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Exporting to China – 4 Tips for Success

Video: A senior U.S. Commercial Service Officer explains why China is a priority target for American exporters.

China is the world’s fastest-growing major economy, and the fastest-growing U.S. export market.  It is now our second-largest trading partner.  While China’s GDP grew by 10.3 percent in 2010, U.S. exports to China were up 32 percent, reaching $92 billion, and have more than quadrupled since 2000.   Our trade deficit in goods with China totaled $273 billion in 2010, but we had a surplus of $6.7 billion in services trade in 2009.

China is the world’s third-largest market for luxury goods behind Japan and the United States.  There are more than 200 million Chinese citizens with a per capita income over $8,000, and most economists predict a surge in the number of people achieving true middle class status during the next several years.

Four Tips for Exporting to China:

Tip #1: Consider targeting the Shanghai market

Tip #2: Multiple opportunities in multiple sectors

Tip #3: Many models for success

See the video in which a Senior U.S. Commercial Service Officer elaborates on the 3 tips above.

An extra tip, not mentioned by the U.S. Commercial Service…

Tip #4: Set up your in-country sales operations through a sales incubator based in Shanghai or other key markets. 

Sales incubators provide new exporters with a low-cost and low-risk solution to quickly build their own sales team in China. In effect, the sales incubator is an exporter’s outsourced sales office in-country, which builds the foundation of client sales and Chinese distributor support, during the early years of a company’s entry into the Chinese market.

Click on this link to read a recent blog post for more details on the sales incubator model.

For more information about China:

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Exporting to China – The Sales Incubator Model

Why are U.S. exporters fixated on selling their products into China? China is a market where U.S. exporters, large and small, endeavor to establish a foothold in an enormous and growing marketplace. Many exporters see an opportunity to capture early market share for long-term export growth into China.

Rising prices in China have resulted in a “slowdown” that mostly impacts U.S. companies with manufacturing facilities in China. Some of these manufacturers moved their operations other low-cost markets, such as Indonesia or Malaysia, (or even relocated production back to the U.S.)

However, economic growth is still strong, and consumer wealth in China continues to expand, driven by a new middle and upper class of professionals and entrepreneurs. As a result, the Chinese market still offers green fields for ambitious U.S. small businesses that seek to export products that have growing demand China.

Exporting your product China has a long list of challenges: language and cultural barriers, regulatory issues, logistics, IP protection… just to name a few. Even the most seasoned exporters struggle with the fundamental question: How can my company break into the Chinese market?

It seems that few good options exist. Agents abound but are often dubious. Good joint venture partnerships may take years to develop, and requires the U.S. exporter to give up some level of control and profits. Setting up a direct subsidiary or sales office can be prohibitively expensive, complex and time-consuming.

Weighing the time investment, capital requirements and business risks, many SMEs abandon their China entry ambitions, leaving the opportunity to bigger businesses with deeper pockets. However, some SMEs have discovered a relatively unknown business model that offers compelling advantages: low risk, low investment and local know-how.

The concept is dubbed the “sales incubator”, and the strategy is simple. View it as your company’s cost-effective outsourced sales department. A sales incubator provides its clients with the equivalent of their own sales team and office in China but with the added power of local China sales and business development experience… and without the overhead, liability and regulatory requirements of opening a Chinese subsidiary.

The sales incubators provide a comprehensive cross-industry platform for American SME’s to sell their products and build their sales channels in China. Their support programs range from single sales objective, trial sales efforts, and Chinese distributor support, to full-service sales support programs that prepare an SME for its own entity in China.

A good incubator provides their client with a professional China sales team in as little as two months. The service includes a market-specific salesperson hired for your business, China-proven management oversight, an inside salesperson and administrative support.

The CEO of one U.S. industrial products exporter describes how the sales incubator model worked for them. “[The sales incubator] was key to our successful entry into the China marketplace. From recruiting and managing our China-based representative, helping manage safety certification process, to navigating through the cultural and commercial nuances of China, they continue to be a valuable partner in establishing our brand in China.” 

