Chapter 29
OPTIONS FOR GROWTH

IN This Chapter
Export and import
Green business opportunities
Dealing with large organizations

Many small businesses grow more or less by default, as demand for their product increases within an existing market. Other businesses make a strategic decision to grow by pursuing new products and new markets. Common growth strategies include expanding into foreign markets, selling to large businesses or the government, or offering greener products. These topics are complementary, because in many cases, selling to a foreign market, a large contractor, the government or the U.S. military will require you to pursue greener business practices.
Export and Import
Thanks to globalization and e-commerce, small U.S. businesses are finding profitable opportunities all over the world. Foreign sales can solve cash flow problems, extend a product’s life cycle and fuel innovation.
That said, international trade is not for everyone. It takes exceptional selling, negotiating and management skills, as well as plenty of flexibility and patience. And of course, it also requires a clear, detailed and realistic international marketing plan.
Fortunately, you’re not on your own; many U.S. government agencies, instructors, mentors and other experts are available to help you develop and execute your plan.
Are You Ready to Export?
Consider your own abilities and resources.
Demand. Do you feel reasonably sure that a current or planned product will be viable in a foreign market?
Commitment. Can you dedicate the time, energy, resources and staff that exporting will require, given that the investment may not pay off for years? Can you afford to take foreign business trips, some of which may be necessary on short notice?
Financing. Do you have the financing you need to adapt and market your product to foreign consumers?
Capacity. Can your facilities and staff meet additional demand? Are your accounting, marketing, sales and logistics teams ready to serve foreign customers? Can your website handle foreign sales and inquiries? What about shipping, tax and currency? Can you deliver the same level of service—including after-sales service—that domestic customers expect?
Adaptability. Does your product require adaptations to foreign safety, quality or technical standards? Does the cost outweigh potential benefits?
Knowledge. Are you familiar with the culture, laws and business practices of the foreign market? Do you have relatives, friends or business partners in your target country? Will you be able to conduct primary market research?
Language skills. Do you have language skills or access to someone who does? How will you use these skills to compete in the foreign market?
Intellectual property. Will you need to protect trademarks, patents or trade secrets in one or more foreign countries? Do you understand the relevant laws?
Expertise. Do you understand shipping processes, such as completing common export documents and managing freight forwarders? Do you understand export financing and payment instruments, such as time drafts and letters of credit?
Legal issues. Do you understand U.S. export controls, licenses and regulations? What about foreign laws and restrictions? Will you be able to comply with both sets of laws while remaining competitive?
Evaluating Export Markets
The process for researching a foreign market is similar to the market analysis process outlined earlier in this book. The main difference is the source and type of data needed. Issues to consider include:
Unmet needs. Is there a market for your product that isn’t being served by domestic or international competitors?
Familiarity. Are you selling something consumers know about and appreciate, or will you need to educate them?
Income level. Is your product a necessity or a luxury? Can people in your target market afford it? Don’t just consider the product itself; you should also consider its size. Amounts that are standard in U.S. markets may be too large for foreign households with lower earnings or less storage capacity.
Direct and indirect competition. Who is your foreign and domestic competition? How and where do they sell? How does your quality and price compare to theirs? If your domestic competitors aren’t exporting, why not? Are they missing a golden opportunity, or do they know something you don’t?
Infrastructure. Does your target country have the necessary infrastructure for your product? Consider transportation, roads, electrical systems, refrigeration, phone, Internet, water and so forth.
Supply chain. Some countries won’t have the distribution networks and raw materials you need. Research local carriers and suppliers carefully.
Incentives and assistance. Do U.S. or foreign agencies offer export assistance or incentives for small businesses?
Tariffs and import fees may be imposed on imported goods, raising their price to a point where they’re no longer competitive. You must research these fees before entering a foreign market.
Demographic and psychographic trends. How are U.S. products viewed in your target market? Are they seen as desirable, or do people prefer local or regional products?
Labor and employment. Will you hire foreign employees? If so, will they have the necessary skills and training? What laws apply to employers?
Localization. There’s more to preparing your product for a foreign market than translating your packaging and website. You may also need to “translate” the product itself. The response to colors, images, language, materials, promotional methods, and product purpose can vary greatly from one country to the next. For a fee, a localization service can help you adapt your products and website to foreign standards and preferences. Note, though, that adapting your product to a foreign market may downplay or eliminate qualities that make it special.
Export and import controls. You’ll have to comply with the Export Administration Regulations (EAR) of the U.S. Department of Commerce, in addition to embargoes, border control measures and antiboycott regulations. For more information, visit www.bis.doc.gov. You must also research and comply with all import regulations and restrictions in your target country.
Marking and labeling. Common marks include hazard symbols and logos relating to recyclable content. Labeling requirements generally deal with issues like size, weight, country of origin and nutritional content. Not all of these requirements are mandatory in the legal sense. However, a product that lacks them may be at a strong disadvantage. The U.S. Trade Information Center can help you understand packaging and labeling regulations in your target country. Call 800-USA-TRAD(E) for more information.
Extended producer responsibility (EPR) laws shift waste disposal costs from taxpayers to private industry by requiring producers to take back spent products or packaging. Examples include the EU’s European Packaging and Packaging Waste Directive and Japan’s Home Appliance Recycling Law. Exporters normally pay a packaging recovery company to do this job for them. The cost of this arrangement varies according to the type and amount of material used, and by country.
Dispute resolution. How will business disputes be resolved? What laws apply?
Pricing. Can you cover all your export-related costs and still sell at a competitive price? Research local prices, as well as export distribution fees, marketing costs, tariffs, localization costs and packaging recovery fees.
When considering which foreign market to enter, try to initially limit yourself to one or two promising options. Choosing countries that have similar cultures, and are located in the same region or trading bloc, may simplify research, marketing and other tasks. Note that although secondary data can be very useful, especially for assessing general market conditions, primary data may also be necessary.
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I always have to laugh when I hear the phrase “dirt cheap.” When you think about it, dirt is one of the most valuable things there is. You can put houses on it, raise cattle on it and—maybe most important of all—grow crops in it. Good agricultural soil is precious; we literally can’t live without it. So for me and my team, dirt is very serious business.
While working toward a degree in soil science at University of California—Riverside, Tom Corliss became fascinated with the process of creating high-quality agricultural soil from compost and other waste materials. As an enthusiastic gardener, scientist and fledgling entrepreneur, Tom created a low-tech, easy-to-assemble set of interlocking composting bins that produce clean, rich soil from food scraps, landscaping wastes, biosolids, industrial organic sludges and manures. Since then, his “SoilBox” bins have been incorporated into large-scale composting systems for commercial growers.
SoilBox products are manufactured under contract by a firm in El Centro, California. Customized models are sold all over the country to commercial growers, zoos, state parks, resorts and golf courses.
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Conducting Market Research
The first step in researching a foreign market is to get the classification codes for each of your products, as most data sources require you to enter these numbers when conducting research. You will also need these numbers for export documents.
Harmonized System (HS) codes. These six-digit codes are developed by the World Customs Organization and are used worldwide to classify import and export goods for customs purposes.
