Going Global: Can You Afford It?
Content provided by the Women Presidents' Organization
By Laurel Delaney
Determining how much you can afford to invest in your international expansion efforts can be a tricky proposition. Will it be based on ten percent of your domestic business profits or on a pay-as-you-can-afford process?
That's an excellent question. And my answer is: It depends. If we lived in a perfect world, here's how your initial export effort might pan out.
Your company manufactures hammers in Rockford, Illinois. Your chummy neighbor down the street produces screwdrivers and you are quite aware she has been selling them to a customer in Oman for years. One morning, you stop in for your usual cup of Starbucks coffee and there sits your neighbor reading the daily newspaper.
You casually bring up your interest in expanding your business internationally and she responds by sharing her export success story on shipping screwdrivers to a customer in Oman. You ask, "Do you mind if I try to sell my hammers to your customer? I don't see any conflict of interest." She answers, "Not at all. I'll get you his name and email address this afternoon. Keep me posted on progress." It can be that simple. Non-competing products can be sold to the same customer and through the same distribution channel.
You then contact the customer. He replies asking for samples and pricing. You send them off. Two weeks later, you have an order. You ship and earn a U.S. $20,000 profit on the transaction. You are well on your way to increasing sales, yielding greater profits and building a global empire. A dream come true -- yes -- but most of us realize we don't live in a perfect world.
Realistically, developing export sales can take anywhere from a couple of weeks to several years depending upon the nature of the product, its competitive position, your experience, the economic climate, pricing and worldwide demand. I anticipate though that if you have a long-term outlook, it might take from 3 to 5 years to build a permanent overseas market position. If your vision is shorter, then sales can take place immediately.
In terms of money, it's hard to say how much you will spend. A good way to estimate is to use your domestic operation as a mirror on how well you might perform internationally. For example, if you have achieved success capturing a local share of market, then you will most likely achieve similar success in the global marketplace provided you target your market and select the right product for export. As a quick mental exercise, think back to when you first started selling your product. Did you have an action-oriented plan in place to cover progress made no more than 12 to 18 months down the road? Did it work for you? How much money did you spend? Then think along the same lines when you begin to export but double the amount of time and money expended.
If you are new at selling, I caution you to allow a couple of years to get established on an export-only-basis. Before you begin your journey, develop a simple strategy with a realistic timetable for each action. The shorter the timetable, the better your chance of making adjustments along the way. Your focus should be on what you are going to export, where you are going to export to, and by what date. Risks are greater for overseas orders than for similar orders from a local market.
Don't think for a minute that jumping into the export market is a sure ticket to sales success. But if you develop an international action-plan and cultivate one other fundamental competency - "stick-to-itiveness" -- before you go global, your chances for success overseas will certainly improve.
Copyright ©2005 Laurel J. Delaney. All rights reserved.
About the Author:
Laurel Delaney runs GlobeTrade.com and LaurelDelaney.com, both Chicago-based firms that specialize in international entrepreneurship. She is also the creator of "Borderbuster," an e-newsletter and The Global Small Business Blog, which are both highly regarded for coverage on global small business. Laurel can be reached at email@example.com.
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