After S.C.’s record export numbers in 2013, local companies continue the search for global opportunities
After exploring the options and talking with those who have done it, it’s hard to come up with many reasons why a business shouldn’t consider exporting.
One of the first things proponents will point out is that 90 percent of the market for goods and services is outside of the United States, and that number makes it worth rethinking the struggle for elbowroom in domestic markets.
Somebody, somewhere, likely wants what you’ve got, said Denis Csizmadia of the U.S. Department of Commerce’s International Trade Administration (ITA). His trade promotion office in Greenville has a database of about 2,000 companies exporting from South Carolina. He said even products that aren’t considered revolutionary or high-tech could be just the thing missing from a foreign market. A good example is the booming market in Africa for apps that perform sophisticated functions such as financial services and telemedicine on simpler, old school cellphones.
Jennifer Miller, interim president and CEO at the Upstate SC Alliance, said exporting companies tend to grow and hire more employees faster. What’s more, diversification through exports helps to insulate a company from economic shocks. The Great Recession, for instance, prompted several Upstate companies to search for overseas markets, and the trend has continued to increase since then.
We’re Already There
The Upstate already has a notable international presence. The Greenville-Mauldin-Easley statistical area ranked 27th in the nation’s top 50 metropolitan export areas in 2012.
That’s thanks to companies such as Just Aircraft, which exports its small-aircraft kits from Seneca, and Sabai Technology, which exports routers for virtual private networks from Fountain Inn. Spartanburg’s Sun Surveillance has found markets for its solar-powered wireless camera systems in overseas markets where remote areas require monitoring.
It’s true throughout the state, which had record export numbers in 2013, according to February’s report from the U.S. Department of Commerce. At $21.6 billion, exports increased four percent from $25.1 billion in 2012.
Although Michelin and BMW generate a large portion of that revenue, Csizmadia said most of the companies exporting are quite small. About 60 percent have 20 employees or fewer, and most of the rest are not much bigger.
Size Doesn’t Matter
Manufacturers are S.C.’s most active exporters, followed by distributors and consultants. But the world is open to any competitive product.
Greenville-based Aunt Fannie’s Inc., creator of FlyPunch, a nontoxic fruit fly pesticide made from natural ingredients, is crossing the border less than one year after the company was founded by Mat Franken and his wife, Jodi.
“It was always on the radar,” said Franken, “but if I’m being honest there’s so much [opportunity] domestically it was almost too pie-in-the-sky.”
Finding the right support system convinced him to make the leap, however. Aunt Fannie’s signed a deal in February with with St. Louis-based Busch Global Ventures, founded by former ITA chief of staff Adam Wilczewski, who gave a talk at the NEXT Innovation Center last month.
Expanding overseas allows Aunt Fannie’s to sell year-round a product that is generally seasonal in the United States. Manufacturing is currently outsourced, but Franken expects that to evolve with expansion. He also expects the need for employees to grow from 10 people to as many as 25 within two years.
Franken is more excited than anything, though some worries naturally exist. He said an entrepreneurial desire for control over aspects such as supply chain along with the challenges of navigating new business and social cultures haven’t disappeared.
“Those are going to be components that at this point in time are a leap of faith,” he said.
There’s Plenty of Help
President Obama announced goals to double U.S. exports in 2014, and organizations from the national to the local are working to make that happen.
The Upstate SC Alliance just began conducting surveys to identify potential exporters and any possible gaps in local services. As part of its participation in the Brookings Institution’s Global Cities initiative, the group will create a comprehensive list of world trade centers, export organizations, banks, law firms and others who can assist exporters.
Csizmadia said small and medium-size enterprises (SMEs) are the target audience at his federal Export Assistance Center (EAC). The EAC does much of the initial legwork, finding and connecting with potential partners that are not only qualified but are also interested in speaking with a particular company the EAC is pitching.
“They’ll get off the plane in Budapest or Australia with appointments waiting for them,” Csizmadia said.
When to Stay Put
Even with all those resources, some companies can’t make it work. Csizmadia said a company’s leadership is the number one reason why. “It’s not because of a poor product or market, but a lack of managerial commitment. They don’t treat overseas markets as they would their domestic customer.”
They make mistakes like replying too slowly to foreign inquiries. Or they fail to maintain relationships after the sale and remain responsive to market demands in the same ways they would be at home. Some companies stick to rigid payment terms that won’t work overseas, not knowing about export credit insurance that could reduce the risk of cutting a partner some slack.
“Here’s a giveaway: If a company is looking at a market as a way to get rid of excess inventory, they’re not ready,” Csizmadia said.
The cause might be a bit of parochialism or perhaps cultural insensitivity, he said, but in any case it leads to lost opportunities. He suggests companies develop an international department, even if that department is just one person.
That said, retailers tend to have a hard time profiting overseas because too many parties take a cut along the way. They must take extra care that their products are highly competitive.
Where to Go Now
FlyPunch won’t be in China because of that country’s weak patent protections, Franken said. The company is looking at Colombia, and Indonesia has expressed interest.
Right now, businesses are looking south, as in Central and South America. Trade agreements negotiated by the ITA have blazed dozens of trails for would-be exporters. The wheels are greased, quotas set and beneficial relationships established. During the past 10 years, exports from South Carolina to such markets grew by 71 percent, with NAFTA, Australia, Korea, Chile, and CAFTA-DR (Central America and Caribbean) showing the largest dollar growth.
That’s where to start, and after that it is a matter of matching product to market, just as any company would do stateside. Then the regulatory environment in each country is considered.
Companies serious about exporting will need to start buying airline tickets. Much can be done by phone and email, but relationships must be built in person, Csizmadia said, and he suggests participating in scheduled trade missions. The trips cost about $2,000 for SMEs, plus travel, lodging and other expenses.
Csizmadia said the biggest misconception about exporting is that it’s too difficult. But the real challenge is diligence, not difficulty. The payoffs can be huge.
“I’ll tell you something. When most of our clients taste that success, they’re hooked,” he said.
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Engage
Preparing for Overseas Partner Negotiations
Friday, April 25, 2014 (time TBA)
Clemson Small Business Development Center, 1 Main St., Greenville
Contact: 864-250-8429, Denis.Csizmadia@trade.gov
