Expanding Into Exports: An Overview
Kimberly Ullner founded her specialty food company, 1-2-3 Gluten Free, eight years ago. She's since seen interest in gluten-free products flourish, and her products are now found in most of the U.S. Now the Orange resident says she’s ready to take her products global.
"The European Union, Central and South America, and the Middle East," Ullner summarizes.
Of course, there’s a lot involved in shifting to the export market. Labels need to be translated into foreign languages and converted to different measuring systems; there's special packing and shipping arrangements to be figured out; and meetings with international clients can become diplomatic fiascoes if certain cultural norms aren't followed. But Ullner says if she can make it overseas, it'll pay off.
"The diversification with being in the foreign markets is very helpful, it allows us as a company to ride through tougher economic times here."
"If a company has about 30 percent of their revenue from export, they're basically recession proof," says Nate Ward. He's Director of the International Trade Assistance Center, at Cleveland State. He says with 70 percent of the world's purchasing power outside the U.S., there's ample territory for companies to tap into.
"Exports still just account for under 14 percent of our Gross Domestic Product (GDP). Germany by contrast - the largest economy in Europe - 40 percent of their GDP is in exports. So there's lot of opportunities left. It's a matter of determination, and focus."
Money and guidance don't hurt either. Ward says his staff can help companies learn about financing, grants, and other nuts and bolts of moving into exports. And Susan Whitney, Office Director for Cleveland's U.S. Exports Assistance Center, says her staff works directly with 200 regional companies a year, to find potential partners overseas. Hearing her talk about being shrewd and choosy, it almost sounds like…dating.
"A lot of time companies will go with the first company that talks to them", explains Whitney. "And eventually when their sales grow and they realize that they should be selling more, that may actually limit the amount that they can sell in that country. Then they have the problem of trying to get out of a business relationship."
Michael Knoblauch has learned much in exporting his product to China. He's CEO of DVUV, a Cleveland company that applies specialized, colored coatings to wooden furniture and similar products. Today, his workers are finishing teachers' desks.
"The heat bonds it, the electro-static applies the powder," explains Knoblauch, as we walk through the production area.
Knoblauch says exports make up between 10 to 20 percent of DVUV's annual volume. He says he first began exporting to China almost a decade ago, after deciding it provided a great opportunity for his company to grow. His immediate advice for companies? Invest heavily in quality control, when shipping your goods.
"`Cause what you don't want to have, is your product arrive and be deemed unqualified…"
And by "unqualified", Knoblauch means damaged.
"…..now you've got significant business problem because your customer doesn't have product to use to sell to their customers."
Other advice? Research your potential markets. Ron Swinko is CEO of Jet Wastewater Treatment. Its business fluctuates along with home construction. After joining the company in 2010, Swinko pushed hard for exports, which now account for a fourth of Jet's revenue. His company has sold wastewater treatment systems in the U.S., but looked into Mexico, Latin America, and Africa when domestic housing took hits in 2009 and 2010.
"We saw international sales and exporting as a way to not only offset that, but also take some of the seasonality out of our business. Housing construction in the U.S. tends to be seasonal, in the developing countries the seasonality doesn't really exist there, because weather allows for construction year-round."
Swinko also advises companies to assess the competition, as many consumers in foreign countries like to buy locally.
As for helping economic growth, a recent report by the Brookings Institution shows exports created nearly 600,000 jobs in the U.S. between 2009 and 2010, with roughly a fourth of those in Ohio. Cleveland's exports alone were valued at $12-billion.