In 1997, the Eureka based business, American Pet Diner, began exporting its products to Japan. Today, the company, which manufactures and sells a line of hay and feed products for rabbits, guinea pigs, prairie dogs and Chinchillas, ships its goods to about 10 countries in Europe and Asia, with exports comprising 45 percent of its volume. “It’s growing,” said Lisa Marshall, the chief executive officer and president. “It probably will take over a major portion of our business. The potential is just limitless.”
Like American Pet Diner, several Nevada companies export their goods or services to international markets. More, however, should consider the prospect, experts said, as the potential is huge and the payoff worthwhile.
“We tell people that if you’re not participating in the global economy, you’re just not going to see the growth you want to see,” said Michael Skaggs, director of the Nevada Commission on Economic Development (NCED). “To really succeed in business, they need to be engaged in the global markets.”
A Growing Trend
More and more U.S. companies have begun to globalize over the last decade, and Nevada is at the forefront of that trend. The Silver State is entering its seventh consecutive year of increased international export activity, according to U.S. Department of Commerce data.
In the first two months of 2009 alone, Nevada achieved a record-breaking $1.098 billion in exports. (This number only reflects product exports, as the Department of Commerce doesn’t track services exports.) This dollar figure represents a 22.9 percent increase over the same period in 2008. Whereas Nevada’s exports rose, those for the entire U.S. dropped 22.5 percent.
“In a down market, these are phenomenal numbers,” said Alan Di Stefano, NCED’s director of global trade and investment.
Nevada’s services and products exports include business management training, security systems, jet blast deflectors, sporting goods, water purification devices, building materials, thermal imaging systems, beverages, furniture, apparel, leather, livestock and much more.
“There’s a little bit of everything,” said Bill Cline, director of the Reno office of U.S. Commercial Service, a federal government agency dedicated to helping Nevada businesses develop international markets.
Business Benefits
The primary benefit Nevada businesses gain from global exporting is increased sales and revenue, which comes from expanding and diversifying one’s markets, said Andrew Edlefsen, director of U.S. Commercial Service—Las Vegas (Cline’s Southern Nevada counterpart).
Globalization allows companies, in their off-seasons, to do business elsewhere in the world and offset their cyclical markets.
“You can keep your workforce busy, keep people employed and take advantage of full production capacity,” Cline said.
Because other countries’ product needs, demands and specifications differ, exporting helps businesses creatively develop new merchandise, which then oftentimes can be sold at home. Sometimes, benefits trickle down to the exporting companies’ customers in terms of lower prices, better terms and the like.
Companies selling to international markets are better able to contend domestically with their competitors at home who also export, Cline said.
When companies add global sales to their domestic ones, business tends to grow, requiring them to hire additional staff. This then creates jobs, benefitting the state as a whole. Goods leaving Nevada for non-U.S. countries currently support about 86,000 jobs in the state, according to Department of Commerce data. These jobs pay on average 17 percent more than similar positions in domestic-only businesses.
Anytime is a good time to begin exporting, experts say. Now, however, is one of the best, Di Stefano said, because many of the world’s countries still have growing economies, whereas the United States’ gross domestic product, or total market value of all final goods and services it produces in a given year, is shrinking.
“Going into international markets where people are still buying products will yield more positive results than just selling in the domestic market,” he added.
Further, 95 percent of the world’s population and, therefore, the majority of potential customers, reside outside the U.S.
In the current economy, Nevada companies with exports are, for the most part, doing well. They are growing and expanding whereas domestic-only companies or those with few exports are seeing business shrink or cease, Di Stefano said.
Exporting Myths
Misconceptions about exporting generally keep businesses from pursuing it. These misconceptions include executives believing their companies’ are too small, lack the right type of product, won’t get paid and that exporting is expensive and too risky, among others.
“It’s a matter of educating them that it’s not that hard and where the opportunities are,” said Di Stefano. “There are only positives, and no negatives, to growing your business through exports.”
Services are needed as much as tangible exports, Edlefsen said. The exporting of services isn’t any more or less difficult than that of products, only different.
This doesn’t mean the process is easy. It requires learning about shipping, logistics, specialized paperwork, permits, labeling requirements, product registration, cultural differences, proper social etiquette and variations in business practices. For American Pet Diner, it’s been a “long, slow process of learning how to do it,” Marshall said. “It’s definitely worth it,” she added.
Available Assistance
Whether a company is “new to export”—wanting to export for the first time—or “new to market”—wanting to add an additional country to those it already exports to—all kinds of assistance is available, much of it free. However, some services do have an associated fee.
A good place to start is the U.S. Commercial Service, formerly called the U.S. Export Assistance Center (USEAC) and part of the U.S. Department of Commerce. It consists of a network of export-knowledgeable, government representatives in 82 countries, many of them based in U.S. embassies and consulates, and in 100 U.S. cities, including Las Vegas and Reno. Each center in the network help companies identify, enter, develop and sustain international markets.
