Exporting as a revenue generator
If you’re a manufacturer or a business owner looking to grow, consider adding exporting to your distribution mix.
Why? Because roughly 95 percent of the world population and 70 percent of the world’s wealth is overseas. The fact that most small American manufacturing companies limit themselves to domestic distribution constitutes a major missed opportunity.
Exporting brings many potential benefits. First and foremost is the potential for substantial growth in sales, revenues and profits. Adding export capacity diversifies sources of income, reducing dependence on the U.S. market and its ups and downs. It can blunt the impact of seasonality and it can absorb excess inventory, eliminating the need to sell at a discount. In addition, it can increase productivity, improve competitiveness and spur innovation.
All the same, exporting may not be for everyone. It adds complexity and it’s not risk-free. Deciding whether this is the best growth avenue for your company requires a two-part analysis.
The first part is to assess how export-ready your company is. Consider the following:
• Can you allocate funds for research of foreign markets?
• Can you increase production with the equipment you have? What about other production elements — labor, warehousing, and access to parts and materials?
• How easy will it be for you to obtain export financing?
• Finally, trade has its intricacies — shipping, foreign exchange, communication with foreign buyers. Are you willing to learn what it takes to do it right? The second part of the analysis focuses on the following externalities:
• Do you have a product or service that is in demand in overseas markets? Will it have price or technology advantages over already available products?
• How different is the business culture or political system in your target market?
• What about distribution networks? Labeling and packaging requirements? Tariffs? What other obstacles are there?
• All told, are the challenges acceptable or too much?
All this may make becoming an exporter seem daunting. Fortunately, there are resources available to Nevada companies interested in finding a way.
A bank with trade expertise is essential, particularly when it comes to helping you navigate the various financing options available (secured or unsecured loans, working capital lines of credit, asset-based lending, and offer you solutions to help extend terms to buyer and accelerate cash flow). Additionally, your bank can help you navigate Small Business Administration and other programs that guarantee export loans.
At City National, we also encourage and facilitate a relationship between export-oriented clients and the U.S. Commercial Service, a Commerce Department unit with offices in Las Vegas and Reno. There are qualifying requirements (including some that involve the percentage of U.S. content of the product), but the reward is access to a network of trade professionals located throughout the U.S. and at nearly 80 U.S. embassies and consulates — a network that provides trade counseling, market intelligence, business matchmaking and commercial diplomacy.
Additionally, Nevada Industry Excellence, which is the manufacturing extension program for the Nevada System of Higher Education located both in Las Vegas and in Reno, can help develop an actionable growth plan through its EXPORTECH program.
The competitive imperative is clear: grow or fall behind your market rivals. Exports offer an avenue to growth. Yes, exporting can make the entrepreneur’s life more complicated, but help is available and if you investigate this option, you may find that the rewards are potentially great.
Robert Saikali is vice president/manager of the international banking division for City National Bank.
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