Tips for Small Businesses Looking Abroad

Online resources make foreign trade easier, but firms still need to budget for bumps in the road.

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The game of international trade is not just for big multinational corporations. Small businesses are increasingly outsourcing administrative and other tasks to other countries, while the knowledge work is done back in the States. They're also getting more involved in directly selling their goods to foreign markets because of growing ease in finding buyers (think eBay) and a weaker dollar. Here are some tricks of the trade that small-business people have used to help expand their global reach:

Try social networking. Even if a business is too small to send its own people around the globe, it doesn't have to. Some websites let potential international employees find U.S. firms. Elance.com is one where for a subscription fee buyers and sellers of services can look for each other. This website has become a major spot for foreign workers to sell their services to Americans, according to Steve King of the Institute for the Future. Seventy percent of those offering their skills on the website come from outside the United States, while almost all of the buyers are domestic.

Use affordable communication tools. While instant messaging is used mainly for family and friends to connect, global small-business people now use this cheap means of communication to direct their employees operating abroad. Pauline Lewis runs Oovoo Design, an Alexandria, Va., company that sells handbags sewn by over 600 workers in women's cooperatives in Vietnam. Customers are mainly in the United States and Canada. Lewis says her business would be impossible without the services of Skype and Yahoo chat, which she uses to talk to the woman who organizes her business in Vietnam.

Look to where the money is. Just because a buyer is online doesn't mean the normal taxes on international trade don't apply. Certain products carry lower taxes and tariffs than others. That's true whether you are importing or exporting. Customs brokers can tell you which products carry certain advantages or disadvantages.

Budget for the barriers. Larry Harding directs High Street Partners, a consulting firm that works with businesses to ease their transition to global markets. He says one of the most common mistakes businesses make is getting into a foreign market too quickly before working around all the rules and regulations. "It's all well and good to think you can enter China and India—but you can't do it in a month," Harding says. Setting up an overseas office requires small-business people to overcome not only language and cultural barriers but also sometimes arcane labor and business registration laws. He recommends that small businesses plan to set aside 5 percent of their expected revenue to pay for these costs.

Get help from Uncle Sam. The Export-Import Bank of the United States offers small-business exporters insurance policies to protect against the risks that accompany dealing with foreign buyers, such as nonpayment for commercial reasons or perhaps a sudden civil war. This policy is aimed at any company that fits the Small Business Administration definition of a small business, but it has to meet other requirements as well, such as exporting only goods that are at least 51 percent produced in the United States.