Developing Your Export Strategy: Not Just Legal Issues

In my last blog post I highlighted some of the reasons you should consider taking your business global, and listed a few free resources available to companies.  In this post I’d like to discuss how to begin developing an export strategy, to get you started down the road to doing business internationally.

As with any business venture, you need to plan for success.  It is critical to define your goals, and then outline your strategy to achieve those goals.

First, what are your goals in exporting?  To increase sales and profits? Diversify your customer base? Take advantage of underserved or less competitive markets?  All of these are worthy objectives. However, if your goals is to weather a temporary downturn in U.S. sales and then abandon export markets once demand at home picks up, you are most likely wasting valuable time and resources. You must have the support of key constituencies in your business, including managers, suppliers, and your banker in order to be successful.

Once you have defined your objectives and achieved the necessary buy-in, you are ready to develop a plan. Just as you would conduct market research on new products and services in the U.S., you must first research where there might be a market for your products or services, whether customers there want them and can afford them, whether you need to modify the products to meet local regulations, and how you will market, sell, and deliver to customers in the target market.   The U.S. Department of Commerce’s Export Assistance Center (www.export.gov), with offices here in Denver, is a great place to begin your research.

Learn what is different about the target market’s laws, customs, and economy, as those differences could affect your success. To take a simple example, in Finland potential business partners may want to cement a new relationship by relaxing in a sauna, not something we Americans might be comfortable doing. In some countries, it is customary to give a gift at the start of a meeting, while in other countries doing so might be considered an insult or worse, an attempt at bribery. If your product relies on electricity, know that most other countries use 220 volts and different plugs than in the U.S. Know your target markets!

You must also research how the cost of exporting will affect your pricing in the target market, and whether you can still be profitable.  With shipping costs and times, possible import duties and other taxes, and delivery costs in the target country, your costs of goods sold could be significantly higher. You will have to factor that into your pricing. What terms and conditions, including returns and warranties, will you offer?  Honoring such terms can be very different for a customer 10 time zones away.

In addition, determine how you need to be paid.  There are various methods, including cash in advance, letters of credit, documentary drafts, or (and only for established, reliable customers) open account.  Payment may take longer when exporting, which can affect your cash flow.

Aside from your specific products and services, what operational requirements will you have?  Will you need to hire additional employees? You will need to engage the services of a freight forwarder, who knows how to obtain any required export documentation, and can arrange for the most cost-efficient shipping of products.  If you offer services, your people may need to travel to the target country, for which temporary work visas could be required.  This can add time and money to the process.

Exporting can be very profitable if done correctly, with forethought, planning, and a realistic view of success.  But it is vital to do your research and get sound advice; notice that I haven’t even discussed legal issues in any detail, just business issues!  Check out this article from Velocity Global, a Denver firm that helps companies enter new markets.  It has tips from 17 successful international business people, who will confirm the importance of advance planning.

Future posts will highlight some of the legal issues you need to consider at you plan to take your business global.[/fusion_text]