Exploring New Markets.

When SMEs take off to new destinations with a view to exporting their products or services, the experience can prove positive for some but disastrous for others

What's the best advice for small- to medium-sized businesses (SMEs) that are thinking about exporting their products or services? How should they go about choosing the right destination for them? How can they determine whether the timing is right? Many questions come to mind when faced with such a daunting decision.

Clement Joly, managing partner at Montreal-based Raymond Chabot Grant Thornton and an SME consultant for 30 years, explains that a well-established company has a better chance of succeeding, and that the choice of product should be a primary consideration when it comes time to selling in foreign countries. Joly knows companies that are exporting very specific merchandise and are very successful at it. "They've got an exportable item," he says. However, an SME selling a common consumer product will run into a lot of trouble. "It won't be easy because you have to understand there will be a lot more competition within the target markets as well as with other exporters," he adds. A high-quality, well-priced product in a solid niche will have a better chance of succeeding in foreign markets. The same rule applies wherever you are.

Knowing the basics

Entrepreneurs do not have to go for it alone. They can easily find all the start-up information they need to launch their foray into foreign markets right here at home. SMEs that are thinking about exporting can find expert advice from law and accounting firms who know and specialize in certain markets. Also, the provincial and federal governments offer a whole host of services for companies. All you need to do is inquire.

An individual can sniff out what's needed from their base in Canada using only these contacts. Exporting is not easy to do, and you need to have a strategy. Once the groundwork is done, Joly recommends that potential exporters go and explore the target country a number of times before embarking on the great adventure. Your first impressions may be positive, but you need to analyze the situation over time. In subsequent trips, other opportunities could be analyzed. He recommends gathering essential material and talking with other Canadians doing business in the country, even if they're in a different sector. They'll be able to tell you at what stage problems arose or suggest people who could help you.

A parallel universe

Joly draws a parallel with the process a company would normally go through if it wanted to expand its market here at home. You need to set up the right meetings and find out exactly who the real players are. The right player, the person who's truly interested in what a company has to offer, can open doors because he or she will have all the right contacts. After you've investigated all the possibilities from your home base, the only viable solution is to go and find out for yourself what is happening on site.

Another important issue that cannot be overlooked is the payment of invoices. Even before you start thinking of setting terms of payment, you need to determine if your potential customers have any money. Often, Canadian companies unwittingly embark on discussions with people who have no financial means. Joly says, laughing, that one of the first things to ask outright is "Where's the money coming from?"

In very poor countries, there are a lot of people who think that North Americans are extremely rich and that they're going to give them the money. This is a delicate issue when it comes time to start negotiating. Foreign business people are often ready to talk, but you have to be very careful. And most important, don't start dreaming -- remain realistic. Joly says that's the biggest challenge facing potential exporters.

Networking builds strength

Networking among participants is one of the main strengths of trade missions, such as Team Canada missions. Team Canada brings government and industry together to plan trade promotion activities that can help companies become successful in global markets. "There's actually more dialogue among Canadians than with people from the host countries," adds Joly, a veteran of such trade missions. Business people who go on these trips take a more strategic stance in their approach to networking. They can talk with each other about the meetings they've had and exchange information, which saves a lot of time and energy. "The best way for anyone to explore a foreign country in the most efficient and rapid manner possible is to take part in Team Canada," says Joly.

Joly, in fact, has been on every Team Canada mission, except one. They take place about every five years, and the next destination has not yet been decided. Other delegations led by government ministers are organized on a regular basis by both federal and provincial governments. Although the cost of joining Team Canada is higher, SMEs that want to position themselves well and do some serious soliciting will find this option far more profitable.

Understanding your target market

When it comes to foreign sales and distribution, Joly believes that it is better to use people who completely understand the target country's culture. "You should never overlook the customs of a country," he says. The way you dress, your attitude and gestures, and a mass of other details could make all the difference in a country with different traditions. All these factors, he says, could make or break a deal.

"People are travelling more and more and the quality of the hotels abroad could lead us to believe that we are right at home, when in fact we are in a completely different environment," he stresses. The context changes from place to place. Exporting to the United States versus a developing country requires two completely different approaches. Countries and peoples all have their own characteristics, and Joly makes a point of recognizing the importance of this fundamental rule.

There's another issue that's critical to exporting. "If an entrepreneur is doing business with China, Australia or South Africa and a problem crops up, the return trip to these destinations takes at least 48 hours," notes Joly. The travelling required to follow up on an issue or manage a crisis is therefore far more complicated.

The best advice for SMEs that are thinking about exporting is to go step by step. "A company that sells products or services in a city should proceed in a logical manner, expanding first regionally, then progressively throughout the province, the country, and North America," he says. It's an easy way to acquire exporting experience.

A Quebec company, for example, could start by doing business with Vermont or Maine, instead of targeting markets farther away. Then the company could look at California, where it will gain experience dealing with Latin Americans. With this experience, it can then cross the border into Mexico, and so forth. "To succeed at exporting, you have to be an explorer," says Joly. "There are tremendous opportunities out there for those who know how to observe, listen, organize a network and be careful."

Julie Demers ([e-mail]) is the associate French editor of CMA Management magazine.