In summary, the sales incubator model provides a platform for SME exports into China in early years. Once they have a foothold in the market, the client may choose to roll over the sales program into their own independent entity or otherwise expand their distribution channels.

For more information on exporting to China, contact your local U.S. Commercial Service Office about export assistance programs. (See www.export.gov.)

For recommendations on a sales incubators in China that would be a good fit for your company, you may contact the author of this blog, Ray Hays.

Email: ray@rayhays.com

International Visitors to the U.S. Spent Record $13.9 billion in May, Helping Support U.S. Jobs | Department of Commerce

An interesting read about an often overlooked export.

Courtesy of Ray Hays, (www.RayHays.com), Member of the Arizona District Export Council

International Visitors to the U.S. Spent Record $13.9 billion in May, Helping Support U.S. Jobs | Department of Commerce.

U.S. Clean Energy and Energy Efficiency Trade Mission to Saudi Arabia

If you are in the Clean Energy sector, you should be aware of this event. Reblogged courtesy of Ray Hays, Member of Arizona District Export Council.

Tradeology, the ITA Blog

April 14–18, 2012
U.S. Clean Energy and Energy Efficiency Trade Mission to Saudi Arabia
Riyadh and Dhahran (Eastern Province), Saudi Arabia

In April, Assistant Secretary Nicole Lamb-Hale will lead a Clean Energy and Energy Efficiency Trade Mission to Saudi Arabia. The mission will include market briefings by industry experts, opportunities for U.S. firms to meet key Saudi Arabian government officials and decision-makers, hold one-on-one meetings with potential business partners, and enjoy networking events, with the goal of increasing U.S. exports in the clean energy and energy efficiency sectors.

The mission comes at a critical time for both Saudi Arabia and the U.S. clean energy and energy efficiency industry, and has the potential to create opportunities for U.S. exporters while helping Saudi Arabia to achieve its energy goals.

Saudi Arabia has ambitious plans to improve energy efficiency and reduce reliance on hydrocarbons for power generation.  These plans offer abundant opportunities…

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U.S. Exports: Helping Create an American Economy Built to Last

Reblogged courtesy of Ray Hays, Member of Arizona District Export Council.

Tradeology, the ITA Blog

This post contains external links. Please review our external linking policy.

Francisco J. Sánchez is the Under Secretary of Commerce for International Trade.

Increasing U.S. exports is an essential part of shaping a healthier and stronger American economy.

This is a point that President Barack Obama made clear during his recent State of the Union Address, when he unveiled his “blueprint for an economy built to last.”  In the speech, the President outlined the four pillars that “an economy built to last” should be founded on:

  1. A new era for American energy, spurred by a commitment to homegrown and alternative energy sources;
  2. Equipping young people and workers with the skills needed to thrive in the 21st century economy;
  3. A renewal of the American values that demands fairness for all, and responsibility from all; and
  4. Supporting the manufacturing sector to create jobs and make more American products.

This manufacturing…

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2011 Export Success Highlights

Reblogged courtesy of Ray Hays, Member of Arizona District Export Council.

Tradeology, the ITA Blog

The International Trade Administration helps thousands of companies every year and we’d like to highlight a few of our most recent success stories from this past year.

Sirchie of North Carolina wins $1.1 million contract with Brazilian government

Sirchie of Youngsville, North Carolina manufactures crime scene investigation kits and materials used by law enforcement officials worldwide. Sirchie contacted the U.S. Commercial Service office in Raleigh for assistance in selling law enforcement products to the government of Brazil.

Sirchie used a Gold Key Service, which would introduce them to prospective buyers in Brazil as well as give them the opportunity to meet with key industry officials and ministries, including local police and law enforcement. In advance of the Sirchie’s trip to Brazil, the trade specialists in the Commercial Service in Brazil also provided Sirchie with information on the government procurement process in Brazil and how Sirchie could tap into opportunities selling to the Brazilian government.

As a result of assistance from…

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Interested in expanding your business in Africa, the Middle East and South Asia?