“Each of our export assistance centers around the country work with various offices, world trade centers, banks, universities and chambers of commerce, anybody that is doing anything international related,” Edlefsen said. “We really have all the tools necessary for any company to start exporting or expand their exporting base.”
Cline and Edlefsen, the two Commercial Service directors in Nevada, spend at least half their time counseling businesses. That can include helping them identify markets or troubleshooting an issue to walking them through a licensing procedure or exploring financing avenues, Cline said. They conduct seminars, such as “The Basics of Exporting,” which provides an overview for “new to market” companies, along with other outreach and educational programs.
The export assistance centers help companies find qualified foreign partners, distributors or agents to work with internationally. They also conduct background checks on these individuals.
The centers get involved in and have Nevada companies participate in trade shows both locally and in foreign countries, such as China, Germany, France and Mexico. Because Las Vegas is a hot spot for both trade shows and international visitors, the Las Vegas branch of the U.S. Commercial Service frequently participates. Either it has a booth and staff at the shows or its international offices organize delegations of buyers from several different countries and escort them to the shows. “It’s a great venue for companies to utilize our services,” Edlefsen said.
With its organized trade missions, about six Nevada companies are taken to a foreign country for pre-arranged one-on-one meetings with potential partners and/or distributors there. “We provide as much support as we can on the international end,” Edlefsen said.
The U.S. Commercial Service Web site, www.export.gov, contains a host of free market research materials, such as “How to Do Business in ‘X Country.’” A second site, www.buyusa.gov/nevada, lists Nevada’s export assistance centers’ upcoming events.
The Nevada Commission on Economic Development (NCED) also offers a host of educational and promotional programs through its Department of Global Trade and Investment.
Its “Export Readiness Programs” involve consulting with a new-to-export company on whether it’s ready to export and what its growth and expansion potential is. Through NCED’s export seminars and one-on-one counseling sessions, companies learn how to be successful in exporting and the best ways to approach new markets, said Di Stefano.
The NCED helps businesses show their products or make connections at international trade shows, which are open to the world at large, and on trade missions, where only a handful of Nevada companies are taken to a foreign country to introduce their product and/or connect with potential partners. NCED hosts between two and five inbound buying missions per year, which bring foreign buyers to the state to meet with Nevada companies.
The Commission contracts with eight international representatives who help Nevada companies access the countries in which they’re based. They’re located in China (Beijing and Hong Kong), Southeast Asia (based in Singapore but covering Thailand, Malaysia, Vietnam and Indonesia), Taiwan, Japan, Mexico, Italy and the United Kingdom.
NCED’s Web site, www.expand2nevada.com/globaltrade.html, contains various helpful publications, including lists of foreign companies in Nevada, the Commission’s International Representatives and the Permanent and Honorary Consuls in Nevada, as well as NCED’s planned export-related activities for the year. Other resources there include the Nevada Exporter Directory and the state’s trade statistics.
The NCED charges a fee for some services conducted in association with U.S. Department of Agriculture’s programs. These include some of the organized trade missions not supported via grants, the “Export Readiness Programs” and seminars.
Potential Pitfalls
Companies that try to export could face problems if they don’t properly prepare and take the necessary, preventative steps. They could fail at their exporting attempts, not selling any products or services at all in their chosen country, and not earning any revenue, Di Stefano said. Additionally, they could lose any money they spent to establish distribution in the foreign markets. A second attempt at a later date to enter the same market could be marred by potential customers’ poor perception of them as well.
Companies could also have problems getting paid for their sales if they don’t negotiate payment issues clearly at the outset. They could lose their intellectual property rights in a country if they don’t properly register trademarks, patent their names and products, and regularly and closely monitor them all.
Keys To Success
To avoid the pitfalls and succeed with exporting, Di Stefano offers the following advice – companies:
• Already should be fruitfully selling their products or services for about one to three years domestically.
• Must conduct research to determine which countries have the largest market potential for their products or services and to determine competitors’ market shares.
• Must learn all about doing business in the chosen country or countries.
• Must learn the best method for selling their products or services in each country (distributor, importer, direct sales, joint-venture, etc.) and the associated contractual agreements.
• Should hire a law firm in the particular country, especially if they plan to be located there physically, to ensure they comply with all local laws.
Other advice includes starting small and growing rather than taking on more than is manageable. Continually perform due diligence on all deals. Develop good relationships with your international partners.
When something seems insurmountable, call one of the organizations that provide assistance and ask for resources and/or other help.
“You just need to do your homework,” Marshall said. “It is very simple. Don’t let it seem so overwhelming that you don’t do it.
You’re going to have stumbling blocks and obstacles. People who aren’t successful have given up too easily. You just need to persevere,” she added.
