The typical entrepreneur always has his or her eyes open, scrutinizing every situation for ideas and watching for subtle shifts in the market that might spell opportunity. But sometimes the greatest opportunities lie outside the normal scope of vision. So though it is vitally important for small business owners and management to be on the lookout for opportunities, it also pays to step back and view things in perspective.
For many private companies, that can mean determining exactly where the market and potential customers really are. There is literally an entire world of opportunity out there. The Small Business Administration notes that 96 percent of the world’s customers live outside the United States, and two-thirds of the world’s purchasing power resides in foreign countries.
Finding a way to reach those customers while still turning a profit is the real challenge. Before tackling new markets for products and services overseas, the company needs to make sure it is prepared for international commerce. Here are a few tips for understanding what’s involved with conducting business abroad.
Make a Plan and Stick to It.
Expanding a business overseas requires a solid business plan, just as it does in the U.S. In fact, with the uncertainty that often comes with doing business internationally, a business plan is even more critical. The plan should start with some basic questions — how important is this market, what are the goals and how committed is the company?
Putting the answers to these questions on paper is essential to clarify the potential payoff of the strategy. Other considerations include potential export pricing, narrowing the focus to the most promising markets and customers and tactics for entering a new market. In addition, businesses should estimate export costs and revenue, along with investigating legal requirements, transportation logistics, financing and the need for partnerships or foreign investors.
One resource is local Small Business Development Centers, which might offer training, programs and other resources.
Prepare for International Payments.
Doing business overseas means being prepared to deal in foreign currencies. Once the domain of large corporations, even small businesses now have access to foreign currency transactions, which can bring real advantages when dealing with vendors and customers abroad. The company may, for example, be able to take advantage of favorable exchange rates by paying overseas vendors in foreign currency. Wiring foreign currencies to destinations abroad may be less expensive than wiring U.S. dollars, depending on the available exchange rate and applicable transactions fees.
Transactions in foreign currencies also come with risks. The same fluctuations that can help businesses can also hurt them. In 2010, for example, the euro’s value fluctuated as much as 16 percent. That kind of variation makes it necessary to monitor exchange rates closely and to work with an experienced foreign currency transaction partner.
Some businesses limit risk by aggregating payments, meaning that multiple payments in the same currency are processed together. That may qualify the transaction for a better rate of exchange. Some services that allow businesses to send and receive payments overseas help small businesses make the most of foreign currency transactions.
Know Before You Go.
Every business will encounter growing pains and unexpected curves when venturing into international markets, but proper research can greatly simplify the process. One good place to start is www.export.gov, which brings together information from a variety of government agencies to help companies when doing business abroad.
In addition to providing basics for creating an export plan, the site offers general guides on doing business in a particular country, research tools for specific industries and resources on legal issues in doing business overseas and more.
Doing business aboard will require a variety of vendors and partners, and there are many ways of making contacts with potential vendors and partners, not to mention customers. A good starting point is the U.S. Chamber of Commerce, which maintains offices in major cities around the world. For businesses seeking distributors or other partners, foreign chambers of commerce operating in the U.S. are also a good resource, as are industry trade organizations.
Robert Ciccone is vice president of American Express OPEN. He leads the product management team for OPEN Business Apps, a suite of software products, which includes FX International Payments from American Express.
This article first appeared in Financial Executive magazine.