ImageIn April, regional experts from Africa, the Middle East and South Asia will convene in Glendale, Arizona for the two-day ACCESS 2012 conference at the Thunderbird School of Global Management.

ACCESS 2012 is a unique opportunity to hear directly from U.S. Commercial Service officers serving in some of the world’s fastest growing economies. ACCESS 2012 can help your company identify new export markets and opportunities in Africa, the Middle East and South Asia, obtain the resources necessary to succeed in these markets, and develop market entry strategies. Senior Commercial Officers from the following countries will attend: Algeria; Eqypt; Ghana; India; Israel; Jordan; Kenya; Kuwait; Lebanon; Libya; Morocco; Nigeria; Pakistan; Qatar; Saudi Arabia; South Africa, and the United Arab Emirates.

The forum will consist of: 
• Sessions on market entry strategies, financing, and mitigating risk 
• Concurrent sessions covering country and industry specific information and opportunities 
• One-on-one meetings with market/industry specialists from U.S. Embassies in the region  (requires separate, free registration from the conference.)
• High-profile keynote speakers 

• Numerous networking opportunities

Venue: Thunderbird School of Global Management, 1 Global Place, Glendale, AZ
Date: April 24 & 25, 2012
Web link and registration: http://export.gov/arizona/access2012/index.asp   
Linked In: http://linkd.in/Ay243q

Fee: $425 per person ($350 per person for registrations prior to March 1st.) 
 
Arizona companies can qualify for a 50% reimbursement through the Arizona Commerce Authority’s STEP grant program. Please contact Kevin O’Shea for details about the grant: kevino@azcommerce.com

The Global Economy: A Greek Tragedy

What’s Wrong with this Picture?

Let me get this straight…

A prime minister in Greece suggests a referendum on their country’s bailout package, and the Dow drops by 2.5%? So, if you had a 401K of $100,000 tracking exactly to the Dow, you just lost $2,500 in one day… because of what an idiot in Greece said… Are you kidding me?

Sure, the almighty Dow will eventually rise again as this Greek tragedy comes to a boring conclusion, with the Greek PM committing political suicide. That’s not the point.

The point is that the global economy is unstable. If the PM of Greece can open his mouth and make global markets crash, this is certainly not a viable global economy. We need to come back to reality and fix the problem. What’s the problem? The global financial markets are disfunctional.

Academics can dispute me here — and I welcome their debate — but economics is nothing more than a social science. It’s not about numbers. It’s about people and how they react… or how they are supposed to react… to changes in the economic environment. Example: If interest rates go down, savings will go down and stock prices will go up. This assumes that people logically will pull their money from a bank savings account at 2.5% if that money can average a 10% return in the stock market. Perfectly logical. The problem is that 99% of people on the earth do not understand this logic. They just move with the tide, as dictated the global economy.

Answer this question: I would assume that most readers have savings accounts. When the Fed (or other central bank) dropped interest rates, did you react by pulling funds from your savings account and investing in the stock market? If you answer “no”, you are in-fact refuting the laws of economics. How many people answer yes? My guess is 2%. Not enough to justify the wild swings in the stock market.

Economics is not math. Economics is not a hard science. Economics is a “soft science”. It’s about how people react to a given situation. If you think that most people react “rationally” according to the laws of economics, then you are drinking the Kool Aid of economic theory. (Link provided to explain the American Kool Aid metaphor.)

In my article, Small Business of the World Unite, I stood on the soap box to insist that small businesses should not fall into the trap of stock market follies. I feel that small businesses (not big businesses, not Wall Street), need to lead us out of this “economic” mess with common sense.

Think about it. By avoiding the stock market insanity, small businesses can prop up our world economies with common sense business strategy. The solution is about people. It’s about profitability. It’s about good business practices. That’s why small businesses survive and grow. Let’s apply this strategy to the global economy and see what happens. It certainly can’t be worse than our current situation.

I look forward to hearing from those economists out there… Oh, and by the way, if you are an economist with less than 20 years of experience in the real business world, don’t bother joining the discussion… That should eliminate about 90% of economists.

