May 6, 2010

Tips for rookie and veteran exporters

Tip #1: don't go global just for the sake of going global.

No doubt you've heard countless pundits predict dire futures for companies that aren't selling into emerging powerhouse markets such as China and India. But depending on your particular business and your experience in other markets, these may not be the best places for you to start.

"Your business needs to have attained a certain level of maturity before you start thinking of integrating China, India or any remote market inside your immediate target for growth," explains Bruce McConnell, vice-president, BDC Consulting. "But don't let that dissuade you. There are huge opportunities internationally for small Canadian companies."

First time exporters, for example, should often set their sights closer to home. The Canadian Trade Commissioner Service (TCS), which provides free advice to help entrepreneurs navigate international markets, says the best exporting opportunities for small companies continue to be with the United States, particularly border states.

"The U.S. is still our largest trading partner and I don't see that changing," says Christian Hansen, a trade commissioner in Vancouver. "The similarity of business culture, the proximity and the North American Free Trade Agreement make the U.S. a compelling market for first-time exporters. Foreign, overseas markets can be more difficult to access because of language and cultural differences, time differences, and the investment and patience it takes to go into those kinds of markets."

According to a recent Canadian Manufacturers and Exporters survey, the majority of Canadian business owners identified the U.S. as their first market for future potential, followed by Canada and then Mexico.

Tip #2: make sure your company is "export ready".

Today, many entrepreneurs rely on an export plan, which is largely an extension of their business plan. Put simply, an export plan is a map that documents the strategy your company will implement to conquer international markets. Much like a business plan, it focuses on key factors such as your strengths, weaknesses, opportunities and threats in the international playing field.

In developing your export plan, look first at whether your business is "export-ready". Are your sales at home solid? Do you have a healthy balance sheet? Do you have export experience? Do you have the resources and the patience to invest in marketing abroad?

If the answers are 'yes', your prospects for selling internationally look promising. If not, you may want to start with the Canadian Business Network, which helps entrepreneurs do the groundwork necessary to expand beyond Canada. Once you're ready, groups like BDC and TCS can assist in developing an export plan, including putting you in contact with qualified contacts in countries you're targeting.

Macro-economics will also influence which markets are most attractive. The high Canadian dollar and the economic downturn south of the border, for example, are making it tougher selling into the U.S.. At the same time, rising fuel costs are making it less affordable to export overseas. Remember, one size doesn't fit all.

"You need to articulate the right strategy for your business. This requires looking at the strength of your business model, including the strength of your people and the strength of the industry you serve," says McConnell.

Once you've decided that going global is the right decision, choose your markets carefully. If you're in the insurance business, the hot markets for Canadian companies right now are China, India and Indonesia. The market opportunities for other products and services may be more limited.

For example, Hansen says the TCS has worked with BC companies that manufacture wood pellets from trees affected by the Mountain Pine Beetle. The pellets are used in place of coal to fire power plants. The pellets have found niche markets in Japan and Europe, where the TCS played a role in identifying potential buyers and partners.

Next, decide what kind of entry strategy is best for each new market. You may decide to use a distributor, licence your product, negotiate a joint venture, hire a sales agent or sell directly to end users.

And, for those companies already selling into the U.S. who are worried about shrinking profit margins, the decision often comes down to two choices: defend your turf or find new markets.

"You can be defensive and attempt to preserve your market share in the U.S., or you can be offensive and try to expand into new markets – or you can do both. It really comes down to laying out a strategy that is customized to your particular business needs," says McConnell.

As a first step, check out the abundance of online information available, including: Canadabusiness.ca, CanadExport and Foreign Affairs Canada. You can also try out the TCS's virtual trade commissioner tool and www.bdc.ca .