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Small Businesses Going Global
The Perry-based company sells its database software, which indexes text, graphic and video files, in 18 countries through a network of 14 distributors. Yet of its 20 employees, only one person has primary responsibility for overseas distribution. "The cost of reproducing and shipping our product is minimal compared to the cost of R&D, marketing and customer support," says Schnyder. "We do not have staff overseas; we do not spend marketing dollars overseas; so the revenues from our international sales are almost entirely profit."
More and more small businesses in Florida are turning to exports to expand markets and boost sales. Indeed, exports valued at $29.4 billion passed through Florida's ports in 1995, an increase of 17.9% from 1994. Some businesses, like askSam, work through distributors; others handle all the export logistics and paperwork themselves.
Actively exporting since 1987, askSam used to grant distributorships on a first come, first serve basis. As the company has gained export-savvy, it has gotten pickier about who it will do business with. AskSam now contracts with the Octagon Trade Group, which specializes in international software distribution, to find the most qualified distributors. Since askSam's 14 overseas distributors provide their own marketing and customer support, the company sells to them at a big discount - around 50% if they peddle the English language version of askSam, up to 75% if they translate askSam's manuals and help files into a native language. "We've been very pleased with the partners they've selected for us in the U.K., Spain, France and Japan," Schnyder says.
He also appreciates that Octagon doesn't charge up front, but instead takes a percentage of the licensing revenues generated by the distributors it finds. "If you decide to venture in the export market, make sure your consultants are getting paid for results, not promises," Schnyder says. "If an international marketing consultant says, ?Give me $5,000 and I'll be back with some information in a month,' you haven't found the right consultant."
The exporting experience hasn't been so carefree for GTO Inc., a Tallahassee manufacturer of remote-controlled gate openers with 40 employees. Manufacturing costs are a significant percentage of overall expenses, so GTO, unlike a software maker, loses real money when customers don't pay. Its gate openers are bulky, making them more difficult to ship. Electrical connections and remote-control frequencies must be adapted to each new country, and, to sell in Europe, GTO had to pay $7,500 for a CE Mark, the European equivalent of an Underwriters Laboratory certification in the United States.
Even so, GTO found the export market well worth the effort. Last year, exports accounted for $250,000, or 6% of GTO's overall sales of $4.1 million, according to Chuck Mitchell, GTO's president, and in recent months, export sales have jumped to 15%. For all of 1996, GTO projects that it will have total revenues of $4.5 million, with $400,000 coming from foreign sales. GTO sells through distributors in 16 countries in the Caribbean, Europe, Mideast and Far East, and is actively courting half a dozen more. "It's the fastest growing segment of our business," Mitchell says.
Mitchell cites assistance from the Export-Import Bank as the major factor in GTO's ability to export profitably. An independent government agency, Ex-Im Bank insures up to 95% of the value of GTO's overseas shipments for a fee of slightly less than 1% of that value, provided the overseas customer has good credit in its native country. "It's a great program," Mitchell says. "Frankly, it enables us to offer better terms to creditworthy foreign distributors than we can to some of our domestic customers."
GTO found out about Ex-Im Bank through the Tallahassee office of the U.S. Department of Commerce's U.S. Export Assistance Centers.
Tracey Van Hook, export sales manager for GTO, has experimented with a host of government and private sector marketing and advertising vehicles in her search for new distributors. She's gotten the biggest bang for the buck out of a small ad in Commercial News USA, a catalogue published 10 times a year by the U.S. Department of Commerce and disseminated by U.S. embassies and consulates and over electronic bulletin boards to 259,000 business readers worldwide. "We paid $395 for a 2-inch blurb beneath a small picture of our gate opener," Van Hook says. Once GTO lands a distributor, it counts on freight forwarder Export Management of Atlanta to get its products shipped with proper documentation and on time. "That's critical," says Van Hook. "The last thing you want, when you sign up a new distributor in a new country, is a botched first shipment."
Business Beat - Week of May 3rd