Article by Ray Hays, Member Arizona District Export Council. All rights reserved.

Ray Hays serves as an international consultant for businesses that wish to enter new global markets or expand current operations abroad.

Click here for more information on consulting services of Ray Hays.

Small Businesses of the World Unite!

….We have nothing to lose but our chains!  

A Small Business Manifesto by Ray Hays, www.rayhays.com  

Bottom line, it’s up to small businesses to save the world. Big business, financial markets and politicians have lost touch with the common man.  

They’ve also lost touch with reality. They worship false deities – mysterious and faceless entities, with names like DOW, S&P, DAX and Hang Seng. When the financial gods become angry, the politicians and Central Banks attempt to appease them through complex rituals in which they manipulate magic potions with names like the debt ceiling, interest rates, financial regulation, fiscal policy, money supply and stabilization programs. They posture and debate how these potions should be mixed, while the world’s economy sits on the brink, awaiting some miracle to emerge from the voodoo fog bank. 

So what can we do as small business owners? 

For one thing, spend more time working on your business and less time worrying about the economy. It seems that the only certain thing in the financial markets is uncertainty.  Over the past week, we’ve heard it on the news ad-nauseam: “The market shows signs of uncertainty.” Really? What the heck does that mean? Just tell me how I can retrieve my retirement account as it swirls down the toilet. 

Then some talking head comes on the TV screen and explains that the uncertainty might be attributed to unemployment indicators… or the debt ceiling… or the Standard and Riches credit rating… or rumors that a camel passed gas in Oman. 

We stand back and scratch our heads, inwardly embarrassed that — despite our years of business experience, and regardless of our academic pedigrees — we have no clue what they’re talking about. Join the club of ignorant masses. Unless you are one of the minions in the financial markets, you are probably mystified by the swirling market forces that shape the destiny of the global economy. 

However, in the real world, business is not about some abstract financial benchmark or macroeconomic policy. As small business owners, we know that business is about people: our employees, our customers and our community. It’s about hard work and good management. It’s about simple concepts, like sales, costs and profits. 

Who will be our economic savior from the economic winds of uncertainty?

Politicians? Stock market gurus? Central Banks? The banking sector? The real estate sector? Multinational corporations? China? God? Superman? … Superheroes aside, I would place my bet on the small business sector.

 Look at it historically. Prior to the industrial revolution, small businesses represented the heart of economic development in most countries. Before the days of “big business” and the stock market, small entrepreneurs built the foundation on which the industrial and financial giants of today stand.

However, today, big business and politicians are tied to the hip with global financial markets. (Or is it vice-versa?) Comparatively, small businesses have significantly more freedom and leeway from the market. Sure, small businesses are impacted by global market forces, including inflation, interest rates, labor costs, fuel prices, etc.  Sure, economic downturns destroyed many small businesses, which were defenseless to the onslaught.

Yet small businesses are more nimble than their large brethren. We can adjust more quickly to market risks or opportunities. A small business can re-brand in a week, whereas it takes United and Continental Airlines over a year. We can completely change our business strategy without worrying about the perception of shareholders and our stock price on Wall Street.

That said, increasingly small businesses are burdened with chains of the global economy, which prevent us from change and strip us of our independence.

It’s time to take control of our destinies. Long Live the Small Business Revolution!

Yes, small businesses DO have the power to change the global economy. Let’s take the example of the U.S. market. According to the Small Business Administration, small businesses (fewer than 500 employees):

    • Represent 99.7 percent of all employer firms.
    • Employ just over half of all private sector employees.
    • Pay 44 percent of total U.S. private payroll.
    • Have generated 64 percent of net new jobs over the past 15 years.
    • Create more than half of the nonfarm private gross domestic product (GDP).
    • Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).
    • Are 52 percent home-based and 2 percent franchises.
    • Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007.
    • Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.

