Five Steps to Participate in the Global Marketplace
Share current LOB: commercial-corporate-banking
The global marketplace affects most small businesses, whether or not you consider your business a global enterprise. Propelled by a growing middle class globally, as well as increasingly connected supply chains, customers and markets, global trade represents a growth opportunity for many businesses.
Worldwide demand for goods and services will continue to generate a considerable amount of international trade — and even expansion in some sectors. Small and midsized U.S. businesses in a range of industries, including manufacturing, professional services, agriculture and technology, drive most of the growth in global trade.
If your organization is looking to grow, consider finding ways to participate more in the global economy — by selling, sourcing or both. Global sourcing, the practice of acquiring goods or services from abroad, allows small businesses to expand faster, diversify offerings and improve margins. Exports have been a growth engine for the U.S. economy in the past few years, proving how expanding globally can be a solid growth strategy.
Begin assessing your business’s global opportunities by looking at your core business. Consider your supply and demand chains.
Are there price or product innovation pressures your business is experiencing? Are there product improvements that customers are requesting? Or innovations with which you are experimenting?
On the demand side: Which of your products and services represent core strengths of the business? Would you consider extending any of them to new markets?
Consider the following steps to assess your participation in the global economy:
1. Quantify the opportunity.
Take advantage of the U.S. Department of Commerce (www.commerce.gov) and the U.S. Export Assistance Center (www.export.gov). These agencies can affordably and quickly attain the market intelligence you need to figure out the size of the addressable global market for your goods and services, or how much you can cut costs through overseas sourcing.
With 85 international offices, these organizations have access to valuable marketing intelligence. They can educate you on government programs, grants or incentives that may make a specific sector of international trade an attractive option for your business.
Be wary of getting bogged down with analysis paralysis. There are two key questions, related to the size of the opportunity:
If selling, who will buy my products and services, and how big is the potential revenue?
If sourcing, how much can I realistically reduce my costs or add value and margin to my product with improvements or differentiation?
2. Assign an executive to develop your strategy.
You need to honestly assess whether your organization has the management commitment and financial resources to succeed in the global marketplace. Global trade is a strategy that requires the support of the CEO and top executives. International business can stretch your organization’s skills and patience. Increasing lead times can put pressure on your working capital, and it can take well over a year to see results.
Determine how much trade your existing financial resources can support by asking:
How much trade can you support on your current cash and credit resources?
How large of a loss can you absorb?
How long can you wait for payment?
Can you absorb currency fluctuations over the life of the contract?
Can you offer favorable terms and/or credit if buyers demand it?
3. Pursue partner relationships.
The U.S. Department of Commerce and the U.S. Export Assistance Center can help you conduct an International Partner Search, which targets, qualifies, contacts and introduces your organization to prospective international customers, suppliers or distributors. Many of these services only cost hundreds of dollars and can be delivered within a matter of weeks. They can also help you with trade advocacy, troubleshooting and background checks.
4. Secure global banking expertise.
An experienced global banker can help you:
Mitigate your risk through letters of credit, insurance and FX capabilities
Guide you through financial rules and regulations
Provide the expertise to help you negotiate better terms
Deliver financing for you and your partners.
Your banker can connect you with the right distribution partners for your business, including in-country banking relationships to help meet the financial needs of your selling and sourcing partners, as well as the U.S. Export-Import Bank and the SBA to support your financing needs.
5. Secure an international attorney and an international accountant.
Obtain a referral for an experienced international lawyer who can help you in the United States and abroad with contracts, intellectual property issues, and foreign laws. You also should consult an experienced international accountant to guide you through export-import taxation issues unique to global trade, such as value-added taxes (VATs) associated with trade in Europe and Canada, as well as the U.S. tax implications of generating profits overseas.
This content is educational in nature and is not an advertisement for a loan or business solicitation. It does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Once you have explored your lending options and decided to pursue financing to meet your business objectives, it is important to contact advisors to help get your house on solid ground and gain financing approval.