Why small business owners can also be successful exporters

Alibaba.com SEPTEMBER 06, 202115 MIN READ
Why small business owners can also be successful exporters

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.

Seven reasons why small business owners should start exporting

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:

  • Access to the most lucrative markets: Although local trade brings the opportunity to enter a stable, easily accessible market, the greater gains are abroad. The vast majority of the world’s purchasing power is in foreign markets (at least 2/3 if you’re in the US4), and export trade allows you to get a slice of this.

    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.

  • Expand your customer base: The more significant majority of your potential market will be in foreign countries at any point in time. For instance, the US Department of Commerce estimates that 96% of the world’s customers are located outside of the US.5

    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.

  • Scale your business: Adding an export category to your small business can be the next frontier in your growth strategy. With the potential to access bigger markets and a larger customer base, global trade presents excellent opportunities for business growth. The access to new markets can provide the impetus to outstrip competitors and acquire a more significant market share for your business, both locally and internationally.
  • Build resilience: Statistics indicate that export SMEs are 8.5% less likely to fail,6 and there are obvious reasons for this. The broad geographical reach that an international export business provides can insulate your business against disruptive events like natural disasters, political unrest, etc. In addition, the export sales and added jobs that international trade brings will help protect your company against the usual challenges that cause business failure, such as failing revenue, poor product reach, and the like.
  • Extend product life cycle: Jaded local products might find a new lease of life internationally. Export successes can help refresh the product, especially in less developed or growing markets. Apart from reaping additional revenue from extended sales, your business will also be providing products that cater to local needs and might represent an improvement on local offerings.
  • Leverage economies of scale: Growing businesses will need greater quantities of raw materials, resources, and supplies, leading to potential cost reductions. As your input demand increases, you can access economies of scale, meaning you pay less on input materials as you produce more. In the long run, this will translate to higher revenue figures and, ultimately, higher profit.
  • Improve your community: Finally, it is essential to recognize that international trade can drive local growth, both in your business and society. Your export business can help provide jobs within your community, an increased tax base that helps provide public funds, and a positive for your country’s international trade balance.

    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.

Eleven tips on becoming a successful small business exporter

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!

  • Obtain support from industry bodies: Various industry bodies are set up to support small business owners who want to export. The truth is starting an international export business can be overwhelming, and companies that try to go it alone often experience adverse outcomes. These industry bodies are designed to provide financial, professional, logistical, and political support.

    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.

  • Consider export financing: Export financing can be an excellent option for small businesses that require an added boost in working capital. There are loan programs run by various bank lenders that you might consider. Other bodies such as your local bank of commerce or industry can also provide interest-free/low-interest export loans to help you get your business running. Be careful about overindulging in these loans, though. Only collect what you need and be sure to manage your spending strictly.
  • Carefully pick your export countries: Although the world provides a massive global market for your goods, certain markets will be more lucrative or make better sense than others. Those are the ones you want to start a business exporting to. Ideally, you should start with countries that have a free trade agreement or treaty with your home country.

    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

  • Pick the right goods: While most countries welcome imports, certain goods are more valued than others. Likewise, certain goods are not approved for import into some countries. After deciding on the country you intend to export to, you should conduct thorough research about what products are allowed in the country, and whether your preferred export goods are right for the country.

    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.

  • Pay close attention to intellectual property: If you have created a unique product, design, original process, or own a profitable trademark, you should think carefully about your intellectual property (IP) before you proceed.

    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.

  • How to reach customers: Finding customers is at the core of international trade, but this can often be difficult for SMEs. Since your potential market is in countries where your business might not have a presence, your first duty will be to create one. E-commerce presents a great avenue to accomplish this at a relatively minimal cost. With just your website and a few well-placed ads, you can connect with international purchasers that want your product.

    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.

  • Decide on shipping: You need a way to get your products to your customers, and shipping covers all of these. You can come to various arrangements with customers, called ‘incoterms’, although each of these will have different implications for your 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.

  • Set up seamless payments: Collecting payments for your export products is just as crucial as selling in the first place. There are a range of options to consider, including wire transfer, promissory notes, and bank credit notes. Payments solutions such as Stripe, Flutterwave, PayPal, AliPay, and more can also work, especially for B2C or smaller B2B orders.

    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.

Sell on Alibaba.com

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.

1. https://smallbusiness.yahoo.com/advisor/resource-center/exporting-is-easy-say-small-business-owners-who/
2. https://blog.trade.gov/category/trade-data/export-data/
3. https://www.ifo.de/DocDL/forum2-07-focus5.pdf
4. https://www.sba.gov/blog/take-your-business-global-2020
5. https://www.uschamber.com/co/start/strategy/small-business-exporting-guide
6. https://www.sba.gov/blog/take-your-business-global-2020
7. https://commodity.com/data/brazil/
8. https://www.worldstopexports.com/united-kingdoms-top-10-imports/