SolArc, a Houston company that sells software to help businesses deal with energy issues, employs only 135 people. But the company has customers in nine different countries. Like SolArc, many small businesses are finding it easier and more profitable than ever to go global. By 2018, half of U.S. small businesses will be involved in international trade, according to a report by the California think tank Institute for the Future and the software company Intuit. A third of such businesses are already doing business abroad, according to a 2007 survey by UPS.
U.S. exports are surging, and small businesses are along for the ride. According to the Commerce Department, exports last year were at an all-time high of $1.62 trillion. A weaker dollar, rising incomes overseas, and lower taxes and tariffs around the world have all helped American companies sell more abroad. But certain technological advances have particularly aided small businesses to export. For one, the creation of PayPal means that small businesses—which generally can't hire large legal teams—can be assured they will get paid when they do international business online.
The Internet has also leveled the playing field. "The single biggest barrier for small businesses is matching buyers and sellers," says Steve King, one of the authors of the Intuit/Institute of the Future report. The Web allows small-business people to find consumers directly without incurring the expense of global travel.
But small businesses aren't just going global from behind a computer screen. They can go after foreign customers in other ways. A wellspring of new consultants who can guide small businesses through the complicated process of dealing with foreign tax and labor laws has made setting up shop overseas feasible for more than just big multinationals.
Four years ago, SolArc was doing well and selling its services to big corporations like ConocoPhillips. But all the company's clients were domestic. Tim Smith, SolArc's controller, says that the company saw international opportunities in new airlines and energy companies popping up in Europe and Asia, but "we didn't have the manpower to chase it." SolArc enlisted the help of global business consultants High Street Partners to set up offices overseas. The result: It won new clients like Singapore Airlines. Smith says SolArc made $10 million last year from foreign clients, compared with "only a few hundred thousand" in 2003.
As the global economy continues to expand, there's even reason to think that small businesses may have some competitive advantages. As people get richer, they demand more and more specialized products that are not mass produced. So, as incomes in China and India rise, consumers there will be willing to pay a premium for authentic niche goods that small businesses can provide.
Will American small businesses cash in on this demand, as far away as it is? King says that the small businesses that have been lured into exporting by the weak dollar are here to stay. "A lot of people are exporting who have never exported before," he says. "They're discovering how easy it is to do."