By Meredith Wood
These days the cost of communicating and transporting goods across national borders is relatively easy and inexpensive. In light of that, many small businesses are asking themselves if now is a good time to consider exporting for business and revenue expansion.
Exporting has advantages and disadvantages, however. Consider these pros and cons before deciding whether or not you want to take the leap.
The Pros of Exporting
Expanding your business into new untapped markets can increase sales and boost your profits overall. Plus, once you’ve made the leap and covered your initial expenses, your company’s profitability has the potential to grow even more after the first couple of years.
A Diversified Market
When you sell to multiple markets in different countries, your business achieves greater diversification. Diversification is a good thing, because it means your risks are spread out over different geographic and demographic locations. When the domestic economy struggles, for example, you can rely on the sound economies of other countries in which you operate to keep your business in the black.
Level the Effects of Seasonal Factors
If you experience low demand for your products during the winter months, operating in other markets can level out the feast or famine cycle you typically experience. For instance, countries in the Southern Hemisphere are experiencing summer temperatures when temperatures in the Northern Hemisphere turn frigid. A company that sells pool supplies could see a more steady revenue stream by exporting to complementary markets.
Reduce Your Production Costs
It’s generally true that the more inventory you produce, the cheaper your costs are per unit. So exporting your goods can lower your expenses per item and increase your profit margin.
The Cons of Exporting
It Takes Money to Get Started
f you’re already short on capital, trying to export could sink you. In addition to larger up-front costs to get an exporting model started, travel costs, administrative costs, and ongoing legal fees can add up.
Additional Production Costs
Not all countries have the same consumer safety laws and import restrictions. It might turn out that it is too costly to modify your production process for sales in a foreign market. This is definitely something you need to research before you move forward with any exporting plans.
Unreliable Market Data
In some cases, SMBs may run into a problem uncovering accurate market data to thoroughly research a new market. In other cases, it might simply be impossible to find at all. Without solid data to back your decisions, your business could expand into an unsuitable market for your product.
If you thoroughly weigh the pros and cons of exporting and find that the advantages outweigh the disadvantages, dive a little deeper. Ask yourself the following questions to figure out how much work it might take to begin exporting:
- What concerns you the most about exporting?
- Do you have concerns about payments or logistics in foreign markets?
- Do you know and trust an international attorney that can help you navigate the red tape of this kind of expansion?
- Are your marketing materials friendly to new markets? For instance, will you need to have your brochures, manuals, or websites translated?
- Are you financially ready to export? That is, can you obtain a loan if you need one?
Once you have taken the time to carefully consider the advantages and challenges of exporting, you’ll know whether it’s time to get the processing rolling. If you discover that exporting would put too much of a strain on your business, that doesn’t have to mean it’s the end of the road. Incorporate an export strategy into your business plan, and give yourself smaller goals to reach for in the meantime.