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Advantages and Disadvantages of Exporting
On: November 29, 2021 | By: David Noah | 9 min. read
Deciding to jump into the world of international trade isn’t an easy decision—or one you should enter into lightly. And being an exporter isn’t for everyone! However, in my opinion, deciding to export is the single most important thing you can do to grow your company and increase your sales. After all, more than 95% of the world’s population live outside of the U.S.!
In this article, we’ll discuss the advantages and disadvantages of exporting in international business, as well as several resources available for exporters getting started.
Advantages of Exporting
The world is open for business! In 2021, the value of U.S. goods and services exports was an impressive $2.5 trillion. Whether you’re a small business or a large corporation, it is easier than ever to market and sell your products anywhere around the globe.
If you can sell your products in the U.S., then you can almost certainly sell your products outside of the U.S., and to a large market. As I mentioned above, 95% of the world’s consumers live outside the United States. That’s a lot of potential customers to ignore by choosing not to export!
Notably, Asia’s huge, growing middle class is a big opportunity for exporters. In 2020, an estimated 2 billion people in Asia were members of the middle class; by 2030, that number is forecast to grow to 3.5 billion! That’s 3.5 billion people with disposable income, ready and willing to purchase goods.
Companies that export are more profitable, can employ more people and help grow the U.S. economy.
Companies that export are 17% more profitable than those that don’t. And according to the Institute for International Economics, U.S. companies that export grow faster and are 8.5% less likely to go out of business than non-exporting companies. Exporting companies learn how to compete more successfully than non-exporting companies.
According to the U.S. International Trade Administration (ITA):
Doing business in a market that’s beyond one’s borders can transform its practitioners. The experience of forming new relationships, getting up close and personal with another culture, figuring out how to meet the needs of others, and learning how to address new business challenges is personally rewarding. It also leads to improvements in products and services and makes companies stronger in whichever markets they compete.
There is ample support for small businesses who export.
One concern potential exporters have is that they’ll be a rowboat in an ocean of intimidating international rules and regulations, having to figure it all out on their own, and set up to fail. This is not true! You are not alone, and you don’t have to do it alone! According to the ITA website, U.S. small- and medium-sized companies—firms with fewer than 500 employees —account for 98% of the nearly 280,000 exporting businesses.
And for every one of those exporters, there are many agencies, companies and resources available to help them get started in international trade and provide assistance every step of the way. We’ll explore all of these resources at the end of this article.
Exporting helps you protect yourself against downturns in the U.S. economy.
As an exporter, you can secure yourself from dynamic U.S. economic conditions and competitors. Because we don’t know when or how much the U.S. market will change, having the U.S. as a share of, but not all of, your sales portfolio, can help you weather tough times when they inevitably hit your domestic market.
Check out these statistics from the ITA:
- A study of U.S. exporters found that 60% of small companies in the survey derived 20% of annual earnings from exports, while 44% of medium-sized companies did.
- When asked whether export sales would grow at least 5% per year for the next three years, 77% of the small companies and 83% of the medium-sized companies said they would.
You can find new markets for your products.
When your products seem to be on the tail-end of their lifespan in the U.S., choosing to export provides new markets that may not be saturated with competitors’ goods. Additionally, companies with seasonal goods can market those products in different hemispheres and increase their year-round sales.
Disadvantages of Exporting
“This all sounds good,” you may think, “but it’s easier said than done.” And you’re right—exporting is not an easy, quick fix for a business looking for long-term, sustainable success. But for those who are dedicated to growing into internationally competitive, successful exporters, the disadvantages pale in comparison to the opportunities offered by international trade.
Below are some of the common disadvantages to exporting I hear about, as well as the myths surrounding them.
Exporting is risky.
This is true—it certainly is a risk! International trade is more complicated than sticking to a domestic market; however, the flip side is also true. You limit your company to 5% of your potential market when you don’t attempt to export because it’s too hard or too risky.
And in some markets, such as Canada, the risk is almost exactly the same as selling in the U.S. Every international market is different, and the perceived risks can be reduced or eliminated if exporters take advantage of the resources available to them.
I think most people considering exporting choose to stop at this step because they see the risk, but they don’t see a clear path forward. Our whitepaper, Developing Your Export Strategy: 5 Things Every Exporter Should Know, can help you envision that path.
In the free whitepaper, you’ll learn how to :
- Develop your export strategy.
- Review and understand export and import regulations.
- Prepare your goods for shipping.
- Complete your export paperwork.
- Make sure you get paid for your goods.
It’s a must-read for those who are considering exporting and want to create an export strategy that will help maximize export profits and avoid common pitfalls.
International trade is ever changing.
The international trade environment changes—sometimes rapidly—and if you want to export, it’s non-negotiable to be aware of and monitor these changes. Exporters can’t be static in how they do business; the market demands that they be willing to adapt and change and be flexible to be successful. For example, in the last year alone, we’ve seen a number of new trade sanctions targeted against the Russian invasion of Ukraine, tariff increases when importing and exporting with China, trade disputes, changing Incoterms, a global pandemic that disrupted trade and more. If you aren’t willing to learn, grow and stay up-to-date with these changes, then the opportunity exporting provides is not worth the problems you will face by staying stagnant in a dynamic industry.
