Global Growth for Businesses Is Easier Than Ever Today: Is Your Company Benefitting?

By Ed Marsh

Global trade is ages old and core to the American experience. Europeans first arrived in America as a coincidence of exploring a path to shorten key trading lanes. Since then we’ve gone from exporting agriculture and textiles to major manufactured goods and digital products.

More recently, advances in communications and logistics have accelerated the process of globalization, and federal initiatives have contributed to a vigorous discussion around exporting's benefit to the U.S. economy. Stories of success and struggle are common among small businesses, and most big companies are thoroughly globalized—but less often discussed is the middle market—those U.S. businesses with annual revenues between $10 million and $1 billion.

New research from American Express and Dun & Bradstreet reveals fascinating insights into global growth opportunities for this powerhouse group that generates 21 percent off all revenues and 28 percent of employment in the U.S. "The Middle Market Power Index: Taking the Global Stage" highlights two key insights:

• Only 5 percent of middle-market companies export, compared to 34 percent of larger companies.
• More than two-thirds (68 percent) of middle-market firms that export have been in business for 25 years or more.

As global buyers seek U.S. goods and services, America’s middle market has room to grow!

Hesitance

Every company has a unique story, and for the 95 percent of the middle market not currently exporting, there are many reasons. As the research shows, mid-sized firms are generally vibrant and growing, but companies often hesitate to export for reasons including:

• They are meeting growth goals domestically.
• Perceived risk and complexity of international sales is intimidating.
• They’ve tried unsuccessfully in the past.

In many cases, however, some myths and misconceptions about exporting persist even as technology and policy have dramatically lowered barriers to success.

The Path to Global Growth Really Is Different Now

Exporting used to be a risky, speculative process. A strategic decision to expand required research, a “best guess” of opportunity, and a substantial investment in time, money, and patience. Often the process of creating awareness, developing relationships, initiating projects, and closing and delivering deals would take years, and actual profitability would take several more.

Traditionally, most middle-market companies started by selling to their existing domestic customers as they expanded internationally, and, in the best case, a persistent foreign buyer would drive a deal from their side. Companies generally took years to saturate the domestic market and to achieve the scale required to commit substantial resources to international expansion.

Recently, policy changes have lowered trade barriers while technology has reduced the complexity and cost of logistics. At the same time, the Internet has created access for buyers globally. Companies no longer need to make huge, speculative investments to create, measure, and respond to global demand.

Today, export success can be kindled simply by helping eager buyers around the globe find innovative goods and services that will enable their growth. That change means middle-market companies can start to globalize much earlier in their life cycle.

If you can help the buyers find you, then export growth becomes as simple as managing the transactional details.

The Benefits

Exporting proponents commonly cite the statistic that 95 percent of the world’s buyers are outside the U.S., and estimates show that more than 70 percent of purchasing power is foreign. This leads to “growth in revenues” as the typical justification for exporting.

For many companies managing strong domestic growth, that’s not an adequate rationale. As barriers fall, the risk-to-reward ratio moves in favor of international markets, and three compelling benefits beyond revenues are sometimes overlooked:

• Diversification–Every business dreads the “slow down.” Markets have cycles, yet even in slow times buyers buy, and cycles vary from market to market. Diversification across different economic cycles and into areas with different currency, market, and growth environments decreases a company’s exposure to unfavorable conditions in any single market. It changes the “survival” mind-set common among companies during downturns to one of pivoting toward opportunity.

• Business vitality–Diversification helps to smooth the dips, but exporting also helps to extend the “ups.” Data shows that exporting companies often pay higher wages, and companies that develop strategically important diversified revenue, sales channels, and reach often enhance their valuation. Strong companies strengthen their communities, and stakeholders (employees and owners) benefit.

• Lessons learned–Disruption and innovation are critical elements of business today, and companies that sell globally often collect insights that enhance their core domestic business by spawning new product innovation and enabling operational improvement. Further, a deep understanding of global cultures that comes from extensive business in other countries can create competitive advantage when selling to a variety of communities in the U.S.

In short, the study highlights the power of the middle market and an untapped opportunity for global growth. Reduced barriers to trade simplify exporting, and the power of the Internet enables companies to connect with buyers globally. The benefits of exporting extend far beyond the obvious revenue growth potential.