Every company should be exporting, right? The message is seemingly everywhere today – exporting is critical, don’t let your company get let behind, exporting is easy, and look at all the free government resources to help you get started!
Everyone — from President Obama’s National Export Initiative, to various government agencies, to large banks and financial institutions, is on the proverbial “bandwagon.”
True — many companies that don’t export should consider it.
But lately I’ve run across quite a few who are exporting or want to export, but really just shouldn’t – at least not right now.
I’m not talking about purely local businesses like restaurants, hair stylists, plumbers, and chimney-cleaning services. These companies seldom draw customers from outside a 50-kilometer radius. Their business model requires very local delivery.
No, I’m talking about companies that have a product or service that might be attractive outside their home market. Maybe it’s even obvious there are good export prospects, with stellar margins.
But these businesses shouldn’t be exporting because they have the wrong mindset.
In this series of blogs, we’ll talk about mindsets that can actually shrink your business if you jump too quickly into exporting. By reading this series you can decide if exporting is right for you, or if you’re better off staying focused on providing a great customer experience domestically.
Here’s our first candidate for either ceasing exports or taking a serious step back to reassess:
Type #1: Any Port in a Storm Will Do, or Why We Hire Former Circus Artists.
These companies grab export sales wherever and whenever they can. They’re proud of the fact that they almost never turn down an order, and so they have lots of distributors and partners and countries involved, but most are quite small or sporadic. They often use a variety of business models to sell.
However, chasing all these sales and trying to service these customers turns their organization into a veritable pretzel to make all these deals work. Cirque du Soleil artists would admire their extreme flexibility! These companies are always sure the next opportunity will be the big break-through
One company I recently met with had one guy managing sales in 42 countries. That wasn’t his only job. He looked completely frazzled, and admitted as much. The company was using distributors, agents, and co-marketing partners, trying hard to adapt to each country. He was constantly juggling a million things, like a circus performer with no break in sight.
We suggested he first look at all of these distributors and perhaps focus on a manageable number of countries where the prospects were best to maximize their sales. He reacted with horror. He didn’t want this – he wanted help making sales in still more countries!
Sure, this company was exporting. But the results were seriously sub-optimal. The whole company was pulled in so many directions that none of their markets was really growing rapidly.
Most companies that export with this approach don’t measure the all the various costs to the organization — all the extra hours sorting out local requirements, supply chain, finance, and customer service issues. Not to mention the opportunity costs — the costs of NOT spending more time with the best partners, or the potential of hurting the overall customer experience.
Most organizations that get around to tracking these are shocked by the overall costs. When the true cost is measured, this type of export business is generally unprofitable.
And if so, why export? The goal isn’t just more sales – it’s profitable sales.
These companies remind me of my father, who used to shop religiously for great deals. The only problem was, he often bought stuff – often quantities of it – that he really didn’t need, just because it was a good price.
Selling more stuff that’s not profitable is a bad way to run a business. Making more unprofitable sales is not a formula for making them profitable.
In our almost 30 years of experience, we’ve found that the best formula for success is to have a dedicated resource, focus on fewer countries, stick to one business model (at least at first), and really grow the business in those markets.
It’s also much easier to calculate the true organizational cost and ROI of supporting this kind of structure. Sure, you will say no to many opportunities, but if you’ve choosen only the best ones, your investment is more likely to pay off, and pay off faster.
Maybe your company or client already has a dedicated person to focus on growing export sales – if so, great! But maybe there are other mindset issues holding your company back.
In our next blog in this series, we look at companies who either don’t understand the investment needed or can’t afford it. Stay tuned for part 2: “Why Isn’t This Free?” Free is good, right?
Not always when it comes to exporting. Stay tuned!
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