Exporters face supply chain issues.
Everyone, everywhere saw the impact of the global supply chain chaos caused in part by the COVID-19 pandemic. While some of the effects of the pandemic probably should have been anticipated, they weren’t—and as e-commerce has boomed, the supply chain infrastructure hasn’t been able to keep up with it. Exporters are now faced with figuring out how to get their products to consumers or refund them. This type of situation exposes weaknesses in your company and its structure because it stresses the company in areas that have never been stretched.
Some exports need a license.
Many would-be exporters balk at the idea of the compliance angle of exporting. “It’s too complicated,” and they just don’t want to deal with licensing, classification and other required compliance issues.
My take on this: It’s just lazy. There are so many resources, classes and training tools available from the U.S. government, consultants and even our Shipping Solutions blog, webinars and whitepapers that tell you exactly what to do and how to do it.
You can learn how to manage the compliance angle, even if you are starting from scratch. Will it be complex? Yes, at least at first. But there is so much potential out there that to refuse to try because of compliance issues is a poor excuse.
Getting paid is more complicated for exporters.
Compared to domestic trade, getting paid can be difficult! Exporters must deal with terms of payment, currency fluctuation and more. However, once you understand your options, it’s easier to pick one that will help you get paid accurately and on time. Here are some resources that can help:
- Whitepaper: Trade Finance Guide: A Quick Reference for U.S. Exporters
- Article: Getting Paid for Your Exports: Payment Options for International Transactions
- Article: 10 Terms You Need to Know to Get Paid for Your Exports
Intellectual property theft is real and rampant.
Protecting your intellectual property is one of the most difficult aspects of exporting, especially if you export to countries such as China. Unfortunately, this is one of the biggest disadvantages to exporting that doesn't have a clear solution. It is a risk to export intellectual property.
While it may be impossible to guarantee your IP will be safe if you export, there are steps you can take that serve as a defense that may stop or slow down theft. The following articles may provide some guidance in protecting your intellectual property:
- 4 Strategies Exporters Should Use to Protect Their Patents Globally
- 5 Strategies for Exporters to Protect Their Trademarks Globally
Resources to Help You Get Started Exporting
While the risks of exporting goods are real, the truth is that the advantages of exporting far outweigh the disadvantages. Knowing how to get started can make taking the leap into global trade less daunting.
Here are several resources. Take advantage of all of them, and ask every question you have. They are here to help you!
The Small Business Administration
The Small Business Administration (SBA) provides counseling, training and financing to small businesses to allow them to take advantage of export opportunities. The SBA is dedicated to helping small businesses succeed in the overseas marketplace by providing one-on-one as well as interagency trade education and by making export loan guarantee programs available to small companies.
The number of small- and medium-sized exporters more than doubled between 1992 and 2007, and nearly three-quarters of exporters have fewer than 20 employees. There have been many instances where a small company is able to leverage exports with the help of the SBA, without adding extra staff until ROI justifies it to continue growing their export business.
The U.S. Commercial Service
As many U.S. firms seek new opportunities, they find conducting international business offers unique challenges. That's where the U.S. Commercial Service of the International Trade Administration (ITA) comes in. Every year, the ITA, often in partnership with the SBA, helps thousands of U.S. companies navigate those challenges to export goods and services worth billions of dollars.
Located in more than 100 cities across the United States and in U.S. embassies and consulates in more than 75 countries, the U.S. Commercial Service's global network of trade professionals can help open doors around the world. Whether you're looking to make your first export sale or expand to additional international markets, the U.S. Commercial Service offers the trade counseling, market intelligence, business matchmaking and commercial diplomacy you need to connect with lucrative business opportunities.
Shipping Solutions Software and Resources
For small and midsize businesses that want to be serious about exporting, Shipping Solutions software saves time and money—and takes the tedium out of export paperwork. Many of the disadvantages of exporting can be nullified when you partner with Shipping Solutions. Here’s how:
- It’s indispensable for compliance. The Shipping Solutions Professional Export Compliance Module ensures you stay compliant in every aspect of exporting, helping your company avoid costly fines and other penalties.
- You can create forms five-times faster. With Shipping Solutions, simply enter your information once, and the software automatically formats and places it on the right spot on the right forms, every time.
- It’s more accurate. Shipping Solutions improves the accuracy of your export paperwork by reducing typos and inconsistencies across documents that slow shipments and delay payments.
- It’s easy to file through (AES). If you’re filing through AES yourself—or thinking about starting—you’re probably going to the ACE portal and retyping all your electronic export information. What a waste of time! With Shipping Solutions, you can simply click a button to submit your export information to AESDirect on the ACE portal without any redundant data entry.
Sign up for a free demo to see exactly how Shipping Solutions will benefit your exporting business.
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About the Author: David Noah
David Noah is the founder and president of Shipping Solutions, a software company that develops and sells export documentation and compliance software targeted at U.S. companies that export. David is a frequent speaker on export documentation and compliance issues and has published several articles on the topic.