The export topic gets some “ink” periodically, but relative to other SMB topics, not much. Somewhat puzzling considering:
- 76 percent of global economic activity occurs outside of the United States. Granted, the U.S. economy is still the largest in the world by a wide margin (with China a distant second at $7.9 trillion GDP vs. $14.6 trillion for the U.S.), but the U.S. is just one of hundreds of markets.
- 96 percent of the global population resides in a country other than the United States.
- Emerging markets experienced economic growth of approximately 7.1 percent in 2010, more than double the 3 percent of the advanced economies. According to the IMF, 2011 will follow a similar trend.
- Large U.S. firms rely heavily on overseas markets for revenue growth (e.g. Google generates more than half of its revenue from international sales). Overall though, relatively few U.S. businesses export. According to the Dept. of Commerce’s International Trade Administration, less than 1 percent of America’s 30 million companies take advantage of export opportunities.
- Technology continues to diminish geographic barriers. The rise of cloud computing, apps, “anything as a service,” and the evolution of platforms for communication, collaboration and commerce enable customers and vendors to do business anywhere, anytime.
Given the limited data on SMB export dynamics, especially among tech firms selling software or services, CompTIA Research conducted a survey of nearly 700 small and medium size businesses during early 2010. The goal was to gain a better understanding of how SMBs export, the factors contributing to success and the challenges affecting exports. A few key findings include:
- 86 percent of exporting SMBs in the CompTIA study indicated their export sales were growing faster than their domestic sales. For exporting tech SMBs, the figure was slightly higher (88 percent). SMBs attributed this growth to a range of factors, including new partnerships, better connections to trade agents, improved distribution/channel options and strong demand from emerging markets such as the BRIC countries.
- Conversely, 61 percent of SMBs not exporting cited lack of resources as the top reason. This may entail lack of time to understand the target market, the cost of localizing sales or marketing material, time needed to understand export rules and regulations and host a host of other resource-oriented constraints. Additionally, many SMBs cited lack of expertise (58 percent), distribution/channel issues (57 percent) and inadequate ROI (56 percent) as barriers to tapping international markets.
- If given the opportunity to recommend an area for improvement, SMBs are most likely to seek greater transparency of trade regulations, greater consistency of regulations across countries and further reductions of non-tariff barriers such as bureaucracy that stifles business efficiency.
According to CompTIA research, 57 percent of non-exporting SMBs plan to test the export waters over the next 5 years. Realistically, not all will follow through or achieve the desired results, but there are resources to improve the odds of success. A few examples:
- Export.gov – aggregation of resources from several government agencies covering business planning, self-assessments, export counseling, research, assistance in finding buyers, financing, trade law and more.
- Office of the United States Trade Representative – provides a Trade Toolbox with resources covering a range of export assistance topics.
- Small Business Administration Office of International Trade – provides guides such as 6 Steps to Begin Exporting and the State Trade and Export Promotion (STEP) Pilot Grant Initiative.
Have an export success story or challenge? I’m sure your colleagues in the CompTIA community would like to hear about it.
