Updated: Feb 22, 2019
Exporting overseas can be daunting for small medium-sized enterprises (SMEs). Many SMEs want to reach new customers but turn down exporting opportunities due to common challenges, such as high cost, inadequate knowledge of the market, or simply not knowing where to start.
According to U.S. Census Bureau, SMEs have made up 97% of U.S. exports from 2006 to 2013. As technology continues to advance, so does globalization. Many export resources can be found online and experts are just a phone call or email away. To get you started, we’ve put together five important things small businesses should know about exporting.
1. How to Find the Right the Market
It’s a big world out there. Searching for the right market for your product will take time. However, this process could reward you in the end. It’s important to take the time to research and narrow down a list of potential markets. Dig into that market’s culture. You may be surprised at how many cultural similarities you can find.
Use your resources online such as the U.S. Census Global Market Finder and participate in events around your area. Attend international trade events to speak with market experts. They can offer insight on specific markets and industries you are seeking to enter.
2. Your Product
After narrowing down your list, discover what is in demand. You’ve already researched cultural similarities. Now it’s time to find specifics to your industry.
Finding similarities between your product and what is in demand is just as important as finding the differences that make your product unique. You may have a variety of products that you want to sell abroad, but only a few may sell in a foreign market.
Sometimes you’ll have to alter your product or packaging to appeal to international customers. People are more likely to purchase a product that is familiar to them. Take the time to research and ask for help from local trade resources.
3. Finding a Foreign Buyer
Make sure your buyer is legitimate. There are resources available to help ensure your buyer is who they say they are. The U.S. Commercial Services offers “International Company Profile” to conduct due diligence and background checks on potential foreign partners, as well as ordering an international company report to verify their legitimacy and financial information.
A great way to get in front of international buyers is to attend domestic and international tradeshows. Buyers are there to find your product. International trade organizations will help you find export resources abroad and set up business matchmaking meetings with foreign buyers.
The CalAsian Chamber hosts trade missions every year, so small businesses can explore new markets and participate in international trade shows. View our current trade missions.
4. Shipping Your Product
Comply with the law. It’s important to know the local laws, import trade regulations for the desired market, and if your product will need specific certifications or licenses to export. You can visit the Bureau of Industry and Security (BIS) - Export Administration Regulations (EAR) to view an electronic version of the unofficial EAR files created by BIS.
Lay out a contract with your buyer delegating who is responsible to pay for and handle specific tasks. You may find it useful to contact a shipper’s association to help negotiate volume discounts or service contracts. Reach out to the Global Initiatives team on more information about the benefits of using a shipper’s association.
5. Getting Paid
New exporters will request for payment in advance to minimize the risk of the buyer not paying. However, this is a big mistake for the SME as the buyer may find a better payment option with a competitor and drop out of a deal. Foreign buyers prefer payment methods like a letter of credit or an open account transaction.
Letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount.
Open Account Transaction is a sale where the goods are shipped and delivered before payment is due, which is typically in 30, 60 or 90 days.
For these payment options, export credit insurance is a great way to minimize risk of non-payment and ensure you’ll get paid during unforeseen circumstances.
Exporting can be intimidating process for SMEs, but it is not impossible. Tackling a new initiative takes time and requires months of planning. It is important to assess your export readiness and plan around all possible issues that may occur. Alongside online resources, CalAsian Chamber can help you discover the right market for your business, guide you through export logistics, and help you make long-term relationships with a global network.
Want to hear more from the experts? Join us in San Jose on March 21st for our Grow Your Export Forum. Register here.