Schedule B codes. These 10-digit codes are used by the U.S. government to track U.S. export goods for statistical purposes. You can find Schedule B codes for your products at uscensus.prod.3ceonline.com; the first six digits will be identical to the HS code.
Like the United States, other countries add extra digits to the HS code to track exports and imports and apply import tariffs. Minor numerical differences can have major tax implications, so it’s important to learn the full classification code for your product in each of your target countries. An Export Assistance Center can help you with this (see below). For general purposes, HS/Schedule B codes should be adequate.
Next, use these codes to look for countries that have a significant market for your firm’s products, and assess the growth of that market over the past three to five years. You should also look for smaller countries with unmet needs or fewer competitors. Identify three promising countries for further research, and then choose the best two. Once you have become an expert at export, you can add more countries. But for now, you should narrow your targeting to minimize risk.
The following public and private sources of secondary data can also help you with gathering primary data, sales leads and many other aspects of exporting:
Export.gov offers country commercial guides (CCGs), industry sector analysis (ISA) and market research through its Market Research Library at www.buyusainfo.net. The information is free to registered users. Customized market research and analysis—including primary data—are available for a fee, as are due diligence reports. export.gov
Export Assistance Centers (EACs) are staffed by international trade experts from the SBA, the U.S. Export-Import Bank, and other public and private agencies and organizations. They help small businesses with every aspect of exporting, from conducting market research to getting paid and resolving disputes. To find an EAC near you, visit www.sba.gov/content/ us-exports-assistance-centers.
globalEdge. Funded in part by the U.S. Department of Education, globalEdge offers many tools and resources for researching and understanding foreign markets. You can search and compare data by country, state, trade bloc or industry. globaledge.msu.edu
SBA’s Office of International Trade collaborates with other federal agencies, and public and private groups, to facilitate small-business exports. www.sba.gov/offices/headquarters/oit
Trade Mission Online is an SBA database of small businesses that wish to export. Registering your business here will make it searchable by foreign firms looking to buy U.S. products, and also by U.S. firms looking for partners. Registration is through the federal SAM system, which we will discuss further in our section on government procurement. www.sam.gov/sba
Export.gov’s International Buyer Program matches foreign buyers with U.S. firms exhibiting at major trade shows. www.export.gov/ibp
U.S. Commercial Service’s International Partner Search locates up to five pre-qualified strategic partners for small exporters. This service is available through your local EAC.
Gold Key Matching Service. This program of the U.S. Commercial Service matches U.S. exporters with foreign buyers, agents, distributors and partners. The USCS also offers a videoconferencing service that allows you to meet prospective business partners without leaving the country. To learn more, contact your nearest EAC.
U.S. Trade and Development Agency helps U.S. businesses expand into global markets through conferences, trade leads and orientation visits. This effort includes reverse trade missions, where foreign buyers are brought to the United States to meet with prospective manufacturers and suppliers. www.ustda.gov
TradeStats Express compiles annual and quarterly trade data and helps you to produce custom reports, graphs and maps. tse.export.gov
U.S. Trade Online offers current and cumulative trade statistics, as well as more in-depth data such as the unit price of export goods in foreign countries. usatrade.census.gov
Exporters’ associations often provide education, tutorials and research libraries for their members. The Small Business Exporter’s Association (www.sbea.org) is a good example. You can also contact your state’s nearest World Trade Center.
U.S. trade associations provide various types of assistance to their members. To learn more, visit the Federation of International Trade Associations at www.fita.org.
Chambers of commerce sometimes have staff members who are international trade specialists. If not, they may be able to refer you to an expert in your area.
Foreign embassy commercial sections. Consult the commercial attaché assigned to your target country’s embassy. Visit www.embassy.org/embassies for contact information.
Foreign tariff schedules. Many countries maintain publicly available tariff schedules, which you can search by HS code. Export.gov maintains a list of schedule links at export.gov/logistics/eg_main_018142.asp.
International statistical agencies. Most countries have an official agency that compiles detailed demographic and economic data. The U.S. Census Bureau maintains a list of these agencies at www.census.gov/population/international/links/stat_int.html.
A more expensive—but sometimes necessary—option is to hire a market research company in your target country. Get advice from an EAC or other trade agency before pursuing this option.
Entry Strategies
Your choice of entry strategy depends on your product, your resources, and the economic, political and cultural environment of your target country.
Direct Exporting
Direct exporting ranges from selling through a foreign office, website or catalog to working with an importer or foreign distributor. It lets you retain control of the product and earns a higher profit margin than indirect exporting. However, you must assume all marketing costs and take responsibility for shipping the goods.
Sales reps and agents work on commission. The two terms are often used interchangeably, but agents are legal representatives of your company and can make commitments on its behalf.
Distributors take title to your goods. Using a distributor means you’ll lose some control of your product and earn fewer profits. That said, the distributor takes on local responsibility for sales and service, and may build business you wouldn’t be able to create yourself.
Buying agents for foreign governments. Foreign government agencies may have procurement needs, leading to opportunities for U.S. firms.
Partnerships and strategic alliances. Some foreign firms are looking for goods to complement existing product lines. They may also be interested in co-managing businesses that wish to combine their resources.
Retail and direct sales. You may be able to sell consumer goods direct to a foreign retailer, either through a sales rep, direct mail or the Internet. Direct selling to end users is another option.
Indirect Exporting
Many small businesses use intermediaries to deliver their products to foreign markets.
Export agents work on commission. Although this cuts into your profits, they may be able to help with packing, shipping and documentation.
Export management companies (EMCs) will conduct market research, locate foreign reps or distributors, negotiate export contracts, handle logistics, provide after-sales support, and give legal advice on domestic and foreign regulations. Most EMCs work on commission; others take title to the goods. They can be pricey, so specify in your contract that you’ll pay nothing until the first order.
Export trading companies (ETCs) are similar to EMCs. They usually take title to your goods and pay you directly, which eliminates much of your risk.
Foreign trading companies (FTCs) outside the United States may wish to import your goods.
Repackagers buy products and adapt them to the target country. They reduce your risk, but you may lose control over foreign pricing and branding.
Piggyback exporting means allowing an exporter with existing distribution channels to sell your goods.
Apart from the cost, the main disadvantage of indirect exporting is that you may have to give up some control over sales, distribution, marketing and quality control. Your contract should address these concerns.
As your business and knowledge grows, you may wish to take over some of the services formerly provided by your intermediary.
Shipping and Logistics
Most small businesses sell directly to foreign customers through the U.S. Postal Service or an express carrier such as UPS; tech-based companies may simply make their products available for download. But businesses that need to ship very large amounts of a product to another country typically work with a freight forwarder or shippers’ association.
Freight Forwarders
Freight forwarders act as agents for exporters. They have expertise in international shipping options, regulations, documentation and costs. A good freight forwarder can choose the right shipping methods for your business, prepare your goods for shipment, and handle much of the export and financial documentation.
Although a freight forwarder can prepare your documents, you still need to be involved in the process. You must give them accurate information, quickly respond to requests for documents, and monitor each transaction to completion.
