Have you considered the potential benefits of exporting your company’s products or services into the United States? If not, you may be neglecting the largest, richest and most responsive market in the world.
Jim Pettinger, the president of International Market Access, Inc., which helps Canadian companies export into the U.S., believes that many Canadian small business owners and entrepreneurs are either confused or intimidated when they hear the words ‘export’ or ‘international trade.’
“But with the right planning, small business owners in Canada can and should approach the U.S. like an extension of the Canadian market,” he says. “Once you’ve developed some basic procedures for dealing with the international boundary, exporting to the U.S. can be both easy and lucrative.”
A Huge and Receptive Market
The United States is a huge market of more than 300 million consumers who welcome foreign products. What’s more, the U.S. government is very cooperative when it comes to helping Canadian businesses get a foothold in U.S. markets.
According to Pettinger, Canadian business owners can readily obtain a B-1 visa that will enable them to travel within the U.S. for marketing and other business purposes for up to six months. “And once you’ve gone through the appropriate security procedures (like basic fingerprinting and photographing), you can have access to fast-track border crossings unavailable to most other visitors,” he adds.
The Canadian government has also instituted programs to help facilitate business across the southern border. In addition, Canadian businesses are generally well-respected in the U.S. and considered to be trustworthy. “Canadian goods and services are often perceived to be of high quality and a cut above by U.S. customers,” Pettinger notes.
Secret to Success: Think Domestic
The secret to successfully exporting your products or services to the U.S. is to “think domestic” by establishing a presence for your business in the United States. This doesn’t necessarily have to be a physical presence-you just need for your U.S. customers to perceive that your business has a presence south of the border.
In other words, you should organize all the logistics of your business so that American customers do not believe they will have any additional concerns in dealing with a Canadian firm.
“For example, they need to know that they can deal in U.S. dollars and have their products shipped from or returned to a U.S. address,” says Pettinger. “All of your communications, logistics and other activities should be handled from a real or virtual U.S. branch office or warehouse.”
Regardless of whether your U.S. branch or warehouse is real or virtual, having a US presence will pay big dividends in cost savings, response time and control. You can plan ahead to anticipate storage of trade show booths and the purchase of collateral materials in the U.S., as well as for returns and repairs. And you can avoid headaches by shipping your products, literature and other material directly through your nearest U.S. port of entry.
It’s also crucial that you get to know the U.S. marketplace first-hand. “Many Canadians think they know everything about the U.S. through what they see and hear in the media, but you can’t just start advertising to Americans from your Canadian base and expect immediate success,” says Pettinger. You need to spend some time with your “boots on the ground” conducting first-person research in potential new market areas in the U.S.
Also, remember that the United States is a huge market, so you must focus your limited resources. “Most Canadian success stories in the U.S. result from niche, rather than broad, marketing efforts,” says Pettinger. “Your company’s specific niche market in the U.S. consists only of those prospects you can reasonably afford to reach.”
Meeting Financing Challenges
Another critical ingredient to exporting success is financing. You must ensure that you have adequate working capital in place-or if not, that you have adequate access to outside financing, such as a factoring arrangement-before you consider exporting to the U.S.
There are three main ways in which having a factoring arrangement in place is important to your long-term success in the US:
1. It allows you to fulfill large orders.As an exporter, you should be prepared to fulfill large (and often unexpected) orders at any time. You might need to add a zero to your line of credit limit-bumping it from $50,000 to $500,000, for example.
Banks generally don’t consider U.S. receivables in their margin formulas, and they take a long time to determine increases in lines of credit. But factoring lines are dependent on the creditworthiness of your customers, not the amount of your receivables, so the availability of working capital can be increased as fast as new sales are generated.
With factoring, your business will receive 80 percent to 90 percent of factored receivables in the form of an advance when the receivable is presented to the factor. Compare this to waiting from 30 to 90 days or longer to receive payment and you can see the tremendous cash flow benefits to exporters.
2. It provides payment security.When exporting to the U.S., you’ll start doing business with companies you don’t know, which can be dangerous. A factor will perform extensive credit checks on U.S. customers before you ship your products or perform your service. This will significantly reduce your risk of selling to slow-paying and non-paying customers.
3. It accelerates customer payments.Often, U.S. businesses pay invoices presented by factors faster than other invoices because they know the invoice will be accurate and the paperwork will be in order-and that they will be getting a call if it is past due. Also, U.S. businesses know that factors report directly to all the major credit bureaus. Simply put, a factored invoice typically gets more respect than one from a small Canadian supplier.
Unless you have significant working capital resources at your disposal-or you’re confident that your bank will increase your line of credit if needed (perhaps substantially)-you should consider speaking with a factor before starting to export into the U.S. If you line up your financing ahead of time and take the steps discussed in this article, you’ll greatly increase your chances of U.S. exporting success.
Tom Klausen is the senior vice president of First Vancouver Finance in Vancouver, BC. Tom has extensive experience in providing alternative financing solutions to small business owners. He also provides business management consulting services to both traditional and non-traditional lenders throughout North America. You can reach Tom at (604) 988-1490 or via email at TKlausen@fvf.ca or visit http://www.fvf.ca.