Definitions and perceptions on small businesses vary. For example, in Europe a small business is identified as fewer than 50 employees compared to 500 employees in the U.S.  Some consumers perceive franchises as “big business chains” that kill off small business competitors. In reality, a significant majority of franchisees are small businesses that are locally owned. In terms of franchisors (the franchise headquarter companies), the majority of them are also small businesses. The big players, such as McDonald’s and UPS, are more the exception than the norm.

Definitions aside, small businesses play a critical role in the worldwide economy. Think about it this way. If the small business sector could add 10% more jobs, the U.S. economy would erase the rise in unemployment since 2008, which improves consumer spending, which grows retail sales, etc. In short, shifts in the small business sector can make a big impact on the world economy.

Okay, I’m on-board with the small business revolution. What’s our goal?

Break the chains of the financial markets!  What are the chains that shackle our small businesses?

Big government or a big business clients – If more than 25% of the revenue of your small business comes from on government or big business, you are chained to the market.

Big business vendors or suppliers – If your business relies on big businesses suppliers, you are chained to the market.

Big banks – If your small business is dependent on large banks – for small business loans, etc. – then you are chained to the market.

Financial services – If your small business is in a sector that deals with financial services or commodities, you are chained to the market.

Real estate – If the health of your business is impacted by booms or busts in the real estate market, you are chained to the market.

“Discretionary” consumer products and services – If your revenues comes from non-essential products and services that are subject to discretionary income, you are chained to the market.

Which chains weigh down your business? How heavy are they?

Realistically, most small businesses will always be connected to the market to some degree. As a small business owner, what chains can you break and what chains can you weaken? How can you minimize your dependence and exposure to big business and financial markets? Possible solutions include:

Completely reinvent your business – If you are in real estate or financial services, either get out of the business or diversify into other sectors. Ask yourself:  If I were not in real estate or financial services, what other business would appeal to me? Don’t wait. Start building your business life boat now.

Introduce new products and services – Ask yourself what new, innovative products and services you could introduce, which are recession-proof? For example, if you own a catering company, you could begin to sell affordable school lunch packages for kids.

Replace your big business and government customers with small business customers – Ask yourself, if my big customers disappeared tomorrow, what other types of small businesses could I service? This may require changes to your products and services, as well as changes to your strategy of marketing and sales. Don’t wait for those big clients to disappear. Do it now!

Replace your big business vendors with small business vendors – This may be difficult, and it may cost you more money, but ask yourself: As a customer, am I more valuable to a big vendor or a small vendor? A small vendor is more likely to provide you with personalized service, they are more likely to refer clients to you, and they are more vested in the success of your business. Is that worth paying a premium for the product? In most cases, the answer is “yes.” Most importantly, you will help another small business owner to break their chains to the market.

Cut out the big company middle man – One advantage of the global economy is that small businesses are better able to simplify their supply chain. Ask yourself: Why can’t I just go to the source for products? For example, if you sell uniforms that are made in China, do you really need to purchase through a large distributor? Why not work directly with a small manufacturer in China? Again, you will have more control over your supply, better leverage and in some cases, better pricing.   Tip: If you have no idea of how to import, you may wish to engage an international business consultant to help you identify overseas suppliers, and engage a small, licensed customs broker to manage the import process for you.

Replace your big bank with a small bank – Like all small businesses, small banks are more flexible than big banks. Small banks are hungry for your business, and relatively speaking, your small business will be a much larger client to them.

Hire more employees – During a downturn, fear of “uncertainty in the market” prevents small business owners from hiring. Step back and evaluate your values as an employer and the mission of your company. Do you believe that your employees are your most important asset? Many good employees are on the market today. If you add two or three… or ten “top-performers” to your team, what would this do for your operational capacity or your sales growth? How can do your part to reduce unemployment and still prosper as a business?

Entrepreneurship, innovation, customer service, employee loyalty, family values…  These are the enduring hallmarks of a successful small business. With these values in-mind, it’s time to level the playing field and allow small businesses to chart their own destinies.

Now, small business revolutionaries… Go forth and save the global economy!

Article Copyright © Ray Hays 2011 All Rights Reserved. Electronic distribution is permitted with citation of author’s name.