You can find a reputable freight forwarder by visiting the National Customs Brokers and Forwarders Association of America at www.ncbfaa.org. If possible, find a freight forwarder with a wholly owned office in your target country as well as a major U.S. port city.
Shippers’ Associations
Shippers’ associations are nonprofit cooperatives that negotiate volume discounts with air, ocean and land carriers by pooling their members’ goods. Shippers’ associations often specialize in a specific type of product. For example, the Global Shippers Association handles furniture, while the North American Shippers Association specializes in wine and spirits.
Export Documents
The documents listed below are required for most large international shipments. Additional requirements may apply to foods, plants, lumber, textiles and other materials, or to goods going to specific countries. Contact the Trade Information Center at tic@trade.gov for help, or consult your freight forwarder.
Commercial Invoices
Commercial invoices set forth the shipping and financial terms of a transaction between an exporter and an importer. Customs agencies use this document to identify the value of goods and determine duties. The terms in this document form the basis of all other export documents, so they must be accurate. Requirements vary by country; in some cases, you may need to use a consular invoice from the importing country.
Electronic Export Information (EEI)
Formerly known as a shipper’s export declaration (SED), EEI is required for shipments that require an export license or are worth more than $2,500.
The Automated Export System (AES) is a streamlined, paperless method for filing EEI. In addition to simplifying paperwork, it improves the collection of U.S. trade data.
When you make shipping arrangements as an exporter, you or an authorized agent will file the EEI for that shipment with AES. The system checks the information for compliance with export reporting requirements and either approves it or sends an error message. Once the EEI is approved, you will receive an internal transaction number (ITN) for the shipment.
During the shipping process, the carrier updates the AES information. Again, the system checks it for errors and requests correction where necessary.
You can register and use AES for free through AESDirect (aesdirect.census.gov). The site offers online tutorials. Your freight forwarder can also help you with AES.
Export Licenses
An export license authorizes a seller to export a specific amount of a specific product to a specific destination. Although most export goods do not require a license, it’s your responsibility to identify goods that do and to contact the appropriate government agency. Products that may require a license include foods, plants, drugs, chemicals, nuclear materials, munitions and “dual use” items that may have military or terrorist applications.
Certificate of Origin (CO)
COs identify the country in which shipped goods were manufactured. Rules for COs vary depending on the exporting country, the importing country and the type of goods. They may also vary depending on whether a free trade agreement exists. For example, shipments between Canada, Mexico and the United States use a CO that conforms with the North American Free Trade Agreement (NAFTA).
Bill of Lading
A bill of lading is a contract between the exporter of goods and the carrier, which details the parties, goods and carriage terms. It also acts as a proof of shipment and a document of title to the shipped cargo; the buyer usually must present an original to take possession of the goods.
Dangerous Goods Declarations
Air shipments of hazardous materials must be accompanied by a Shipper’s Declaration for Dangerous Goods (DGD), which states that the goods have been identified, classified, packed and labeled in compliance with the hazardous materials regulations of the International Air Transport Association (IATA). Ocean transport requires the International Maritime Organization’s Multimodal Dangerous Goods Form. Carriers such as UPS and FedEx regularly offer training sessions on preparing hazardous materials for shipping.
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About two years ago, SoilBox got an email from an agricultural product distributor in Monterrey, Mexico called La Siega. The company was interested in marketing SoilBox products in Mexico.
The timing of the email was ideal. Tom and his director of sales and marketing Sofia Ortiz had just attended a conference on agricultural trends in Queretaro, Mexico.
We’d been thinking about expanding down south, but it was mostly just theoretical. The interest from La Siega lit a fire under us and got us motivated to do a feasibility study.
We looked at the market trends, the likely competitors, intellectual property issues, and whatever else we could dig up. We also looked at our full range of distribution options—with the help of company profiles from the U.S. Commercial Service—just in case we could find a better fit. Ultimately, the combination of a strong reputation, and very similar corporate culture and values, is what sold us on La Siega.
The question then became, “Can we really make this work on our end?” After all, it doesn’t matter how good your distributor is if you can’t give them what they need when they need it. That’s Sofia’s area of expertise, so she and a couple of assistants got busy on a full-scale international marketing plan.
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Getting Paid
Choosing the right payment methods and terms is crucial to export success. Minimize risk by researching buyers thoroughly and insuring yourself against defaults, currency fluctuations and political risks.
Common payment methods include:
Cash in advance. If your customer pays in advance, there’s no risk to you. This is most likely to be acceptable to individual online buyers. Wholesalers and retailers are less likely to pay up front.
Letter of credit (L/C). This is a contract enforced by a bank, which makes sure the terms of sale are met on both sides.
Drafts require the buyer to pay the full amount in accordance with specified terms. Sight drafts are paid on presentation. Time drafts are paid a certain number of days after the buyer accepts the draft. Date drafts specify the date on which payment is due. The buyer takes title to the goods after accepting or paying the draft. Drafts cost less than L/Cs for the buyer, and they are less risky to the seller because they create a written obligation to pay. However, if the buyer doesn’t acknowledge or accept the documents, the exporter must absorb the cost of finding another buyer or having the goods returned. Drafts can often be sold, although only at a discount.
Open account. This is the most risky approach to foreign sales. Sell under an open account only if you have a long relationship with a reliable trading partner. Always specify the exact date on which payment is due.
Consignment. International consignment sales are much like domestic ones, except that they’re even riskier. A consignment contract should establish which party is responsible for property risk insurance on the goods. Note that you’ll be responsible for the cost of recovering unsold goods.
Collection payment method. The seller consigns goods not to the buyer, but to the bank. The bank pays the seller for the goods, and in order to obtain them, the buyer must pay the bank for them. Of course, the goods also serve as collateral if the buyer defaults.
Incoterms
Incoterms are standardized three-letter abbreviations for the terms of international commercial transactions. They define the risks and responsibilities of buyers and sellers. FOB and CIF are the two most common terms. FOB means “Free on Board,” which indicates that the seller pays all costs to load goods onto a ship. It is always used with a named shipment port; “FOB New Orleans” means the seller will pay to transport goods to the port of New Orleans and to load them onto a ship. The buyer is responsible for all costs and risks after that point.
CIF means “Cost, Insurance and Freight” and indicates that the seller pays all costs to deliver goods to the named destination port. “CIF Tokyo” means that the seller pays for transport to the port of Tokyo, Japan. The buyer is responsible for all risks and costs once the goods are delivered to the destination port.
It’s important to understand Incoterms, as they affect paperwork, costs and many other aspects of trade. You can learn more by visiting the International Chamber of Commerce at www.iccwbo.org.
Cross-Cultural Negotiations
International business negotiations are fundamentally different from domestic negotiations, and thus require a different set of skills and knowledge. Even when your trading partners speak English, there may be problems with the interpretation of business and contract terms.
Multiple laws and regulations. Negotiators are subject to the laws and policies of at least two countries.
Currency fluctuations and restrictions. Since the relative value of different currencies fluctuates, the actual value of contract terms may change, resulting in sudden financial losses or gains.
Political and economic turmoil. Disruptive events—such as war or currency devaluation—can shatter international business agreements.
