Casting your net abroad.
NOW MORE THAN EVER, AFRICAN Americans are realizing that a world of business opportunities exists beyond our familiar shores. Although those opportunities may be far from home, costly and risky, the entrepreneurial spirit that's been integral to our survival has inspired those caught by the international bug. Motivated by the promise of new opportunities, African American self-made business owners have been venturing abroad since the early 1800s, when garment maker Mary Gardner Prince moved to Russia in 1824 to create a line of children's clothing for nobility.
A number of African American in this century have joined large corporations in various roles overseas, and set up importing or exporting business in the States. Today, international entrepreneurship is becoming another viable option for our progression into the 21st century.
While it's unknown exactly how many African American entrepreneurs are doing business, they are gaining some exposure. New York-based makeup artist Diane Stevens, an internationally known consultants, is setting up a cosmetics manufacturing plant in South Africa next year. Several African American restaurants are cooking up a storm in Australia and China, while U.S. servicemen have opened businesses in Vietnam and Germany.
Perhaps one of the more formidable tasks is uniting black entrepreneurs worldwide so that we can be more productive and feel less isolated. The National Federation of Black Women Business Owners in Washington, D.C., is aiming to do just that, Its sister organization, the European Federation of Black women Business Owners, based in the U.K., was encouraged by U.S.-based founder Mary Walker, Ph.D., and its foreign president, Yvonne Thompson, to bring European sisters into the loop.
While Walker is planning globally, she doesn't, however, encourage African Americans to start overseas businesses before doing their homework here. "First, be solid at home. Be astute in both politics and business. Then, make sure you have a solid product or service that is usable in the country that you choose. Know the economy, the language, the ethnicity and the culture of the country," she wants. "Don't go unprepared and come back broke."
EFBWBO's London-based vice president, Sandrah Monthieux Pelage, agrees. "Understand that each country had different legislation, culture, language and tax issues. For example, in France, small business are more disciplined and the taxation is higher than in England," she says. "Be aware that certain parts of the world, like South Africa and the Caribbean, have a natural population that's black, making a black entrepreneur feel less isolated," she says.
Despite the cultural barriers, some black entrepreneurs have found a more accepting business environment, though the scene will be familiar. Preparation will be key, notes Kathryn Leary, president and CEO of The Leary Group Inc., a New York-based firm that promotes trade development and marketing for black entrepreneurs.
"Start doing the legwork before you get on the plane," Leary advises. Contact the mayor's office, chambers of commerce, U.S. Embassy and the economic development office in the city where you want to do business. "Go to their meetings and establish your credibility," she urges.
You'll find that it also takes expertise in the service you want to provide, a thorough business plan, the willingness to adapt to a new county, the diligence to secure visas and other documentation, and enough capital to get your business off the ground and keep it there. Take time to learn details such as the legal system's stance on international trade, and know the native language of the country. Make sure to find out if your products is already being produced locally.
That's the kind of initial background you'll need to consider if you are ready to embark successfully abroad. Once all of that is in place, African American entrepreneurs say you're likely to meet with business colleagues who don't instantly dismiss your credibility because you're black; in fact, you'll probably be eagerly embraced as an American citizen.
To give you insight and information on what African American entrepreneurs need to launch internationally, we talked to Edward Burnett, an Edward Burnett, an American-born entrepreneur who's taken the plunge overseas in Japan. After you read his profile and gather all of your background research, you can start to decide whether your next business move should be...international.
Taking A Bow
This is not the ideal time to have a business in Japan. The economy crashed late in '97 and the country is suffering badly. The Japanese of the ravenous '80s who liberally bought luxury automobiles and American buildings left and right are paying a hefty price for their shopping spree. Bank loans have gone sour, and they've been forced to consider selling back those buildings and other purchases at just a fraction of the original cost. As the country suffers, so do its business.
"People no longer have lots of disposable income," says Edward Burnett, owner of E.C. Burnett's Casual Fashions, an urban fashion retail store in Japan. Still, his merchandise is a hot commodity right now. It generates $225,000 annually. The key is "right now." As long as that holds true, Burnett should be able to keep his head above water.
