Last June, Bob Pattison was sailing across the Atlantic in a 44-foot yacht when a monster storm hit. The wind kicked up to 55 knots. Swells reached over 20 feet. Many sailors would have faced such a violent squall with dread. But Pattison stared it down with confidence. The 46-year-old Las Vegas native had designed the yacht's sails himself, and he knew that they'd get the vessel and its crew to Crookhaven, Ireland, safely, no matter how treacherous the conditions. "When you're in the middle of the seas in a gale, you come to appreciate the work you do," Pattison says.

Back home, at the Milford, Conn., headquarters of Neil Pryde Sails International, Pattison and his partner, Tim Yourieff, are piloting their sail manufacturing business through rough economic waters. Until recently, the company derived 90% of its revenue from the U.S. market. But because of terrorism fears and the economic slump, Neil Pryde's sales to charter sailboat operators dropped 80% in 2003, as would-be vacationers nixed plans for cruises. That, coupled with fewer orders from other customers, sent Neil Pryde's revenue down about 11% this year. What's more, U.S. growth opportunities are few and far between: Sailboat sales have dropped 22% from 2000, according to the National Marine Manufacturers Association. All of which led the partners to a sobering conclusion: "Having 90% of your business in one market is dangerous," Yourieff, 48, says.

So the pair is charting a new voyage to the Continent--pushing to get their sails into the lucrative European boating market. High tariffs had long rendered Europe off-limits. But the U.S. dollar has lost considerable value compared with the euro, making Neil Pryde's sails competitive for the first time in years. But how does a lean, three-person operation become an exporter without major investment? And is it wise to base a strategy on fickle currency fluctuations, considering that the greenback will eventually make a comeback?

Yourieff, managing director, and Pattison, technical director, are no strangers to trying new tacks. Six years ago, their sail-making business was a division of a larger sports equipment company, Hong Kong-based Neil Pryde Limited, founded by the legendary New Zealand sailor and former Olympic competitor Neil Pryde. As the parent company expanded beyond sails to consumer goods such as gym bags and tennis racket covers, the duo grew frustrated at being just another business unit. So in 1997, Pattison and Yourieff purchased the sail-making unit. In exchange for royalties, they gained the exclusive license to make and market sails with the Neil Pryde name and distinctive, blue bull's-eye logo.

Yourieff and Pattison now manufacture about 4,000 sails a year--everything from $170 standard sails for smaller boats to $20,000 custom models that power former America's Cup racing yachts. Using proprietary software, Pattison and designer Scott Mogle design the sails in Milford and e-mail the specifications to manufacturing facilities in China. (All Chinese business is transacted in U.S. dollars.) Computer cutters slice sheets of fabric--from woven polyester to pricey, high-tech laminates--into panels that are stitched together on $40,000 sewing machines. Finished sails can weigh up to 250 pounds.

Since Yourieff and Pattison took over, the company's revenue has risen 10% annually on average, to nearly $3 million in 2002. "These guys have been pretty far ahead in seeing that if you take good fabrics and good designs, you can send those to cheaper labor markets and wind up with very good sails at very good prices," says Duncan Skinner, president of Contender U.S., a Fall River, Mass., fabric supplier to the sails industry.

That was true everywhere but the boating world's most prized market--Europe. Boatmaker Beneteau USA, Neil Pryde's biggest U.S. customer, for example, produces about 400 boats a year. The company's French division, by contrast, cranks out 4,000 annually. Unfortunately, tariffs of some 14% made Neil Pryde sails much more costly than European brands. The dollar's slide gave Pattison and Yourieff a rare chance to use exports to offset slowing sales and even expand.

For two lifelong sailors, crossing the seas in search of new markets seemed like a natural step. But the journey was potentially perilous. After all, Europe was new territory, with unfamiliar languages, regulations, and business customs. Scariest of all was the possibility that the dollar might rebound, raising Neil Pryde prices and forcing deep cuts in profit margins to stay in the game. Was it worth taking a risk?

The Decision

The company began its move into Europe in late 2002, only to push even harder this year, as the greenback continued to weaken. In the 18 months leading up to August, the currency lost about 25% against the euro. That's made Neil Pryde sails about 10% cheaper than European ones, even with the tariffs, Yourieff says.

The company already had a small network of independent agents on the ground in Germany, Italy, Malta, and the Netherlands, selling custom sails to individual sailors. In July, it added a fifth agent, in Denmark. (Rather than being salaried employees, agents are independent contractors who receive sails at wholesale and get exclusive territory in which to operate and a 5% rebate on sales to spend on marketing.) By August, sales to Europe had grown to 15% of Neil Pryde's business, compared with 8% in 1997. "We were able to do all this with no increase in costs," Yourieff says.

Of course, it's one thing to get orders and something else to manufacture and ship the final product. International commerce is a notoriously headache-filled enterprise, requiring traders to navigate a maze of confusing customs fees, regulations, and paperwork. But Neil Pryde found it could simply outsource all this to UPS, which deals with customs brokerage hassles. That's helped the company ship most of its sails within three weeks of receiving an order.

With the infrastructure in place, the next step for Neil Pryde is cracking the large European boatbuilder market. The company's first major investment in Europe might be in a bilingual representative in France, the largest European market.

For now, currency markets show no signs of spoiling Neil Pryde's plans. If all goes well, Yourieff sees the Europe business rivaling the domestic one. Besides, he adds, a rebound in the dollar down the road might not be so painful. "Once we're established, if our price goes up to equal the competition, they are not going to kick us out," Yourieff says. What's more, currency is a two-way street: "If the dollar gets strong, it will be a sign that the U.S. economy is improving, meaning an increase in opportunities for us here."

Sidebar: The Experts Weigh In

Richard Lyons

Hass School of Business, UC-Berkeley
Professor of finance and economics

Neil Pryde should think about hedging against a stronger dollar by setting up financial contracts such as forwards, futures, or options. The contracts are essentially a form of insurance that would pay out if the dollar increases in value, and thereby help offset a likely decline in sales. The flip side, of course, is that insurance has a price and if the dollar weakens, the company will have to pay out the hedge, or give away upside to protect against the downside. But that may be a small price to pay for protection against the larger risk.

Steve Boerema

Cabo Yachts Inc., an Adelanto, Calif., Boatmaker
International sales manager

Neil Pryde's goal is to expand, and that needs to be done not just domestically but internationally. The company is going to have to be concerned with servicing clients through its representatives, who must have the same business philosophy that made it successful in the U.S. If the amount of business justifies it, an in-house employee in France would be a good idea. A rep will serve one master and be focused on the company's product. The independents it has now are more than likely also handling other companies' lines. Putting a full-time rep over there could also help build relationships with the client base and keep Neil Pryde on top of credit and finance issues.

Jack Kahl

Jack Kahl & Assoc., a Cleveland consulting firm
Chairman and CEO

Neil Pryde should not build a big business in Europe expecting the American dollar to stay low. With the European tariffs being what they are, I would view the move into Europe as icing on the cake. The weak dollar is not going to last. While I was building market share in Europe, I would make awful sure that I was building strong personal relationships with my customers and agents. That way, if there is euro-dollar parity, Neil Pryde will have relationships, as well as the expertise to help it hold on to its business. But the company should focus its efforts in the U.S. It's already successful here. It's a long way from having to worry about having to be an international player to make money.