Differing perceptions of time. In some countries, you may have to wait for an hour or two before your negotiating partner arrives.
Respect for age. In many countries, a young negotiator may not be taken seriously. In Germany, Asia and the Scandinavian countries, for instance, the person who negotiates on your firm’s behalf should be decidedly mature.
Table manners. Every country—including the United States—has its own traditions, taboos and etiquette related to eating and drinking. Research this issue thoroughly before traveling.
Body language. In global business, little details like how close you stand to someone, or what gestures you use, can make or break a deal. Learning what is and isn’t acceptable is an important part of doing business in another country.
Ideological differences. Foreign negotiators may have different views on labor, private investment, the environment and human rights. Reaching an agreement may require compromise on these issues.
Ethics. Different countries may have different views on what constitutes an ethical business practice.
Export Financing
The best time to secure financing is well before you need it. Shopping around for financing, negotiating terms, and finalizing contracts takes time, so plan ahead.
Here are some common forms of export financing:
Working capital loans are used to acquire materials for work in process, to acquire inventory, or to fill an order.
Trade finance supports transactions that are self-liquidating (i.e., that pay themselves off through proceeds of the transaction). Usually, the lending bank applies the proceeds toward the loan and pays the remainder to the exporter.
Pre-export loans are usually for labor, materials, marketing or inventory. Small businesses often need a pre-export loan to gear up for an export sale.
Accounts receivable loans are based on the volume and quantity of foreign accounts receivables, which must be backed by export credit insurance.
Federal Export Financing
The U.S. government has several loan programs to help small businesses export.
Export-Import Bank (Ex-Im Bank)
Ex-Im Bank is a government agency that facilitates the export of U.S. goods. To be eligible, you must goods produced with more than 50 percent U.S. parts and labor.
Global Credit Express is a short-term line of credit for exporters who need up to $500,000 of working capital.
Working Capital Guarantees provide a 90-percent guarantee on bank loans for working capital.
Visit www.exim.gov/smallbusiness to learn more about these and other options.
Small Business Administration
The SBA administers its export loan programs through EACs.
Export Express helps small businesses develop or expand export markets. Applicants must have been in business for at least one year, or be able to demonstrate comparable exporting and business experience. The maximum loan amount is $500,000, and the maximum guarantee is 90 percent. Applicants receive a response within 36 hours.
Export Working Capital Program provides up to $5 million in working capital to help small businesses take advantage of export opportunities.
International Trade Loan Program provides up to $5 million for fixed assets and working capital to help small businesses launch or continue an export business. You can also use loan proceeds to refinance an existing loan.
Overseas Private Investment Corporation (OPIC)
OPIC deploys private capital to help U.S. businesses get a foothold in foreign markets. In addition to loans and guarantees, they offer political risk insurance. www.opic.gov
State Export Financing
In many states, the department of commerce and other trade organizations sponsor financing programs. Many cities and states have cooperative programs with Ex-Im Bank and can provide export finance counseling. Details are available through your state department of commerce.
Private Export FinancING
International trade associations, or any EAC, can help you find a reputable private lender in your area.
Managing Risk
Managing risk is essential, because pursuing collections or legal action across borders may be expensive or impossible. Start by considering these questions:
How stable is the currency? Does the country allow payment in a convertible currency?
Does the country have a good credit history? How stable is the government?
Does the customer have a good credit history? The U.S. Commercial Service offers an International Company Profile service through your local EAC.
Is the customer respected in their country? Have they lived up to their obligations with other trading partners?
Foreign Credit Insurance
Foreign credit insurance offsets the inherent risks of exporting:
Commercial insurance protects you against a foreign buyer defaulting on payment or declaring bankruptcy. Insurers usually demand that you try all reasonable means of obtaining payment before they’ll honor your claim.
Political risk insurance protects you against war, terrorism, currency restrictions and other disruptive events
Ex-Im Bank’s Small Business Export Credit Insurance is “a trade credit insurance policy for businesses that are new to exporting or have only occasionally exported.” The policy covers exports made to specified buyers, protecting you against losses if they don’t pay. Additional support may be available for environmentally beneficial exports. Visit www.exim.gov to learn more.
As mentioned earlier, OPIC offers political risk insurance, as do many brokers and private insurance companies that have credit insurance programs.
Other Types of Insurance
You may need three additional types of insurance:
Cargo insurance is for loss or damage to cargo during shipment. Whether the buyer or the seller buys this insurance depends on the contract terms. If your buyer is responsible, don’t rely on the buyer’s representation that insurance has been purchased. Ask for proof of insurance, and check it carefully.
Product liability insurance is for foreign claims that may arise against you.
Workers’ compensation insurance covers you and your employees during business trips to your target country.
Foreign Exchange Risk
There are two primary types of foreign exchange risk:
Economic exposure is the risk that your costs will rise due to fluctuations in the exchange rate, making your goods uncompetitive.
Transaction exposure is the risk that the exchange rate will change unfavorably between initiation and completion of a contract.
The best way to avoid foreign exchange risk is to quote all prices in U.S. dollars. Alternatively, you can minimize this risk by transferring foreign accounts receivable to a factor in return for a percentage of the proceeds. The cost of factoring varies according to the risk level of the transaction.
Another option is hedging, which locks in an exchange rate for the transaction. This can be costly, but it does eliminate the risk of unfavorable currency fluctuation. To learn more, contact an experienced international banker.
Becoming an Importer
Most issues relating to shipping, payment, documentation, and managing risk are similar to those that affect exporters. Your marketing plan should address the following questions:
Quantity. Does your foreign vendor have the capacity to fill your order?
Tariffs. The 10-digit Harmonized Tariff Schedule (HTS) is used to determine U.S. import tariffs. You can get HTC codes online using the HTS Online Reference Tool at hts.usitc.gov.
Legal issues. Do the goods meet all U.S. standards? What restrictions apply?
Promotion. How will you market your imported goods?
Distribution. Can you lower the price by eliminating intermediaries?
Transaction risk. How will you mitigate the risk of nonperformance on the part of your foreign supplier?
Importing Steps Understand U.S. import regulations. Source goods from overseas exporter. Receive pro forma invoice, and negotiate final price and terms of sale. Open a letter of credit at your bank. Confirm shipment from port of exit. Receive documentation from the exporter. Direct your customs broker to clear goods through U.S. Customs. Declare value, receive classification number of import shipment, and pay import tax. Clear customs and load goods. Direct payment to exporter via bank.
You also need to explain how you will sell the imported product:
Direct marketing. The advantage of this method is a higher share of the profits. The disadvantage is that your marketing costs may be higher.
Becoming a distributor or agent. If you decided to import chili peppers from Mexico as an agent, your role would be to research markets, promote the product and make sales. As a distributor, you’d arrange for the purchase of the peppers, including customs, insurance and freight requirements. You’d take title to the goods, so the business risk would transfer to you sometime after they were shipped (depending on the terms of sale). Distribution is riskier than being an agent, but the rewards can be greater.
Partnering and strategic alliances. Many foreign companies hope to expand their business to the U.S. market through an American company.
