date perceptions, Mr. Marsh said.
“The barriers are lower than they have been really ever before, and the perceived hurdles become just a matter of mindset and awareness,” he told Global Atlanta.
At the Grow Global event, Amex released a white paper tackling prevailing export myths: that logistics are too complex, intellectual property rights are tough to protect and that the market for a certain product may be too small.
All those challenges, while valid, can be addressed with the right advice and strategy, Mr. Marsh said. One part of the Amex event showcased the “export team you didn’t know you have,” outlining resources like the U.S. Commercial Service and the Georgia Department Economic Development’s international trade team, among many others.
Those groups, and the lively national conversation bubbling up around trade, can encourage company executives to move from simply reacting to creating a strategic plan. Many firms start exporting simply by responding to online inquiries, he said.
“Just through their websites, they’re getting leads. They’re getting leads in Turkey and Nigeria and Israel and Colombia and Brazil, Argentina, Vietnam — markets where there’s real opportunity which they never may have thought of before until suddenly a buyer jumps up and says, ‘Sell to me,’” Mr. Marsh said. “Then they have to figure out how to do it.”
Of course, some export fears do have basis in reality.
Richard Kopelman, CEO and managing partner of Habif Arogeti & Wynne LLP said some of his clients face currency risk that makes the value of assets and profits fluctuate, while others find it hard to obtain information to report to tax authorities. Some have wasted time assessing mergers with less-than-scrupulous partners, while others have been burned providing loans to international buyers.
“They get so excited about the sale that they extend credit, and they get hit hard,” he said.
Still, the opportunities are enormous. To meet them, the CPA firm of about 100 professionals now has capabilities in 27 languages. This started as a response to clients requests for help dealing with subsidiaries outside the United States. Now the firm proactively pitches its services to foreign firms investing in Georgia.
Many companies are unaware that the tax rates on exported products can sometimes be much lower than on domestically sold merchandise, Mr. Kopelman said.
For some firms, export problems only show up after success. Tvsdesign has designed convention centers all over China, and now the firm has had so much work there that it needs trained architects with Mandarin language skills, which are in short supply in Atlanta.
There have also been challenges with payment timelines, as disbursements in China are based on project phases rather than a clear monthly schedule.
But if the firm hadn’t figured out how to export coming out of the recession, the Atlanta-based architectural outfit would now look completely different, said Becky Ward, a senior vice president.
Work overseas has made the company more competitive in the domestic market. Construction methods learned in China have been adapted for use here, and exchanging information with other firms has broadened tvsdesign’s perspective.
“I think the risk is actually not going international,” Ms. Ward said.
Zaheer Faruqi of Aventure Aviation said export success is a matter of calculating risk to seize opportunities, using the same business savvy to protect your interests as you do at home — with some international twists.
“You have to step outside your comfort zone sometimes to go out and create new business,” the CEO said, noting that the airplane parts company has offices in Istanbul and Dubai.
Mr. Faruqi described a Russian deal where he held planes and parts as collateral on an export sale, which came in handy when sanctions hit and the company couldn’t pay outstanding invoices.
He also noted that the company only accepts payment in U.S. dollars.
“We only speak U.S. dollars. That’s a language,” he said.
He encouraged the use of resources like the U.S. Department of Commerce and the state of Georgia’s trade team. On a recent trade mission to China, they helped him set up meetings with vetted companies, resulting in five new clients.
Trade shows are a great way to meet clients, but just showing up doesn’t ensure success, Dirk Ebener, CEO of Global CIF LLC, told attendees early in the day.
Companies should prepare their staff, providing adequate support back home to ensure the staff on the ground can be fully present at the event, where they have eight hours on average to close deals in their trade show booth.
He also advised training on cultural sensitivity. At one show in Mexico, a client was annoyed by a young man asking a lot of questions at the booth, just to return to the booth a few minutes later to ask more. The client saw him as a nuisance and wanted him escorted away. It turned out that he was negotiating on behalf of his father, the company owner, who couldn’t speak English. He ended up closing a $2 million sale.
Amex signed a strategic partnership with the U.S. Department of Commerce at the event, which featured an exhibition area and one-on-one meetings between companies and export-assistance organizations.
See resources from the Amex Grow Global Insight Series here.
View the day’s agenda here.