Time to venture abroad: exporting is a multibillion-dollar industry that can be extremely lucrative--if you're properly prepared.
The Louisiana native's entrepreneurial drive was evident from the start. While still a model, she bought a mortgage company and a comic book store specializing in collectibles and memorabilia. She also invested in a friend's business, importing automobile oil filters from the Philippines.
Wilson has since given up fashion shows for international trade shows. Now 36, she is president of La Femme International Import-Export Inc., a Woodland Hills, California-based firm that produces medical supplies and pharmaceuticals for export to countries on the African continent, Brazil, and Mexico. La Femme looks globally for raw materials and labor, and then sells the manufactured items at affordable prices in impoverished regions of the world. Her company generated about $5 million in 2003; with several large deals in the pipeline, Wilson expects the five-person firm to gross more than double that figure in 2004.
Wilson got into the business after suffering respiratory arrest brought on by mitral valve prolapse, a congenital heart abnormality. This condition, in the severe form suffered by Wilson, can lead to swelling of the cardiac chambers as the malfunctioning mitral valve allows blood to flow backward into the heart. "I died and was actually brought back," she recalls. "The doctors called my parents and wanted me to say my goodbyes." Wilson recovered, however. But her medication caused her to gain 65 pounds, ending her modeling career. Not letting adversity stop her, she turned her energies to realizing her business goals. Having found alternative sources of low-cost drugs, she sought to create an export business bringing similar benefits to others.
Wilson is just one of many business owners who are actively tapping into the global economy. According to an October 2003 Department of Commerce report titled Small & Medium-Sized Exporting Companies: A Statistical Handbook, 238,284 U.S. firms were exporting goods in 2001. Think this is a game for the big players alone? Think again. Firms with fewer than 20 employees made up 69% of his number and earned combined revenues of $182 billion, These small firms also represented 98% of the growth in the exporter population between 1992 and 2001. There's big money to be made--but as with any business, proper preparation is required.
The good news: getting started isn't as hard as many think. The fact is that while gaining access to foreign markets presents numerous and varied challenges, the U.S. government offers resources and aid for entrepreneurs interested in breaking into these markets. The reason for the assistance is simple: "It's great for the bottom line of the U.S.," points out Jerry Mitchell, senior commercial officer for the Commerce Department in Mexico. "It brings in export dollars, it helps our trade balance, it creates and keeps jobs in the U.S., and it shows that free trade really works."
The U.S. Commercial Service (www.export.gov/cs) is one such agency looking to aid exporters. It offers a two-part support mechanism--much of it on Uncle Sam's dime. Through its 107 local offices, the agency assesses a company's product or service and analyzes the business setup for any structural weaknesses or deficiencies. From there, it uses its international network of 150 offices to pair the company with local resources, conduct the necessary market research, and aid with the regulatory process.
When identifying a market, most entrepreneurs look to familiar regions. For many African Americans, the Caribbean and the African continent are popular starting points. According to Carlos F. Poza, acting assistant secretary of commerce and director general of the U.S. Commercial Service. Canada and Mexico are two other good options. With the passing of the North American Free Trade Agreement in the '90s, trade expanded between the U.S., Canada, and Mexico. Under NAFTA, tariffs were reduced and protective measures, such as intellectual property protection and arbitration/dispute resolution protocols, were put in place. In 2003, some $97.46 billion worth of products was shipped from the U.S. to Mexico alone, while Canada's share of U.S. imports amounted to $169.48 billion.
In Mexico, hot export areas include travel services, marketing to manufacturers, telecommunications, information technology, Internet-related products, security equipment, and construction materials. "Mexican companies buy almost every type of product possible from the U.S. It's a huge market for U.S. goods and services of all kinds," says Mitchell. Canada is a hot spot for agricultural products, industrial goods and materials, chemicals and plastics, office machines and equipment, motor vehicle parts, apparel and footwear, and miscellaneous consumer goods.
"When NAFTA became a reality, you saw an increase in trade activity, particularly in Canada and Mexico," says Manuel A. Rosales, assistant administrator for the Office of International Trade. "Now we have almost 97,000 small businesses exporting to Canada and Mexico alone." The U.S. currently has trade agreements with Israel, Canada, Mexico, Chile, and Jordan and is in the process of negotiating with five Central American countries (Costa Rica, Nicaragua, Honduras, Guatemala, and El Salvador); the Dominican Republic; and four countries in the South American Andes region (Bolivia, Columbia, Ecuador, and Peru). Negotiations with Singapore, Morocco, and Australia are also underway.
The Caribbean market, which imported some $10.8 billion worth of merchandise from U.S. companies in 2003, is not to be overlooked. "Our market share in the Caribbean is not as high as in Canada and Mexico, but it's usually in the 40% to 50% range, so it's quite attractive," Poza points out. "Most of those islands are service economies so they import even their foodstuffs. So you have a very wide range of products in demand--from consumer goods to capital goods. So the Caribbean is a very good market."
The African Growth and Opportunity Act (www.agoa.gov) has opened up possibilities on the African continent as well. The act seeks to more firmly integrate sub-Saharan Africa into the global economy while opening that region to U.S. products. In 2003, $6.9 billion worth of merchandise was shipped from the U.S. to Africa. While South Africa accounts for 40% of U.S. exports to the region and serves as a hub for product distribution throughout the continent, it is not the only market in Africa. Other options are Nigeria, Angola, Ghana, Kenya, and Cameroon. Sectors that stand to do well on this continent include chemicals, construction, automotive, information technology, healthcare, cosmetics, medical, and transportation equipment.
"Trade agreements definitely help to make a country trade friendly," says Kenneth D. Weiss, author of Building an Import/Export Business, 3rd Edition (John Wiley & Sons; $19.95). "We're moving in general toward trying to establish trade agreements with more countries, either in regional groups or one by one. These agreements definitely facilitate trade because they set rules and lower barriers." Weiss notes that one concern many entrepreneurs have is currency exchange but says that most transactions can he done in U.S. dollars.
As with any business, financing is an issue that also needs to be addressed early on. Father-and-daughter team Sam Ennon, 60, and Samantha Ennon, 37, co-owners of Belmont, California-based Coiffure Marketing Group, approached their friends and family to help get them started. "We started with $40,000, and that was enough to create the package design and the products," says Sam. Coiffure Marketing Group manufactures and sells beauty and haircare products targeting African Americans and Latinos in the U.S., Brazil. and England. Sales for the 10-year-old firm totaled $500,000 in 2003. "But we ran out of money, so we had to keep going back to family and friends." In the end, the Ennons wound up investing about $100,000.
Initially, the two planned to sell their products exclusively in the U.S.--until they realized how hard it was to land distribution deals. "The market is so competitive here in the U.S., especially for small, black manufacturers," says Sam. "Most of the companies that were doing good business in the ethnic markets sold their companies to the Revlons and the L'Oreals." So the pair decided to look abroad. Currently, only 20% of their products are sold domestically, with the remaining evenly split between Brazil and England.
One of the Ennons' early hurdles was finding competent, reputable distributors. They turned to the Commerce Department for help. In November 2002, the firm participated in a trade mission to Brazil, supported by the department's Global Diversity Initiative, and signed an agreement with a local distributor. "The brand that we're selling now in Brazil is called Shades of Silk," says the elder Ennon, who began his career in Clairol's marketing department. "It has relaxers and conditioners and shampoos, and its geared toward people with curly hair." This spring, the company will head to Africa to identify potential partners.
Just like any business, being prepared increases the odds for success. "It's tough enough to be a business owner here in the U.S., and it's just a little more challenging if you're going to take it abroad," says Rosales. "So the more research you've done, the better prepared you are; the better financed you are, the more successful you'll be."
DOING BUSINESS OVERSEAS
1. Determine whether this is the kind of business you want to get into. A good start would be to read Exporting, Importing, and Beyond: How to 'Go Global' With Your Small Business by Lawrence W. Tuller (Adams Media Corp.; $10.95). This book walks the reader through the process and even offers advice on topics such as financing and U.S. Customs requirements.
2. Identify the markets you want to explore. Contact your local U.S. Export Assistance Center to talk to an export specialist. For a list of office, visit www.export.gov/comm_svc/eac.html.
3. Develop a business strategy. Keep in mind that you want to identify representatives on the import side. The Federation of International Trade Associations offers a directory of export management companies at www.fita.org/emc.html.
4. Determine how much money you'll need, and obtain the financing. One resource to tap is the SBA's Export Working Capital program (www.sba.gov/financing/loanprog/wcp.html). This program encourages lenders to offer export working capital loans by guaranteeing repayment of up to $1 million, or 90% of a loan amount, whichever is less.
5. Arrange for the manufacture and transportation of the goods being sold. Keep in mind that shipping internationally requires proper documentation if the goods are to arrive safely and on time. Most seaports and airports will have a directory of trade service companies, including shipping companies, serving those ports.
6. Formalize relationships with buyers/associates. Its advisable to get legal assistance when negotiating trade contracts. International trade attorneys at the Export Legal Assistance Network (http://fita.org/elan) offer free initial consultations to small business interested in starting export operations.
7. Establish an online presence. The internet is one of the easiest ways to reach the global marketplace. Virtually every major Internet service provider is set up to accomodate commercial Web hosting.
The Overseas Private Investment Corp. (www.opic.gov) is a government agency providing fee-based services to American businesses expanding overseas. Among their products are political risk insurance project financing, and investment funding.
The U.S. Commercial Service South Africa (www.buyusa.gov/southafrica/en) is a U.S. government trade promotion agency set up to help U.S.-based firms interested in doing business in South Africa. It provides research, in the following categories: market research, counseling and advocacy, finding international partners, and trade events.
The SBA's Guide to Exporting (www.sba.gov/oit/info/Guide-To-Exporting) addresses many of the issues entrepreneurs will face when doing business abroad.
The U.S. Commercial Service (www.buyusa.gov) offers a network of some 1,800 trade professionals in 105 U.S. cities and 151 U.S. embassies, consulates, and trade centers to help companies navigate the international trade process.
The Export-Import Bank of the United States (www.exim.gov) is the of official export credit agency of the U.S. Its job is to help finance the export of U.S. goods and services to international markets.
The International Trade Administration (www.trade.gov), maintains a list of trade missions. Organized by foreign governments or private organizations, these excursions are designed to assist exporters by arranging meetings with potential buyers.
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|Title Annotation:||International Business|
|Date:||Jun 1, 2004|
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