Customs Brokers
Just as freight forwarders expedite the process of exporting, customs brokers help importers deal with the paperwork required by U.S. Customs and can also arrange for warehouse delivery. This allows you to focus on sourcing and selling your goods.
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Sofia did a fantastic job on the plan, but I was especially impressed with her attention to supply chain issues and quality control. Those were areas I hadn’t thought about all that much. But when I saw how she broke things down, I realized that these were probably the key issues for our success. Before that, my plan for meeting the new demand boiled down to “we’ll make more bins.” Sonia looked very closely at the nuts and bolts of that process: Were the materials available in the amounts we needed? Could our supply chain grow with us? What were the lead times? What were the storage issues?
Being fluent in Spanish, she also did some very valuable primary research among our likely end users. That identified a lot of issues and opportunities we never would have known about if we hadn’t asked. It also solidified our initial feeling that La Siega was a good fit for us. We found that they had a solid reputation across the board, which was reassuring.
Having looked at these issues, Sofia set conservative marketing and sales targets to ensure SoilBox would be able to scale up gradually while maintaining domestic quality standards and production levels.
She estimated that within three months, it would become clear whether SoilBox would need to hire more staff to manage its export operations. To be on the safe side, her first-year budget projections included the salary for an export coordinator.
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Green Business OPTIONS
Starting a green business, or making an existing business greener, is a great idea for at least three reasons. First, you’ll be entering a market that has shown strong and consistent growth. Second, the sheer volume of green products creates countless opportunities for synergies, partnerships and continuous improvement. Third, running a successful green business can offer a sense of personal fulfillment that goes beyond the financial rewards.
That said, green business isn’t some easy path to riches. On the contrary, it demands an almost unprecedented degree of discipline, honesty, transparency, attention to detail, research and flexibility.
Above all, going green requires you to be honest with your customers, your business partners, your employees and yourself. You’ll need to back up your claims with evidence, listen and adapt to constructive criticism, and watch out for hidden inefficiencies and external costs.
Consider the following questions:
Why do you want to run a green business? How will being green help you to compete and succeed?
Is there a viable market for your green product or service?
How do you define “green”? What standards will guide your efforts? Do these standards meet or exceed your customers’ expectations?
How will you create a green culture at your business?
How green are your customers? Your competitors? Your suppliers?
How will you communicate your green values, goals and plans?
What aspects of your business will be green? What can you do now, and what are you planning to do later?
Will you seek green certification? From which organization? What are the costs and benefits?
How will you ensure that you stay green? How will you learn about and adapt to new technologies, new standards, new laws and new competitors?
Green Business Practices
One of the benefits of green business practices is that they encourage you to consider the real costs of doing business—not just for you, but also for your customers, your community and your country.
That same commitment to realism, and attention to detail, must guide your efforts to start a green business. Good intentions aren’t enough to bring you success. Your green ideas need to be appropriate, affordable and attainable.
Green and sustainable businesses usually have unique relationships with customers, employees and supply chain partners:
Customers. Green businesses emphasize transparency and dialogue. They expect and welcome constructive criticism from their customers and are willing to educate customers when necessary.
Employees. Even if they haven’t made a specific commitment to social responsibility, green businesses are often expected to treat their employees ethically. They may need to offer—or work toward offering—a living wage, healthcare, childcare and a safe work environment. That said, green businesses often attract employees who are looking for an emotionally meaningful career, and who may be willing to make some sacrifices to make a difference.
Suppliers and distributors. Green businesses usually make an ongoing effort toward greening their supply chain. Often, this involves writing environmental standards into contracts.
Life Cycle Assessment
Green businesses undertake life cycle assessment in order to quantify the environmental impact of each stage in the useful life of a product: resource extraction, manufacturing, storage, selling, shipping, consumer use and disposal. Then, they make an effort to optimize each stage from an environmental standpoint.
While a formal life cycle assessment is beyond the capabilities of many small businesses, taking this broad conceptual approach to your product can reveal wasted effort and inefficiency, as well as consumer benefits that you might not recognize otherwise. It can also help you find nontoxic or renewable inputs, reduce the amount of waste material, extend product life, and reduce energy and material use.
Furthermore, you can use data from third-party life cycle assessments of other products to optimize individual stages in the life cycle of your own product. For example, if a scientifically conducted life cycle assessment shows that soy-based inks are environmentally preferable to petroleum-based inks, you can use this information to improve your packaging.
Many software packages help small businesses conduct life cycle assessment. GaBi is a popular example (www.gabi-software.com).
Eco-labeling
Green businesses often use third-party certification to assure consumers that their commitment to green practices is real and measurable. Certification can be expensive and usually requires annual renewal fees, so weigh the costs and benefits carefully.
UL Environment is a project of Underwriters Laboratories, a well-known organization with more than a century of experience. Product certifications include Ecologo and Greenguard. industries.ul.com/environment
Green America offers a Green Business Certification seal to qualifying firms. Though not as scientifically rigorous as other options, it can help to establish your credentials. www.greenamerica.org
Green-e is the nation’s leading certification program for the sale of renewable energy and greenhouse gas reductions. www.green-e.org
Green Seal sets sustainability standards and awards its label to a wide variety of products. www.greenseal.org
EU Ecolabel encourages businesses to market environmentally friendly products and services, and helps European consumers identify them. For more information, call 800-USA-TRAD(E) and ask to speak to a European trade specialist. ec.europa.eu/environment/ecolabel
Green Business Ideas
What kind of green product should you offer? It’s usually best to focus on an industry or hobby in which you already have an interest. As with any other type of business, it’s good to enjoy what you do!
Green inventions. If you hope to invent a green product, your best bet is to familiarize yourself with a broad range of environmental and health problems, and try to come up with a solution. A green invention that addresses a serious problem is more likely to succeed than a comparatively frivolous niche product.
Greening existing products. Studies show that entrepreneurs who improve existing products are more likely to succeed. Making a product greener can be as simple as replacing one component with a sustainable, nontoxic, organic or biodegradable substitute, or as complex as designing and manufacturing a brand-new item from scratch.
Selling to the government. A number of procurement regulations require federal agencies to purchase greener products, creating a vast market for vendors who can meet their needs.
Upcycling. According to one study, Americans throw away enough aluminum every year to rebuild the commercial air fleet several times over, enough steel to build a city the size of New York, and enough wood to heat five million homes for 200 years. Upcyclers gather discarded materials and extend their useful life. Terracycle, which makes products from candy wrappers and juice boxes, is a good example.
Addressing humanitarian issues. Some green businesses form in order to solve a problem in another country or among the world’s poor. For instance, many businesses vie to create the cheapest and simplest water purification methods. Often, these businesses sell to aid agencies or charities, who then distribute the goods to the people who need them. Although the unit price may be low, the sales volume can be huge. These products are most successful when they are tailored to local conditions, culture, raw materials and infrastructure (this is known as appropriate technology).
Importing. Foreign products tailored to specific environmental regulations or problems may be viable in the United States. For example, water conservation tools that are common in Africa or the Middle East may be adaptable to drought-stricken U.S. markets.
