The Bright Side of the Dollar's Decline

As exports boom, small businesses go along for the ride.

By SHARE

If there's one surefire way for a politician to get cheers, it's to talk up the dollar. President Bush has always maintained he favors a strong dollar, even as it has slid to historic lows recently against foreign currencies like the euro and yen. Presidential candidate Barack Obama in a recent speech blamed Bush's policies for the dollar's slide and said he would turn it around.

But there's one group of Americans cheering precisely because of the weaker dollar. U.S. exporters have enjoyed a tremendous boom as their products have become cheaper abroad, thanks to the weaker dollar. As U.S. exports surge, small-business people are being swept along with the tide.

In 2006, the most recent year for which there is data, some 239,000 U.S. small businesses were exporters, says Chad Moutray, chief economist at the Small Business Administration Office of Advocacy. In addition, the SBA says that a fifth of all U.S. exporters have 20 employees or fewer. But as the dropping dollar has boosted exporting over the past couple of years, that number seems sure to rise as more small-business people venture into foreign markets.

Kerry Welsh is glad he did. He is the chairman of WelCom Products, a 10-person outfit in Los Angeles that designs hand carts to be sold by major retailers. The fall in the dollar's value did not excite him at first, because it meant higher prices for the manufacturing of his products, which is done in China. "We've had a price increase of 12 percent in the last year and a half," he says.

But despite the cost increase, Welsh says WelCom's profits are up for the past year thanks to foreign customers: "They all think it's great value because we're able to sell it in U.S. dollars." He has been traveling to trade shows overseas to let foreign retailers take notice of his latest product, the Magna Cart. He says he has found the most success in Japan and China, where he says sales "dwarf" what's happening back home.

Of course, not all small businesses have the ability to reach Asian consumers or spend lots of money flying around the world. But they don't have to. The good news is, with the U.S. dollar now almost at parity with the Canadian dollar, they need only go north of the border to find tremendous opportunities.

Betsy Shields has run Breakaway Technologies in the Chicago area for 16 years. The six-person business sells used computer equipment to much bigger companies. She has worked with clients in Canada for most of the company's existence, but something has changed in just the past few months. She said she has "six solid buyers in Canada," and her business with them has grown fivefold over a year ago. "I'm pretty positive it has everything to do with dollar," Shields says. "It's not people who are new clients." Her only regret is that she did not boost her activity overseas sooner.

The opportunity cost of time spent learning about the rules and regulations of exporting can be daunting. Shields views Africa as an unexplored frontier for her products, but she has not figured out how to get them there yet. "It takes a lot of time and research," she says. "It's not just pricing—it's duties and customs."

But there are resources for small businesses to find the markets that offer the most potential sales with the fewest headaches. Laurel Delaney, author of the Global Small Business Blog and a consultant to small businesses that go international, says the first step is to talk to one's banker. "Ask where are the best markets that I should be going internationally if I want to finance this deal," Delaney says. "Make sure you're looking at ease of doing business."

Despite all the good news for U.S. exports, small businesses should probably keep their optimism in check. The dollar shows little sign of strengthening right now, but currency fluctuations can be a risky thing on which to base a long-term business plan. "Either you win or you lose a big gamble based on which way the dollar or wind blows," Delaney says. In other words, don't put all your eggs in one basket. With exports booming, it's tempting to make that mistake, says Shields: "You kind of get lulled into doing whats easy.

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