In fact, Burnett is predicting a 20% increase in revenue this year. Japanese youth are embracing anything worn by black youth and the hip-hop generation of rap artist in the States. Baseball caps, designer sweatshirts, baggy jeans--if black youth wear it, the Japanese want it. His biggest asset right now, says the Hampton, Virginia, native, "is that I'm black. Being black enables me to add authenticity to how these designs are supposed to be worn. I don't have to act out the part."
That may sound like a strange statement, but consider this: To attract business, some Japanese store owners have run ads saying that their stores are black owned; they claimed to be the managers. Others have business cards bearing Martin Luther King Jr.'s face because he's a recognizable black American. "That made me focus on my diversity and what it would take for me to survive in this market," he says. Though imported consumer goods have traditionally been sold at department stores and discount houses, Burnett's ability to merge his experience as a black American with his expertise in the Japanese market has equaled a winning combination.
It's a market that Burnett knows very well. When he retired from the Army in 1992 in Japan, he was hired as a tax manager for Royce and Associates Certified Public Accountants, the only non Japanese-owned CPA firm in Tokyo. He prepared income tax returns and later consulted expatriates about establishing a presence in the Japanese arena. All the advice he was giving gave Burnett the notion to start his own business in 1994. That helped, but he knew it wouldn't be so easy.
"The No. 1 barrier to starting a business in Japan is the expensive start-up and operating cost," says Burnett, who lives near Tokyo with his wife, Gwendolyn, who is from Philadelphia, and their three teenagers. He says he made wise investments during his Army years, starting at age 22, liquidated some assets and therefore avoided borrowing start-up capital. "I wanted the business to be self-sufficient," he says. Running a limited corporation like his can easily cost up to $100,000 a year. Rent alone costs $30,000 annually for his 500 sq. ft. store.
For five months Burnett ran the store himself, then he hired an assistant. That gave him time to do marketing and set up a mail-order division. After a year of operation, he started attending apparel shows in Las Vegas and Atlanta, where he does the majority of his buying for the store. An item that costs $50 retail in America would sell for $80-$130 in his shop, depending on the importing fees. Typically, he consolidates his shipments for export to Japan to reduce shipping costs. It also reduces the hassles that result from multiple shipments at customs.
"I try to support black-owned clothing lines whenever they are willing to sell to me," he explains. "Sometimes I am not able to buy from them because they say my company is too small." Some black designers want to be handled only by a large Japanese trading company, he explains. The danger of doing that, he says, is that it may initially provide good sales for a season, but the products are not continually marketed to reach the target population.
Allen Blackwell, 31, owner of Los Angeles-based Herbn Sportwear, an upscale casual clothing line, sells $15,000 in goods to Japan each year to 20 retail stores, including E.C. Burnett's Casual Fashions. "In terms of quality of merchandise and the business that his operation generates, Burnett's operation is in the top 10% of urban fashion retail stores of that size in Japan," he says. Small stores like Burnett's typically do well; about one-half of all consumer purchases are made at stores with five or less employees in Japan, and they usually have exclusive arrangements with major Japanese manufacturers or trading companies. Another reason for Burnett's success is that he's pushing an American product. "The Japanese are trendy," says Blackwell. "If Americans started setting up ice cream shops, then everyone would want to come out with ice cream shops in Japan."
Financially, Burnett's methods are a lesson in discipline. Since his company does not operate with a credit company, the cash flow can be low. The advantage of cash-based buying, says Burnett, is the forced discipline of not overbuying. "There is never a question about terms of payment. All orders are paid by cash in advance by bank wire in U.S. funds. This is not the traditional way of conducting business, but since I have a small foreign operation, I don't have much choice." Duty taxes are another added cost. The tariff on cotton jeans, for example, is about 16%; cotton shirts, 14.4%. "I don't sell leather boots because the tariff is 60%. The wholesale cost would be more than half the cost of the boots!" he explains. Air freight and ocean freight tariffs can range from 5% to 60% of the invoice, depending on the shipment's weight and volume, he says. Other problems arise when manufacturers don't ship products that have been paid for. He's suing several U.S. clothing manufacturers as a result.
