Why Your Small Business Should Be Exporting
December 17, 2012
Amid new data that U.S.-made goods hold high cachet overseas, especially in the blooming China market, American manufacturers are in a favorable position to export. Exporting enables companies to expand markets, generate new distribution and revenue streams, and weather changes in the domestic economy.
As ideologically divided lawmakers in Washington continue to threaten to let the country fall over the fiscal cliff, exporting might no longer be just a competitive advantage but a means of business survival.
“We’re in Europe and Asia. Our strategy is to diversify and protect against conditions by being in more markets,” said Michael Araten, president and CEO of Hatfield, Penn.-based plastic part manufacturer Rodon Group, which makes the popular K’Nex building toys. He noted that due to amenable currency exchange rates, shipping costs are “not outrageous,” and with the Made in U.S.A. brand finding popularity again, “it is easier” to export now.
“Of course, it’s not a cakewalk, but if your product is compelling and priced effectively, you will gain business,” Araten advised. “We’ve been at it for decades. For companies starting now, look to Canada and Mexico. There are 50 million people to sell to.”
According to the U.S. Department of Commerce, 95 percent of the world’s consumers are outside the United States, yet just 1 percent of American businesses export, and 58 percent of those only sell to one foreign market. But there is good news: the number of exporting businesses is growing, and the vast majority of new exporters are small and midsize firms – the profile of most manufacturers. The federal agency also notes that exports support 20 percent of all U.S. manufacturing jobs and 70 percent of new-job growth is created by small businesses.
Unsurprisingly, one of the White House’s goals is to continue to raise exports in order to generate job growth and continue the momentum in the manufacturing sector, which has slowed in recent quarters.
In his 2010 State of the Union address, President Barack Obama announced the National Export Initiative (NEI), with a goal of doubling U.S. exports by the end of 2014. Under these auspices, 19 federal agencies now offer businesses – particularly small and midsize ones – export assistance programs and international sales strategy planning services, all of which are listed under Export.gov, an information site run by the Commerce Dept.’s International Trade Administration.
One of those assisting agencies is the U.S. Small Business Administration (SBA), which has been running a pilot program called the State Trade and Export Promotion (STEP) Program under authorization of the Small Business Jobs Act of 2010. Designed to increase the number of small-business exporters, the program awards a total of $30 million in financial aid each year to U.S. states that apply.
Whether a manufacturer is selling finished goods or industrial goods, before exporting can actually happen, groundwork must be laid, such as outreach and promotion. Face-to-face contact is still the most effective marketing method, and trade shows are still the best F2F vehicles for convincing buyers. STEP grants thus go to state economic development organizations, or EDOs, for supporting small business participation in overseas trade missions and trade exhibitions, as part of an NEI mandate.
Big manufacturing states such as California ($2.5 million), Illinois ($1.3M), Michigan ($1.5M), Pennsylvania ($1.7M) and Washington ($1.6M) command some of the largest STEP funding.
“A second round of STEP funding just took place,” noted Larry Turner, president and CEO of Hannover Fairs USA, which is coordinating with a number of state EDOs on their participation in Hannover Messe, the world’s biggest industrial technology trade show, which will take place April 8-12 in Hannover, Germany. “Each state has a different STEP program, but states are putting together delegations [to Hannover Messe],” Turner, a veteran international business marketing and development specialist, added.
Last year, for example, Washington exhibited under the state's commerce department's Clean Technology Export Program and one company, B&G Machine, was able to enter into a multi-year contract with German diesel engine manufacturer. The state is participating in the show again in April.
As states disburse their STEP funds, Turner is currently traveling around the country to help owners of small manufacturing firms get into a select number of “STEP seats” among the EDO delegations but recently stopped in New York to speak exclusively with ThomasNet News.
For small manufacturers looking to benefit from government assistance and resources, “the delegation programs are not well known, so they’re a best-kept secret,” Turner explained. He said that with a softening domestic market, short-term to midrange overseas opportunities can provide a safe haven of sorts.
Hannover Fairs USA is the U.S. subsidiary of industrial trade events organizer Deutsche Messe, the company that teamed with the Association for Manufacturing Technology on co-locating the Industrial Automation North America show at IMTS 2012. Hannover Fairs USA facilitates small-business participation in Hannover Messe and other Deutsche Messe trade shows, including the machine tool fair EMO and business digital technology event CEBIT, both of which are also held in Hannover.
Hannover Messe, which consists of 11 co-located trade fairs covering industrial automation, power and transmission control, and industrial supply and production technologies/services, among others, is one of Deutsche Messe’s flagship annual events.
Covering nearly 2.5 million net square feet of show space and attracting over 6,000 exhibitors and 200,000 trade visitors in high-watermark years, Hannover Messe carries the Commerce Dept.’s Trade Fair Certification, which means it is federally recognized as an export-centric trade show and attended by the U.S. Commercial Service of the Commerce Dept. The government’s official list of sectors covered by Hannover Messe includes chemical production machinery, composite materials, electronics production, plastics production and materials and robotics.
For the third straight year, the U.S. Commercial Service will have a group exhibit at Hannover Messe, showcasing U.S. manufacturers and business development organizations while providing marketing, promotional and resource support. The U.S. Commercial Service will be helping EDOs and businesses with subscriptions to Commerce Dept. services, building contacts with foreign governments and business leaders, supplying bilingual trade assistants to match-make and set up meetings.
On a state-by-state basis, companies that can get into those STEP seats can benefit from a 50 percent reduction in exhibit space costs, matchmaking services, assistance with travel and lodging expenses and a listing in a supplier pocket guide. Turner added that Hannover Fairs offers U.S. firms turnkey exhibitor packages that include furnished booth space, catering and marketing help.
For 2013, in particular, Turner said the Commerce Dept. agency will be looking at trade opportunities for U.S. businesses in growing markets, such as the BRIC nations, Turkey and South Africa. Its pavilion, called the USA Investment Center, will be among 150 international delegations in the 50,000-square-foot Global Business & Markets networking area at the show.
According to Oliver Frese, Deutsche Messe’s senior vice president based in Hannover, who joined Turner in New York to visit ThomasNet News, Hannover Messe produces some 5 million business matchmaking opportunities over the show’s five days. One in five visitors is a CEO or company owner. “It’s a platform to get in touch with the world market,” he noted.
Out of the event’s 200,000-plus attendees representing approximately 90 countries, 60 percent are European, followed by 25 percent from Asia, but Americans make up only 10 percent of the total. So while it’s a “very international fair,” Frese said, the competitive field between U.S. companies is relatively small. And Turner added that more than eight out of every 10 American firms at Hannover Messe are small companies, with fewer than 100 employees.
Turner said Hannover Messe might see around 30 U.S. EDOs in April. His word of advice to companies looking to take advantage of government-backed export help: “Contact your state EDO. The states are driving it.”