U.S. companies seek expansion via exports
The interior of Hormann Flexon LLC's Pittsburgh manufacturing facility, located in Leetsdale. Hormaann Flexon manufactures industrial doors.
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Before international sales accounted for 80 percent of business at Green Tree-based oil removal company Universal Remediation, CEO Ray Tarasi had to figure out how to ensure that transactions with foreign customers provided the same quality of service and likelihood of payment that come with domestic clients. It wasn't long before he realized he would have to drastically adjust some of his methods to operate outside the U.S.
"I had a conflict in an area where we shipped our product and [the company] said it wasn't all there. It was damaged. Two of the skids didn't come in," he explained.
"We found out the hard way to get the money and then [correct] the shipment if it's required."
Five years into the journey, Mr. Tarasi is still getting to know the ins and outs of international operations as his company has grown immeasurably stronger from the influx of business.
"It's a learning curve. You ship something out of the country and you fight to get paid. And there are some countries that will delay you just to hang on to your money," he said.
He declined to identify the questionable nations, noting that risk can't be a barrier to opportunity when it comes to international sales.
"I don't want to be specific because we may want to deal with those countries next week or next month or next year," he admitted with a chuckle.
Bridging the gap between small- to medium-sized American business owners and billions of potential customers around the world takes more than an Internet connection, a FedEx Air account and a spark of interest from overseas. In reality, navigating even the simplest international transactions introduce business owners to bureaucratic and cultural obstacles that some find prohibitively daunting.
Hoping to push more small- to medium-sized owners past their reservations, during his 2010 State of the Union Address President Barack Obama, a Democrat, introduced the National Export Initiative. The initiative pledged to double exports by 2014 by bolstering funding for the Export-Import Bank -- the nation's official export credit agency -- creating an Export Promotion cabinet, re-establishing the president's export council and promoting trade agreements, in addition to several other goals.
The country's exports of goods and services jumped 17 percent from 2009 to approximately $1.84 trillion in 2010. Last year, the total grew to $2.1 trillion.
Pennsylvania, with 84 percent growth since 2004, did approximately $34.8 billion in exports in 2010 with Pittsburgh's metropolitan area accounting for $8.3 billion. State exports increased by 17.8 percent in 2011 to $41 billion. The state ranked 11th in the nation in total exports last year.
Despite the gains, the country's trade deficit increased $10.3 billion from December 2010 to December 2011, reaching a total of $560 billion.
Brent Rondon, manager of the global business program at Duquesne University's Small Business Development Center, said the country can close the gap not only by encouraging small businesses to export, but by helping those who already export to expand their customer base.
"Out of 30 million businesses in the United States, only 1 percent export. From that 1 percent, you will find 50 percent export to only one country," he said.
"The potential is there and it's just as worthwhile to invest in a second market," he said.
Noting that the United States has signed free trade agreements with at least 17 countries, Mr. Rondon said small business owners still overwhelmingly choose to export to Canada or Mexico to avoid perceived hassles in other countries. China recently moved past Mexico as the second most popular country for American exporters.
Mr. Rondon said many business owners may not consider going beyond the borders of a single nation because they wouldn't know how or where to begin working inside of an unknown country. What many business owners don't know is that the U.S. Commercial Services, the International Trade Administration's trade promotion arm, places commercial officers in U.S. embassies worldwide to do the work of learning the countries' commercial needs and practices for them.
Pennsylvania's companies are in an even better position, since the state's Center for Trade Development operates 23 overseas offices that provide liaisons for more than 67 markets.
Kevin Jones, CEO of South Side-based environmental services and remediation company Cardinal Resources, has worked with the U.S. Commercial Services office in Pittsburgh since 2003, when he made the leap into exporting. Well aware that there was a robust international market for his product, he said one of the most valuable pieces of advice was where not to do business.
"We were asked to participate in a trade show, a group was going to the Czech Republic or another Eastern European country," he began. "We were able to get on the phone with Commercial Services and the people both here locally and in the country, and very quickly they listened to what we had to offer and said, 'Listen, there's not a market here for you.' "
Mr. Jones said the organization was also a resource when he faced problems with currency fluctuation in Australia and when dealing with tax issues in Brazil. But still a business owner must take on the responsibility to research a country's language, regulations and workplace culture in order to be successful.
"U.S. Commercial Services is a tremendous organization and really underappreciated and underpublicized in terms of the services they can offer. At the same time, they can't do magic for you. You're going to have to put in the effort as well and really listen to their advice," he said.
One additional effort beyond relying on Commercial Services is relying on someone who is familiar with the export nation and who has the ability to make an immediate impact.
When Honduras-born Carlos Turcios joined Flexon Inc., a Leetsdale-based industrial door manufacturer now named Hormann Flexon, as its international sales manager in 1994, he was able to hit the ground running in Mexico to find buyers and distributors for the product because of his knowledge of the country's language and culture.
Since then, the company has established customers and distributors in Central America, South America, the Caribbean Islands and several Middle Eastern countries. Hormann Flexon posts average sales of between $15 million and $50 million per year, about 20 percent of which comes from exports.
The country's model of establishing distribution centers in different countries takes Mr. Turcios around the globe several times a year to work with dealers, open centers and train distributors in installation, sales and service procedures, a process he believes is integral to its success.
"Small companies can start this way. They can start by having a person to take care of the market outside the United States who knows the language and is able to travel and is willing to support the business. Some companies just want to sell it and run away, but they have to support it, they have to stay on the top of their game," he said.
Even without expert help, determined small business owners can learn how to get past the barriers associated with new countries on their own.
Mr. Jones said he uses professional translators, hires multilingual employees and sent an employee to intensive language training to prepare to set up an office in Senegal. Mr. Tarasi, on the other hand, works with customers who have English-speaking contacts, uses Google Translate to send and transcribe documents in different languages and learns to adjust to language and other barriers on a case-by-case basis.
No matter what course small businesses take on the path toward an international presence, business owners who have already taken the leap say it's more than worth the effort.
"When the United States isn't doing well economically and you have factories outside the U.S. that still need our product, we're able to keep our power plants busy, keep the people we employ busy and are able to make a profit," said Mr. Turcios.
"Do it," urged Mr. Tarasi. "If you start now it might take you six months, it might take you three months, but once you're set up, it's good."
First Published March 20, 2012 12:00 am