To African American entrepreneurs who are considering starting up a business in another country, Burnett advises that they gain knowledge of the registration process and all costs, including taxes.
"You have to be a legally registered entity with the country's government and the city where the business is incorporated ... and they get to tax you," he explains (see chart, "Requirements for Overseas Entrepreneurs"). "I have a Japanese tax burden, and because I'm a U.S. citizen, I'm also taxed on worldwide income in the U.S.," he explains. Despite the challenges, there are rewards, and Burnett is keeping his eyes focused straight ahead, hopeful about the future. He's advising urban clothing retailers in the Middle East and Australia, and plans to open up another urban fashion store in a few years.
RELATED ARTICLE: FIVE International Web Sites
Log onto these addresses for useful info for entrepreneurs.
This site, sponsored by Tradeport, a regional export promotion and international trade program, will help you research overseas markets and search the best foreign markets for your product; access trade shows and trade missions; find out transportation options, requirements for getting goods to market and how to access financing options through private lenders and government. It's specifically designed for small and medium-size companies.
This is the information site for the Overseas Private Investments Corp., a federal agency that sells investment services to U.S. businesses and invests in worldwide emerging markets. It also links to info on OPIC's investments projects, publications, and financing offered to small business by OPIC.
This site links to the U.S. Small Business Administration's Office of International Trade. Learn about starting, financing and expanding your business and download free business software from the Shareware Library.
The Edward Foundation's site for small business includes Entrepreneurial Edge Online, a quarterly business magazine, and smallbizNet's information center, a collection of documents and excerpts from business books.
This search tool Yahoo ties into its own Small Business Information site, which lists a directory of related sites for small business. Find out about financing and taxes, and search the business, economy, culture, government and media of cities worldwide.
RELATED ARTICLE: Reference Books For Going International
Here are a few bona fide books that will help guide you into the international arena.
Kiss, Bow, or Shake Hands: How to do Business in Sixty Countries by Morrison, Conaway, and Borden, Bob Adams Inc., $19.95.
Detailed, easy-to-follow reference book outlines cultural overviews, behavioral styles, negotiating techniques, protocol and business practices in 60 countries.
Do's and Taboos Around the World by Roger E. Axtell, ed., John Wiley & Sons, $15.95.
Best-selling guide to international behavior includes facts, tips and words of caution from international business travelers.
Gestures: The Do's and Taboos of Body Language Around the World by Roger E. Axtell, John Wiley & Sons, $15.95.
Explores the ins and outs of body language and its interpretation worldwide, including what's inappropriate in a business environment in various cultures.
International Excellence: Seven Breakthrough Strategies for Personal and Professional Success by Christopher Engholm, Kodansha America Inc, $23.
Discusses the necessary skills you'll need to succeed in the global marketplace. Includes how to adopt a global vision, maintain global ethics and develop cultural empathy.
RELATED ARTICLE: Hot Markets For Entrepreneurs
The Big Emerging Markets (BEMs), as identified by the U.S. Government's International Trade Administration, is a compilation of a small core of development countries that will account for more than three-quarters of all the world trade growth in the next two decades, surpassing Japan and Europe. Included on that list are Mexico, Argentina, Brazil, the Chinese Economic Area (the People's Republic of China, Taiwan and Hong Kong), India, Indonesia, South Korea, Poland, Turkey and South Africa, U.S. exports to BEMs totaled $113 billion in 1993, the latest figures available.
The major industries holding promise for global-minded entrepreneurs and businesses that are trying to tap into BEMs include:
information technologies--computer equipment, computer software and telecommunications services.
health technologies--medical and dental devices and supplies, pharmaceuticals and healthcare services.
transportation technologies--transportation infrastructure, aerospace technology, road and rail projects.
automotive industry--automotive parts and motor vehicles.
transportation infrastructure--development, expansion and upgrading of foreign transportation facilities such as bridges, airports, railways and transit systems.
