Due to the typically lengthy trade routes and cross-border concerns involved, it is easy to think that international trade is best left for bigger, stronger companies. For some small business owners, the reasoning is that the hassles of entering global markets might be too much for their small operation. But this is just a myth.
The statistics indicate that small and medium enterprises (SMEs) are more suited to international trade than they think. For example, one survey by Yahoo Small Business found that SMEs actually thrive in export business.1 Considering this, it’s no wonder that small businesses constitute the majority of exporters in most countries – 98% in the United States2 and 68% in China (as of 2007)3.
If you have been considering the merits of taking your small business into the global market, this article explains why that would be a good decision and best practices for becoming a successful exporter.
Table of Contents
Although small businesses start out fulfilling a need within their community, the ultimate goal of every business is to sell more and make more profit. This is a key role that international trade and exports can help fulfill.
SMEs that get involved in the global marketplace obtain a unique opportunity to enter very lucrative markets, cater to a massive customer base, growth hack their business, and improve their community while at it. Here are some of the most compelling reasons why SMEs should become exporting companies:
In countries and regions with an industrialized economy – like China, South Korea, Europe, Australia, and Canada – it is more than likely that local production already exceeds consumption. By taking those goods to foreign markets, you gain an opportunity to get higher sales at potentially more favorable costs.
International trade gives you the means to reach these customers and potentially expand your client base. Thankfully, with the increasing profile of e-commerce, reaching these customers is not only easier, but it is also more profitable than ever before.
The bottom line is that starting an international export business can produce a net positive overall for your small firm, employees, and community. You gain the opportunities, and the support (which many don’t know about), to grow your business and produce better returns for those that rely on you. Read more here about the benefits of exporting for small businesses.
Next up, we’ll explain what you should keep in mind as you begin your foray into international trade and how to find the support that can help you become successful.
Although international trade brings lucrative opportunities for small businesses, there are also many barriers to success. Export trade comes with its risks and challenges, and you should be prepared to face these as you begin your export business.
The tips we’ll share in this section cover most of what you need to know, including how to find export financing, navigate foreign trade regulations, reach the customers you want, and receive the payments you deserve. Let’s get in!
You might join a small business exporters association for wholesalers, small business development centers, an international trade administration (ITA), or local small business administration (SBA). These bodies have professionals that can help you learn about export opportunities, potential challenges you may face (such as language barriers and trade barriers), and how to overcome these obstacles.
Also, consider your choice of country based on what products are likely to sell best there. For instance, within South America, Brazil is a significant export location for agricultural and industrial machinery, electronics, vehicles, mineral fuels, and chemicals.7 Similarly, the United Kingdom is a great location for precious metals, machinery, and pharmaceuticals.8
It is important to remember that picking the right export goods is more than just considering what foreign buyers or purchasers want. Think about whether foreign export of your preferred product is feasible. What are the foreign regulations and tariffs you need to comply with? What would the supply lines look like? Can you keep a steady stream of goods flowing? Drawing up an export plan can help you answer all of these questions.
While you have a right to ownership and use of your IP, others may violate those rights if you do not protect them adequately. You should consider consulting with an IP attorney on what rights you own, how they can best be protected, and the actual process of securing these rights.
In addition, be careful to avoid violating the IP rights of others, as this can expose your small business to needless litigation. Incidents like this can happen more often than most expect. For instance, another company in your export country might register your trademark or product name to another business in your export country. This might mean you have to change your trade name or product name to avoid violating their IP.
Although, one of the early questions you will need to answer is: should you focus on B2B e-commerce or B2C clients? Another great option you can consider is finding customers in global marketplaces like AliExpress (for B2C buyers) and Alibaba.com (for B2B clients). Learn more here about how to find international buyers for your export business.
For instance, a popular incoterm is CIF, which means cost, insurance, and freight. It means that you will be responsible for shipping the goods to a port chosen by the buyer. Other terms are FOB, EXW, and FCA. You can read more about these incoterms in our guide to incoterms.
You also want to decide what freight option to use between air freight and ocean freight. We have written all about these two and the pros and cons to keep in mind. Read all about ocean freight v air freight here.
When selling to other businesses, you should also put careful thought into the payment terms you offer. For instance, open account terms allow customers to buy without worrying about paying immediately. While this means you get paid much later, it also gets customers to buy more in the long run.
We hope that these tips will help you navigate the lucrative but sometimes challenging international trade environment. So long as you keep a firm eye on the risks and create a good plan to combat them, you should soon find yourself enjoying the benefits of starting an export business with your SME.
Alibaba.com is the largest international marketplace where businesses can find B2B buyers of all sizes and nationalities. Many small companies started their export trade journey with Alibaba.com, and today, we continue to support them to connect with great buyers and lucrative trade deals.
Read our ultimate guide to starting an export business here or take the first step to establish your export business today by reading about how to open an online storefront on Alibaba.com.