Improving old technology. The drive toward sustainable business practices has inspired engineers to revisit older technology. As an example, the 200-year-old Stirling engine is used in modern solar-thermal plants.
Servicizing. As Amory Lovins of the Rocky Mountain Institute famously said, “If I want to hang a picture, I don’t need a drill; I need a hole.” Making goods available on demand has been lucrative many green-oriented businesses.
Greening Your Plan
Like any other aspect of your business, the things that make your business green need to be set forth in your business plan. This doesn’t mean boasting about how you’re going to save the world. Instead, you need to explain how being green will help you to be competitive and profitable by meeting customers’ needs.
You’ll also need to explain what standards you intend to meet, what structures you’ll put in place to achieve them, and how you’ll monitor and communicate compliance. The more important being green is to your customers and your brand, the more attention you must give to these issues.
Here are some of the basic questions a green business plan should answer:
What expertise do you have with green business and technology?
Are you targeting buyers who are actively seeking green products, or will you have to win over people who are skeptical or uninterested?
What standards will you meet? Your green goals need to be quantifiable.
Will you formally address social and environmental costs and benefits in your accounting documents?
How will you handle competition? What will you do if Walmart or Costco starts selling a product with the same green features as yours?
What is your plan for waste management and pollution prevention? How will it lower costs, increase efficiency, improve safety, and meet or exceed regulations?
If your goal is to become a zero-waste or carbon-neutral business, you should present a realistic timeline for these goals, as well.
Use white papers and case histories to show how your approach has led to substantial savings or increased market share for businesses with resources, equipment, personnel, capital, customers and goals that are reasonably similar to yours. Put these documents in the appendix if necessary.
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Sofia felt that SoilBox would have to keep a keen eye on their Mexican market. Given the attractiveness of that market and the simplicity of their product, there would inevitably be a response from Mexican and U.S. competitors. Part of her preparations for export included researching possible manufacturing partners in Mexico. If the demand were large enough, local manufacturing would reduce shipping and labor costs. That was a long-term view, however. For the moment, Sofia focused on testing the market on a smaller scale.
While Sofia was worrying about the competition, I looked into possible product modifications. We’d found time and again that depending on how people used the bins, minor design tweaks could make a big difference. That’s especially true in a desert climate, where it becomes a lot trickier to maintain moisture and decrease evaporation.
I visited a bunch of farms and villages in different regions, and found that for the most part, agricultural end users had similar needs to our customers in Texas, Arizona and New Mexico. The main modification would be translating instructional and marketing materials into Spanish.
While I was traveling, I also saw that in a lot of smaller towns, our units had the potential to become an important part of the local waste management process. In some towns, they had no system at all. In others, they’d come up with makeshift systems using cisterns or cargo containers. I knew our units were better, faster and safer, so I saw selling them to local government as a strong possibility.
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Dealing With Large Organizations
There are many good reasons for a big company or a government agency to do business with a small firm like yours. The biggest one is that entrepreneurs tend to be flexible and often respond to changing market needs faster than larger firms.
Of course, dealing with large businesses and the government requires you to make changes in the way you normally do business. You may have to intensify your marketing, budgeting and team-building efforts. Your administrative costs may be higher due to increased recordkeeping and procedural requirements. Also, big businesses and the government are sometimes slow to pay invoices, which can put a strain on your cash flow.
The key to a successful business relationship is to lead with those characteristics that give you a competitive advantage: innovative thinking, clear focus, speed, flexibility and individualized customer service.
Doing Business With the Government
The U.S. government is the largest purchaser in the world. Of the nearly $6 billion it spends annually on procurement, a certain amount is earmarked for:
Small businesses. Each industry has a NAICS (North American Industry Classification System) Code, which is categorized by the number of employees or a maximum amount of annual revenues. If your average annual receipts are lower than the amount designated for that code, your firm is small by definition. To learn your NAICS code, visit www.census.gov/eos/www/naics.
Small disadvantaged businesses must be 51-percent owned by socially or economically disadvantaged minorities (e.g., African-American, Hispanic, Asian or Native American). The SBA’s 8(a) program sets aside sole source or limited competition awards for these businesses.
Woman-owned small businesses must meet NAICS code standards and be 51-percent owned, managed, and controlled by women.
Service-disabled veteran-owned businesses must be 51-percent owned by a veteran. Service-disabled veterans must have their disability confirmed by the Veterans Administration.
HUBZone businesses. This program provides contracting preferences to small businesses located in and hiring from historically underutilized business zones. The SBA can tell you if there’s a HUBZone in your area.
Procurement Policy
The Federal Acquisition Regulations (FAR) System is the roadmap for doing business with the government. It advises agencies on what type of solicitation or contract to use, how to evaluate bids, and how to administer contracts. FAR also informs vendors of their contract rights. For current information, visit Acquisition.gov. Note that specific agencies may have supplemental regulations.
Preparing to Sell
First, consider your location and abilities:
Size. If you’re a very small business, you may want to select a small area at first. If you’re already a larger business, you may want to go for an entire state.
Location. Where are you located in relation to government facilities? Large, populated areas have more government opportunities than rural areas.
Experience. How much experience and skill do you have? If you’re still learning, stay close to your core competencies.
Type of business. If you can manage your business from a distance, your selling area can be much larger.
Next, identify the government buying offices within your targeted geographic area. Your local SBA office can provide you with a list of the buying offices in your region.
Business Registration
In order to sell to the government, you need to have three numbers:
Taxpayer identification number (TIN). This number is issued to your business by the IRS. If you’re a sole proprietor, you may use your Social Security number, but be aware that it will be made public as part of the registration process.
DUNS number. The federal government uses this nine-digit identification number to keep track of contractors. You can apply online for free at fedgov.dnb.com/webform.
NAICS codes are six-digit numbers which define the business purpose and size standards that apply to all federal procurement programs, as well as to specific procurement opportunities. Therefore, your business profile should include all relevant NAICS codes. To find these codes, visit www.census.gov/eos/www/naics and search for keywords that describe your principal area of business. As an example, searching for “pool cleaning” brings up NAICS code 561790, Swimming pool cleaning and maintenance services.
If you plan to pursue contracts with the Department of Defense, you will also need to know the Federal Supply Group and Class number for your product. You can search for these numbers at www.dlis.dla.mil/H2/search.aspx.
The next step is to register your firm with System for Award Management (SAM) by visiting www.sam.gov. This vendor database is searchable by government agencies on the basis of such parameters as size, expertise, location and ownership. When you register, be sure to include all applicable NAICS codes for your business. If you need help registering, you can get it from the Procurement Technical Assistance Center (PTAC) nearest you (see below).
Once you register, your business will receive a Commercial and Government Entity (CAGE) code. You must update your SAM listing at least once a year to remain active.
As soon as you’re listed in SAM, you should also create a profile in the Dynamic Small Business Search (DSBS) at dsbs.sba.gov, which is a database of small businesses registered with SAM. It’s mainly used by government officers looking for small business contractors, but small businesses can also use it to find suitable partners for licensing deals and joint ventures.
One of the most important parts of your business profile is your capability statement. This is a brief statement of your primary technical and managerial strengths and abilities, as well as performance history, past awards, and résumés of key personnel.
