Foreign Affairs

Profile of start-ups doing business internationally.

Tweet

Start-ups such as National Gyp-Chipper are proving that, when you move from doing business next door to doing business around the world, the same basic rules still apply

It would be a stretch to call Pflugerville, Tex., a hub of international commerce. It doesn't look the part -- it's small and sleepy, served by banks gone belly-up and now run by the government -- and it doesn't boast any big companies that you'd typically think of as global rollers.

But in a warren of tidy offices on a dusty side street, a manufacturing start-up is doing global deals: Shipping product to Britain. Taking calls from Dutch distributors. Soliciting financing from Israelis. Entertaining Japanese businesspeople over barbecued ribs.

Admittedly, the company isn't likely to turn the town into an international nerve center anytime soon. National Gyp-Chipper Inc., after all, sells machines that shred excess gypsum board -- not computer peripherals or running shoes or any other product likely to take the mass market by storm.

Besides, the company is painfully typical of a start-up: sparsely funded and thinly staffed, with little obvious incentive to pursue markets eight time zones away and certainly no experience in doing deals that require wrangling through barriers of language, export law, culture, and currency.

But that's the point. With just five managers, seven plant workers, and a little more than two years' manufacturing experience, National Gyp-Chipper has entered the domain most people think is reserved for savvy, seasoned, well-networked, and well-established companies: the world of international commerce.

Many perfectly capable companies shy away from selling outside U.S. borders, just because they think they're too small or too unfamiliar with trade practices or lacking the right in-house personnel. But when young companies like National Gyp-Chipper do go abroad, most find they don't run into the vexing headaches that seemed imminent. Instead, the fundamental challenges apply: figuring out reasonable contracts, getting good patents -- and above all, finding the right people to work with.

And many growing companies are meeting those challenges. In a 1988 INC./Price Waterhouse survey of manufacturing and service companies with revenues between $1 million and $100 million, one out of every five respondents that did have international activities claimed that more than 25% of their sales came from overseas. More than 60% of the respondents said that their foreign operations had become profitable in less than one year.

Even more surprisingly, many companies cultivating foreign customers and partners are, like National Gyp-Chipper, start-ups in their first few years of sales. Indeed, instead of asking, Why go global? a whole generation of new businesses are entering the marketplace and asking, Why not?

Benny Turner is driving a tan Silverado from Austin to Pflugerville, a town about 10 miles north, pointing out two kinds of landmarks along the highway. First are empty offices and shopping centers that line the main thoroughfares, the unmistakable signs of Austin's fall from economic grace. "See those dead buildings?" Turner says, nodding toward a mall complex where half the stores sport For Rent signs. "That's what our economy looks like."

The other landmarks are buildings on which Turner worked as a drywall contractor and distributor over the past 30 years. He estimates that he helped put up gypsum board in 20,000 apartments and 400 stories of high-rise buildings. It was through industry contacts that Turner and partner Jack Mallory first heard about the Gyp Chipper machine. About the size of two trash barrels, the $10,000 Gyp Chipper pulverizes scrap gypsum board and turns it into easily transportable and potentially recyclable powder. Invented by a fellow in Minnesota, the machine was just being brought to market when Turner first saw it -- and it was, he says, the answer to one of a contractor's biggest headaches: getting rid of the junk that piles up at a construction site. Turner saw its appeal immediately, and in 1987 he and Mallory acquired the marketing rights to the new machine. Two slow sales years later, they and a third partner bought the manufacturing rights so they could fix problems they saw in the machine's design and production.

In the past year National Gyp-Chipper has sold 102 machines, for total sales of $528,000 and profits between $50,000 and $100,000. It's begun a new venture, called White Gold, to build plants that will turn the powder into soil additive and other products. A feasibility study for the first plant is now under way in Vermont. In the past year the company -- barely off the ground domestically -- decided to look into marketing the product outside the United States.

 1 | 2 | 3 | 4 | 5 | 6  NEXT 

Read more:

Sign-up for our Small Business Success Newsletter

Email Address: