Small Talk: Export revival under way for small businesses
When Lawrence Scheer began selling baby clothes in 2010, he didn't realize he was on the leading edge of a recovery in small-business exports.
Scheer's company, Magnificent Baby, manufactures its products in China and then sells them in about 20 countries around the world.
"Our goal from the beginning was to sell as much clothes as possible so when international interest was there, we pursued it," says Scheer, whose business is based in New York.
Scheer took a chance that many small-business owners have only recently decided to take. A growing number of companies are turning to exporting to build their sales, reversing a downturn that began with the recession and was likely made worse by the financial crisis in Europe.
Research shows an increase in overseas sales by companies already exporting, and a growing interest in exporting among those who have yet to test the international waters. Exporters say demand for their goods, from clothing to blankets to crop-dusting planes, is rising. That makes it worth their while to deal with the complexities of exporting.
Magnificent Baby gets between 5 percent and 10 percent of its revenue from exports strong enough that the company is adding to its network of distributors, local businesspeople who accept delivery of exported goods and get them into customers' hands.
Sixty-four percent of small businesses are exporting goods or services, up from 52 percent in 2010, according to a survey by the National Small Business Association and the Small Business Exporters Association. And 63 percent of non-exporters said they're interested in selling overseas, up from 43 percent, according to the trade groups.
That's a comeback from the decline that started when the economy began to slump.
For some companies, overseas demand for their goods is growing faster than domestic demand. Love and Quiches, which supplies cheesecake and other desserts to restaurants and stores, has had a 20 percent to 30 percent increase in export sales each year for the past five years, according to the company's president, Andy Axelrod. U.S. sales rose between 5 percent and 12 percent.
Love and Quiches, which gets 25 percent of its revenue from exports of desserts including cakes, cheesecakes and brownies, sells to customers in more than a dozen countries that want U.S.-made products, particularly those considered high-end, Axelrod says.
Breaking into the export market can be intimidating. Many small businesses have shied away from selling overseas because of concerns about risk and the unfamiliarity of business practices in foreign cultures, especially where English isn't spoken, says Donna Kelley, a professor of entrepreneurship at Babson College.
"We tend to sell to what we're familiar with and we're familiar with the U.S. culture," she says.
Small businesses that export to a number of countries have a learning curve each time they enter a new market.
The first time Kingsdown shipped its mattresses to another country, it was an unfamiliar market with different business customs from the U.S., says Frank Hood, CEO of the Mebane, N.C.-based manufacturer. That was 20 years ago, and the customer was in Kuwait. Now the company sells to more than 20 countries, with China the most recent addition. Exports account for between 10 percent and 15 percent of Kingsdown's revenue.
When Hood considers exporting to a country for the first time, he has to decide whether the mattresses should be manufactured at one of the company's five U.S. factories or in plants overseas. He has to learn about regulations in each country that might affect how products are made. For example, he says, some countries want the mattresses to be fumigated so that pests aren't brought in.
And Kingsdown structures each deal to minimize the risk that it takes because it's working with customers thousands of miles away. Hood says the company has never been burned by an export customer.
"If it's based in a country we're not familiar with, we ask for 30 percent to be paid up front to cover any risks," he says. "It's not unheard of to get even 100 percent."
Joyce Rosenberg covers small business for The Associated Press.