Small Firms Don't Look Abroad for Business
BY Matt Quinn
July 21, 2004 -- Despite the opening of many global borders, small businesses are opting not to do business overseas and those that do look abroad are having difficulty identifying customers and reliable foreign sales representatives, according to a survey by the National Federation of Independent Business.
Just 13 percent of more than 600 businesses across a range of sectors made foreign sales in the past three years. However, the numbers improve for small manufacturers, with 39 percent saying they made overseas transactions.
"Although more business is transacted across international boundaries today than at any time in recorded history, the American small business sector is not taking advantage of this sales surge," said Denny Dennis, a senior research fellow at the NFIB.
The survey did not conclude why many businesses avoided international trade, but rather identified the obstacles faced by the manufacturers who actually ventured forth. Roughly half of the exporting manufacturers said locating prospects and reliable sales reps was their biggest problem. But 47 percent blamed themselves, saying that they lacked managerial expertise in exporting. Tariffs and regulations, as well as currency instability, were also given as major problems.
Of the businesses in the survey that did export, very few looked to the government for assistance, a point that the U.S. Commerce Department has been trying to change by promoting its services. Less than 10 percent turned to the Department of Commerce for assistance and just 4 percent asked the Small Business Administration for help.
Small businesses that export do so sparingly, according to the survey. Seventy percent of exporters reported that overseas sales accounted for 5 percent or less of total business.
Canada was the primary destination for exports, with 25 percent of exporters reporting their products going there. Asia was the second most popular destination at 14 percent.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.