Manufacturers Must Export
The headlines are filled with economic doom and gloom, yet people continue in business and their personal lives. Items are continuously purchased and sold here in the USA and abroad, business does not stop for anyone. The world of business is in constant turmoil and will always be, at some level. The recent periods of growth for manufacturers has turned to flat projections, and that can be a good situation, because it focuses the mind. For those who are bold, it is a great time to take advantage and spread your marketing and sales efforts into the international markets. With 75% of the world’s commerce occurring outside of the United States, why would you not participate?
There are a number of organizations and government agencies, just waiting for you to tap into their deep experience associated with exporting. There are financial institutions specifically geared to export finance and International Trade Lawyers stand ready to help with contracts and legal documents. This entire cadre of services is waiting for your decision, the decision that will place your Manufacturing business on the world stage.
I am able to tell the story of exporting, because I have done it in my own business. The plan was to expand markets to cushion the ups and downs in the US economy. The reality is that every country experiences a business cycle and the idea that a foreign country will not purchase anything if they are in a down cycle is ridiculous. The sales may be less, however there will be sales, assuming that you have set up your distribution properly. Distribution and relationships are the key to international sales. For businesses here in the United States, 75% of a business deal is transactional (price, quality and delivery) and 25% of the entire effort is relational (personal relationships, previous business experiences and length of association). This relationship rule is totally reversed when working with international customers. To achieve successful, repeat and long term international business, you must follow a 75% relational and 25% transactional model. At our company we go further to describe the international relationships as business marriages. This unusual description identifies just how deep seated our relationships are, and truly need to be, with our international customers.
Repeat business is another important factor is developing your international business. I will generally not make a profit on my initial shipments to a new distributor in a foreign country. This is because of the time invested in relationship building, sales training, samples and initial set up costs. What I am counting on is continuous repeat orders and making a profit through the efficiencies established over time. What follows in this repeat business model is to ensure that all parties are making a profit and that the end user is receiving a good value. If these simple arrangements are not met, I can assure you, there will not be repeat business. While this sounds somewhat altruistic, it is for your benefit and your business will grow accordingly.
Paulson Mfg ships about 25% of the production to foreign countries, however I have been surprised to learn that while I had been slow to exporting, my customers were not. My domestic customers have been shipping up to 35% of my domestic shipments to other countries. I only discovered this by asking my customers and they are comfortable enough in our relationship to tell me about what they have been doing. Most likely your products are being shipped around the world and you did not even know it was occurring. This proves that you have ready markets for your products and the hold-up is only your own inertia.
As a manufacturer we must know our costs and capacities. We also know that every product has a sales life-cycle. There are many situations where the life-cycle of product can be greatly extended by simply bringing that item into a new market. The life-cycle extension plan can actually be greater in export markets as compared to domestics ones. We have all noted the situation with movie releases and how the sales are listed for domestic and then later in foreign markets. Who would ever say, don’t release that blockbuster movie in China, this is where they can make money after the domestic sales covered the costs. Movies have a short life cycle in the theaters here and while this is an exaggerated example, picture your own products that are slowing and yet you have the capacity to efficiently produce them. While you ponder your capacity, consider the selling price of an item that has already paid back on all of the development costs and tooling expenses. The reconsideration of what this item really costs to manufacture could place you in a very competitive export selling position.
I am often asked a simple question about exporting, “how do I get started”? The stock answer is export education, I have a different approach, “Go to the country you are interested in”. I know this sounds simplistic, however, I think that by going to the foreign country, seeing the people and attending a trade show in your field is the best way to bring down the barriers and get you on the right path. You are not going to develop an export business without a passport, it really takes an understanding of the people and their customs to be successful. As always, you must listen to the customer and deliver what they want and need. While export education is essential and I have listed a variety of resources at the end of this article, you just can’t replace the excitement of waking up in a foreign land and walking out into the fresh new world of export sales!
For more information Contact
CEO, Paulson Manufacturing
951.676.2451 | 800.542.2451
www.export.gov The most comprehensive site that is available from the USG.
www.buyusa.gov This site links you to the local US Commercial Service office in your area.
www.districtexportcouncil.org Link to the District Export Councils in your area.
www.sba.gov/content/international-trade-loan Loan programs from the SBA
www.exim.gov The Export Import Bank of the United States
http://www.cmtc.com/exporting Training with the ExporTech program