Additional markets that may also be accessible to small entrepreneurs include high-tech areas such as Web development, computer software, cellular phones, telecommunications, financial management, marketing, business consulting and production of American, marketing, business consulting and production of American fashion and consumer goods that are difficult to obtain overseas.
RELATED ARTICLE: Requirements for Overseas Entrepreneurs
Before you set up a business in another country, prepare by familiarizing yourself with the federal taxes you'll have to pay on corporate income as well as the value added taxes. U.S. citizens pay taxes both in the country they relocated to do business and in the United States. Note: although English is a universal business language, you should be familiar with the country's native language, mentioned here. You'll also have to file appropriate forms and pay corporate registration fees, which can be hundreds or thousands of dollars, depending on the country. Contact a lawyer or financial advisor for more details.
Official Corporate Value Country Language Tax Rate Added Tax Brazil Portugese 15% 10%-15% (typically) China Chinese 33% N/A (includes 3% local surtax) France French 33.33% 20.6% Ghana English 35% N/A Japan Japanese 37.5% 5%-20.7% (inhabitants tax) United Kingdom English 33% 17.5%
Source: Corporate Taxes: A Worldwide, Price Waterhouse, New York, 1997
RELATED ARTICLE: Forming Global Links
The following is a list of international networking groups.
Assist International Peter Robinson, Chairman and Founder 60 Madison Ave. New York, NY 10010 212-725-3311 www.imex.com/ibe.htmi
A trade promotion and consulting firm that helps clients device marketing strategies, programs and products to reach the international trade community. The group produces the annual International Business Expo, which offers access to more than 2,000 international business leaders and government officials. This year's expo will be held May 13 at the Javits Center in New York City from 8:30 a.m. to 5 p.m. Exhibitors will include consulates from around the world, government agencies, banks, shipping companies, freight forwarders, technology providers and nonprofit organizations. Seminars will focus on all facets of global commerce. The $25 registration fee, includes access to all activities.
National Federation of Black Women Business Owners Mary Walker, President 1500 Massachusetts Ave. NW Suite 34 Washington, PC 20005 202-633-3450
This networking group targeted to black women business owners and corporate professionals was founded and is based in the United States, but has a branch in the United Kingdom called the European Federation of black Women business Owners, which holds an annual conference and "Black Women in Business" awards dinner in London for British, European, African, Caribbean and American black women.
International Association of Black Professionals in International Affairs P.O. box 111675 Washington, DC 20008 301-953-0815
A nonprofit association, BPIA focuses on education and economic, development through forums, conference, the Global Visions newsletter and grants.
The Ronald H. Brown Foundation Inc. 2121 K St. Suite 625 Washington, PC 20057 202-835-0700 www.rhbf.org
This organization was formed in 1996 to carry on the vision of former Commerce Secretary Ron Drown. As part of its mission, the foundation includes a Center for Politics and Commercial Diplomacy, which provides expertise in political training and international business, a minority business roundtable and an international trade seminar.
The Leary Group Inc. Katryn D. Leary President and CEO 625 Broadway, Suite 902 New York, NY 10012 212-673-0736
This U.S.-based marketing company links African American entrepreneurs to overseas markets and conducts trade missions to Japan and South Africa several times per year. Leary, the 1996 recipient of the Ron Drown Award for international excellence from the National black MBA Association, is a prominent and sought-after consultant on international business. She is also the international trade and development advisor for the National Minority Business Council (212-575-2585), a nonprofit organization in New York that promotes marketing, sales and management of its small-business members.
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|Title Annotation:||International Business; includes also list of international web sites, also list of reference books, also hot markets, and global links, and requirements; Black Americans are starting businesses in foreign countries|
|Author:||Gray, Valerie Lynn|
|Article Type:||Cover Story|
|Date:||May 1, 1998|
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