Finding Opportunities
Once you’re registered with SAM, you can use the following sites to research procurement opportunities:
FedBizOpps. Federal agencies use this site to announce procurement opportunities to potential vendors for all contracts over $25,000. www.fbo.gov
Sub-NET. The SBA maintains this list of subcontracting opportunities for small businesses. web.sba.gov/subnet
Subcontracting Opportunities Directory. This SBA page lists subcontracting opportunities by state. www.sba.gov/subcontracting-directory
Office of Small and Disadvantaged Business Utilization (OSDBU). Each federal agency has an OSDBU (or a similar office) that promotes procurement opportunities for small businesses and can help you understand that agency’s procurement needs and policies. Some offer presolicitation conferences and small-business fairs. You can find a list of OSDBUs at www.osdbu.gov/members.html.
General Services Administration. This is the main procurement agency of the federal government. Most commercial contracts are awarded through the GSA Schedules Program, which also serves state and local governments. Tools and resources for vendors are available at vsc.gsa.gov/RA.
Federal Procurement Data System compiles data for all federal procurement contracts over $25,000. You can use this tool to find out which agencies are buying products like yours, who your competitors are, and how many awards small business receive by department and year. www.fpds.gov
USASpending.gov is a database of federal contract awards, which includes the winning contractor, amount and agency. You can use this tool to research the market for products like yours.
State Contracting Opportunities offers a list of links to the purchasing departments of all 50 states www.smallbusinessnotes.com/choosing/contracts/statecontracts.html
Solicitations and Bids
Once you’re in the SAM database, you must wait until a solicitation comes in for the product you sell. (The automatic bidder list rotates offers, so that the same bidders are not always selected.)
There are four types of solicitation:
Sources Sought. This solicitation advises contractors of an upcoming project. It’s generally used to gauge the number, capabilities and interest level of potential bidders. It’s a good idea to respond to Sources Sought announcements, provided you have the ability and willingness to compete. As with the other solicitations listed here, it’s crucial to provide all information requested.
Invitation for Bid (IFB). IFBs, also known as sealed bids, are for standard items with a value over $25,000. They usually include a description of the desired product, bidding instructions and deadlines, and contract terms. Each bid is opened and read aloud in public (you don’t have to be present), and the lowest bid wins. Once it’s accepted, your bid is legally binding, so be sure you want to work on the contract before you bid.
Request for quotation (RFQ). RFQs gather information on the price of relatively simple goods and services, which usually cost less than $150,000. Unlike a bid, your quote is not binding.
Request for proposal (RFP). These are negotiated contracts, so the price and other terms are open to discussion. RFPs are usually for technical or highly specialized goods and services, so your expertise and related criteria will be considered along with your price. If there’s something in an RFP that you don’t understand, you can submit written questions to the contracting officer. However, the officer’s response to such questions will be distributed to all bidders. To avoid giving useful information to your competitors, you must word your questions carefully.
Some agencies use an electronic system for RFPs and RFQs; the GSA’s eBuy system is a prominent example. www.ebuy.gsa.gov
Responding to Solicitations
If you’ve never written a bid, quote or proposal before, your local SBDC can help you prepare these documents. Here are some basic guidelines:
Understand the solicitation. To respond successfully, you must understand all requirements, clauses and terms.
Always respond even if you don’t offer a bid, quote or proposal. Otherwise, you’ll be deleted from the list of bidders.
Be on time. The government won’t accept late submissions.
Complete all requirements. If your document doesn’t address specified requirements, or contains errors, it may be rejected as “nonresponsive.”
Explain how your business will meet the soliciting agency’s needs. Don’t be vague; focus on the solution you will deliver and the exact process you will use to deliver it. Provide clear, compelling and inspiring evidence that you are the right business for the job, such as past performance or awards.
Be careful. Don’t overlook any items that might affect your price. Also, make sure your response is clearly written and free of typos and other errors. Sloppy responses suggest a sloppy business.
Be competitive but realistic. Your price needs to be competitive, but it also needs to reflect the cost of performing to the required standards.
Although price will usually be the main consideration, other factors—such as good references from previous non-federal buyers—may influence the decision. “Best value” is another factor that federal contracting officials sometimes use when awarding a contract. For instance, if your company offers faster delivery, a better warranty or a better product, it may win the contract even if it doesn’t offer the lowest price. Best value is a factor in awarding contracts only when the solicitation states it and includes a description of the agency’s evaluation criteria.
Types of Government Contracts
Although government contracts vary considerably, most fall under the general categories listed below. Remember: Your bid is legally binding upon government acceptance, so make sure you understand all contract terms before submitting a bid.
Getting Help SBA’s Office of Government Contracting supports the involvement of small and disadvantaged businesses in government procurement. www.sba.gov/offices/headquarters/ogc. Business Matchmaking is a partnership between the SBA and Hewlett-Packard. It matches small businesses with procurement representatives from government agencies and major corporations. Business Matchmaking is free to buyers and sellers. www.businessmatchmaking.com. Procurement Center Representatives (PCRs) initiate set-asides for small businesses, recommend small-business sources to federal buyers, and counsel small firms on winning contracts. You can find the PCR for your area at www.sba.gov/content/government-contracting-field-staff-directory. Procurement Technical Assistance Centers (PTACs) are local procurement resources funded by the Department of Defense. They offer free or low-cost assistance to businesses that want to sell to federal, state or local government. To find a PTAC near you, go to www.dla.mil/SmallBusiness/Pages/ptac.aspx.
Note: Federal contracts may have terms and clauses that don’t appear in commercial contracts. The SBA’s Office of Government Contracting can help you understand these provisions.
Firm fixed-price. This contract requires the contractor to supply a product or service at a fixed price. This is the most common form of government contract.
Fixed-price with economic price adjustment. This contract allows for price adjustments in response to specified economic contingencies. There is usually an upper limit for adjustment, but not a lower limit.
Cost-plus-fixed-fee contracts cover all the contractor’s performance costs, plus a fixed fee that is negotiated prior to the award. The contract can only be renegotiated if there is a change in the scope of the work. The contractor has little incentive to control costs, since the fee remains the same regardless.
Cost-plus-award-fee contracts reimburse allowable performance costs, and include both a base fee (profit) and an award fee (more profit).
Time and materials/labor-hour contracts buy labor at a fixed price (which includes profit, as well as overhead and other expenses), and materials at their actual cost.
Indefinite delivery contracts usually procure common supplies, commodities, or repair services. Definite quantity contracts call for delivery of a known quantity of goods over a specified time. Requirements contracts fill all requirements for a specific product or service over a specified time. The requirement is unknown at the time of award, but the contract guarantees that the contractor will fill all orders up to a specified maximum. Indefinite quantity contracts specify a minimum quantity the government will purchase, and a maximum quantity the contractor must deliver, over a specified time.
Unsuccessful Bids
If your company fails to win a contract, you may ask the contracting officer for a debriefing. This will explain why your bid was rejected and how to improve your chances in the future. Be sure to take advantage of this free service.
