Export to America

Export to America
By
William Cate

America represents less than 5% of the World's population. Yet we consume more than 30% of the World's goods and services each year. If you aren't exporting your goods or services to America, you are doing more than ignoring your largest potential retail market. You are ensuring that you can't raise risk capital in North America.

Consistent high quality is the secret to multiyear selling of your goods or services in the States. Every exported item must be as good or better than the sample that you supplied to your American buyers. Japanese automakers understood this quality axiom and have come to dominate the American car industry.

Your company can hire a local exporter to find an American importer willing to find wholesale buyers for your goods or services. If you hire a local exporter, you add another layer of costs that must be paid from your American sales. Aside from the local exporter, your costs will include freight, customs duties if any, importer profit, wholesaler profit and retailer profit. The more of these profits you want your company to retain, the greater the initial costs for your company to export to the States.

There are three cost control strategies for selling your goods or services in America. Each successive strategy potentially increases your corporate profits, but costs your company more money to implement. 1. Your least expensive initial export option is to find an American importer willing to sell your goods or services to American wholesalers. An American importer will develop your US wholesale network for a percentage of the sales that they generate for your company. Using an American importer is the least costly way to develop an American market, but it will substantially reduce your profits. You must pay the American importer while keeping your product or service price competitive with local manufacturers. This often means thin margins for your company. It can mean selling at prices below your current factory price. Exporting through an American importer is by far the most popular way for your goods or services to enter the American Market. American importers expect you to offer quality products or services at competitive prices to those of American manufacturers.
Your company risks little in developing the market using an American importer and should the States prove to be a major source of corporate revenue, you can take option 2 or 3 below when your present American importer contract ends.
2. You can open a wholesale office in the USA and sell your products or services directly to retailers. This direct marketing option can cost your company over a million dollars before your company makes its first sale. However, wholesaling your products or services allows your company to earn the importer and wholesaler profit on your goods or services. It's easy to compute how long it will take your company to repay the startup costs of an American wholesale operation against the costs of working with an American importer. However, it's far more difficult to compute the risks of developing a wholesale company in the States. Usually the risks of failure offset the cost savings of using an American importer.
3. Like non-US automakers, you can sell your product or service directly to American consumers. This allows you the maximum possible profit on your goods or services sold here because you earn the importer, wholesaler and retailer profits. However, developing a retail-marketing network will cost your company tens of millions of dollars before you see your first sale. The risks of failure are substantial. Usually, the best strategy is to start with an American importer and review your contract with the importer when it comes up for renewal.
There is a false belief among potential exporters that they can find an
American importer willing to pay their manufacturing company U.S. wholesale prices for their goods or services. The exporter expects the American importer to work for their company without making any money from their services. In fact, the American importers would lose money, since they must cover their marketing expenses, without compensation. If your manufacturing company wants to earn the U.S. wholesale price for your goods or services, create your own American wholesale firm. Otherwise expect to be selling with a very thin margin on your American export sales.

To raise risk capital in the States, your company must be credible. The least costly way to become credible in America is to sell your goods or services in the States. When a potential American investor can buy your product or service here, they believe that your company exists. If you expect American investors to rely upon a local audit for corporate credibility, you are making a serious tactical error.

If you want to raise money in America, in addition to credibility your company must offer potential investors liquidity and leverage in U.S. Dollars. To do it, you must be willing to take your company public in the United States. With liquidity, leverage and credibility, the odds of your company raising money here drop from about one in twenty-five thousand to around one in ten. Plus, being public and exporting to America offers your company potential tax benefits and access to a free trading currency. Your company's CFO's development plan should be to Export to America and Go Public in the States.

About the Author: William Cate is Executive Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] a merchant bank that takes public and funds non-American companies and has been importing high value items into the US for decades [http://home.earthlink.net/~beowulfinvestments/beowulftrading/]