Expanding a Small Business Globally

It has often been said that we are moving toward a global economy. As the business landscape continues to change, you may find yourself thinking about how your small business can take advantage of this trend and place itself in a strong position for future growth.

At a recent international trade symposium held in Washington D.C., the Small Business Administration emphasized that today's global markets present both challenges and opportunities.

"In the global economy of the 21st century, our competition is not just the firm down the road. Our competition comes from anyone in any corner of the globe with a good idea, a good education and a good internet connection," explained SBA acting administrator Sandy Baruah.

Why not use your financial management software and a plan for global growth to help you prepare to meet this challenge?

Benefits of global expansion

Higher sales. You may be able to boost your sales and profits by remarketing existing products overseas. Approximately 95 percent of the world's consumers reside outside the U.S., according to government figures. What is stopping you from bringing your product to them?

Lower costs. It may take an initial investment to set up the infrastructure for expanding overseas, but the arrangement can end up lowering your costs in the long term. For one thing, establishing your business in a foreign country may be able to help you locate less expensive suppliers.

Diversification. If certain products are encountering weak customer demand domestically, they may still be profitable abroad. Exporting can help smooth out some of the peaks and troughs> Today’s financial management software includes multi-currency support to assist your small business as you diversify.

Will your business succeed?

Market research. If you have already experienced significant growth here in the U.S., that is a good sign for the future. But make sure you conduct sufficient market research - just as you did when starting up in the first place - to learn who your new customers are and what they will expect.

For a small business, it may make sense to begin slowly, with initial expansion into a single region. Then, once you test the waters and establish a system, it may be easier to move into further markets.

Costs. The cost structure of your business will effectively change once you begin growing internationally. Additionally, in the beginning your business will have to pay for a number of expenses, such as travel, research and other set-up costs. The total amount may vary substantially, based on your approach to expansion.

For example, a company that decides to export its products through an intermediary may have fewer costs than one that decides to set up an overseas office - an option which entails thinking about supplies, labor and real estate.

Laws. Before embarking on a plan to expand your company overseas, it is important to research the laws and regulations of that country, as they can differ significantly from those in the U.S.

Consulting with an attorney who specializes in international law will help make sure you are well-versed on taxation, licensing, export limitations and other possible considerations. Also, if you plan to employ people overseas, it is vital to look into employment regulations and labor practices.

Exporting

If you already produce a product, exporting can be a relatively straightforward way to enter the global market. Your financial management software can produce the supporting information you need when exporting your product. In 2007, exports were responsible for around 40 percent of the country's economic growth, according to the SBA. Also, in ten of the past 15 years, America's increase in exports has been greater than its rise in GDP.

Direct exporting. Exporting directly is a hands-on experience that can demand a lot of time, but may also be the most profitable way of distributing your goods overseas. If you choose this method, you will be responsible for finding buyers to purchase your product. You will also have to arrange for shipping it. Another option is to hire a representative based in the foreign country who will be able to liaise with buyers and sell your product for you.

Indirect exporting. Exporting indirectly involves using intermediaries to handle the entire export arrangement, including market research, promotion, setting up distribution channels and finding buyers for the product. Smaller firms may find that this approach is more realistic for them when entering a foreign market, particularly if they are unfamiliar with the country.

Exporting through a U.S. buyer. It is also possible for your goods to be sold in an overseas market even if you are not directly involved. You can sell your firm's products to a domestic buyer who will then export it overseas independently.
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