Certificates of competency
Even if you offered the lowest price, the contracting officer may reject the bid if she feels your business lacks the necessary level of competence, capacity or credit.
When this happens, your case will be referred to the SBA, who will give you the chance to apply for a certificate of competency (COC). To apply, you must give the SBA documentation that shows your firm’s competency (e.g., letters of credit, current financial status, supplies or vendor quotes). If the SBA gives you a COC, the contracting officer must award the contract to you. The COC applies only to the disputed contract. To learn more, visit www.sba.gov/content/ certificate-competency-program.
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Tom and Sofia traveled to Monterrey and negotiated a two-year contract with La Siega. During their visit, they locked down their exclusive distribution agreement. La Siega would place orders for a minimum quantity of SoilBox products each quarter. It would resell these goods with a 30-percent markup, and it would also be responsible for local marketing, sales and service.
SoilBox would support their efforts with online technical training, including Spanish-language Webinars and videos.
SoilBox would review the performance of La Siega every six months. At these intervals, if La Siega’s performance failed to meet mutually agreed-upon goals, SoilBox had the option to cancel the contract. The companies agreed that they would be open to negotiating a partnership or joint venture if all went well.
The last piece of the puzzle was how to get our products down to Monterrey. After a lot more research, we went with a freight forwarder in Houston, Texas, called ShipTek. They were able to handle almost the entire exporting process for us, and they also prepared the payment documents for our bank.
Even with ShipTek handling those details, we found that exporting took a lot of daily work. It was just as well Sofia had planned for an export coordinator in her budget, because after a couple of months, we were both completely swamped. We badly needed help, especially with international logistics.
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Dealing with Big Business
All of the approaches to marketing and personal selling mentioned elsewhere in this book apply to big business. The key is to commit to a marketing plan, and be patient and persistent. As always, the first step is understanding your customers. Once you’ve done that, you can tailor your marketing mix to the large corporation’s needs.
Partnering With Big Businesses
Increased risks, global competition, new technology, changing environmental standards, and the demand for faster cycle times have created a climate in which businesses are partnering more than ever. However, joint ventures and partnerships have long been used by entrepreneurs eager to expand their businesses, gain new skills, and enter new markets.
When considering a partnership with a larger business, the first stop should be your attorney’s office. Know what your choices are, and tally the costs and benefits of each before you sign anything. A good fit between each party’s personality and business culture is also crucial for a successful partnership.
Be prepared for a protracted negotiation process, as big businesses will not enter into joint ventures without thorough due diligence.
Working With Prime Contractors
Prime contractors are those “Big Business” companies—like IBM, Bechtel and Lockheed—that are always winning huge government contracts. When they are awarded these contracts, they’re required by law to subcontract a portion of the work to small and disadvantaged businesses.
Prime contractors usually operate under government procurement rules. However, there are a few important differences:
Bid openings. Contractors are generally not required to hold public bid openings or disclose bid opening results. Some have public openings, and some don’t.
Solicitation publication. Contractors are not required to publish solicitations at www.fedbizopps.gov.
8(a) and other government programs. Contractors don’t make awards through the SBA’s 8(a) or HUBZone programs.
Full and open competition. The Competition in Contracting Act does not apply to prime contractors.
Mentor-Protégé Programs
Mentor-protégé programs establish business relationships between major contractors and small and disadvantaged 8(a) businesses. They’re available to small businesses; small disadvantaged businesses; woman-owned small businesses; veteran-owned small businesses; and HUBZone businesses. Check with your target agency’s OSBDU for more information.
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Today, SoilBox works with two distributors in Latin America: La Siega in Mexico, and Sellinex S.A. in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. The company has benefited from its export sales; it has doubled its revenue and adapted many of its export strategies for the U.S. market. As a result of serving international markets, SoilBox has streamlined its products’ design and installation, which has reduced shipping after post-sales support costs.
Having proved their concept in agricultural markets, SoilBox has also been able to move into municipal waste management. After Sofia’s research indicated that they’d need to work with a local partner in order to sell to government agencies, they were paired with Bioethica S.A. by the U.S. Commercial Service’s International Partner Search. Through this strategic partnership, SoilBox was able to launch a pilot composting project in Puerto Libertad, Sonora, which was financed in part by the Secretariat of Environment and Natural Resources’ environment enhancement program.
The changes at my business have been huge, and for the most part, they’ve been positive. We’ve seen personal changes, too. When we first dipped our toes in the water, Sofia approached things from the standpoint of a marketing person. But as she got more involved with the ins and outs of exporting, she found that she really enjoyed it—the travel and relationship-building side of things, especially.
Now, she’s moved away from marketing to become our director of export operations; she heads a department of three export technicians. Meanwhile, we used the salary we’d earmarked for an export coordinator to hire a new marketing director. As good as Sofia was in her old role, she’s even better in her new one. And she’s happier, too.
That’s just one example of how growing our business has helped us to grow as people. I suppose you could say it’s one more advantage of working with dirt.
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Conclusion
International business, green business and contracting with government or large companies are challenging methods of growing your business, all of which require you to learn and master new ways of doing things. The rewards for success are correspondingly large.
These options are not for everyone. But for detail-oriented entrepreneurs who relish challenges, love learning new things and aren’t willing to place a limit on their possible accomplishments, they are not only lucrative but fulfilling. Further, the convergence between these opportunities means that developing expertise in one area will provide skills that are useful or necessary in another.
Even if you conclude that these growth options are not for you, understanding them is important. In these fast-moving fields—which are heavily affected by private-public partnerships, international agreements and scientific research—technology is constantly being deployed to streamline operations and optimize quality. As these innovations take hold, they have the potential to transform every other area of business.
In a sense, knowing what’s going on in exporting, green business, and government and big-business contracting allows you to see into the near future of your own business—and perhaps more important, the future of your competition.

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Green Marketing Tips Know your target market. How you communicate green benefits must take the motivations of your customers into account. People who are buying for psychological reasons like status or altruism may place a higher value on green products. People who are buying for pragmatic reasons may be more price-conscious. Don’t oversell green features. People who aren’t committed to green products will look at other selling points first, like usefulness, convenience, price, efficiency, attractiveness, and value. Be consistent. Don’t overlook the little things that detract from your green image. If your van idles for 10 minutes while you’re making a service call, people won’t take your green claims seriously. Don’t exaggerate. Don’t claim you’ve achieved things until you’ve actually achieved them. Instead, focus consumer attention on your goals and ask for their help and input in reaching them.

| NxLeveL® TECH TIP BUSINESS RESOURCES AND THE WEB
ISO CERTIFICATION The International Organization for Standardization (ISO) is a worldwide federation established in 1947 to promote technical standards for scientific, technological and economic cooperation. Doing business globally, with the government, or with large businesses often entails meeting ISO standards: ISO 9000 comprises internationally recognized criteria for quality management systems, as certified by a third-party registration agency. ISO 9000 certification is a common specification for large businesses and government contracts. Many SBDCs offer group classes in ISO 9000 certification on a sliding scale. ISO 14000 covers measures that minimize adverse consequences to the environment. ISO 19011 combines the 14000 and 9000 series into a single protocol. Learn more at www.iso.org.