TO OUR BORDERS & BEYOND! …. Safely.
Wait, is the title of this article a reference to Toy Story? Yes, in fact it is.
I have the absolute pleasure of watching this exact movie… or portions thereof … every single morning with our little man.
Why does he watch the same movie every morning? Well, that’s because children love routine. They love the “known”. They love familiarity. So, whether it’s Toy Story or Moana, he is playing it safe and wants to stick with what he knows. I get it.
Now … who are we to judge? Don’t we as adults or even companies act the same way?
Do we not usually stick with what we know and what seems like the logical next step?
STOP THE SUSPENSE! The answer is “Yes”. We do.
I can dive deeper into it from an individual and career perspective. But I will leave that to the experts such as @garyvee to explain and inspire.
Instead, I’d like to focus on Canadian businesses that are selling domestically or exporting only the United States.
Like my 18-month-old son, we want familiarity. So, we probably feel most comfortable selling close to home. Here are some of the main reasons.
1.) Language – Minimizing any miscommunication.
2.) Legal – Pursuing legal action when there is a dispute. Easier to do in your home country than internationally. In some cases, there is a fear of IP theft.
3.) Distance – Time zone and physical distance may minimize your ability to build strong relationships. However, this could be a thing of the past as virtual meetings have become the norm.
4.) Cost – Entering a new market may require a large financial investment upfront. Not to mention the cost of logistics when shipping internationally.
5.) Risk – What if you invest a lot of money and the market does not adapt your product? What if a buyer doesn’t pay you?
The reasons mentioned above are a just a few of the many more reasons NOT to export. However, if you may be so kind, stick with me. Let’s chat about the reason why exporting beyond the USA may be a good option for your company.
1.) Addressable market – The Canadian and USA population combined is approx. 400Million people. That leaves an addressable market of 7.5 billion people outside of Canada/USA.
2.) “America First” – Don’t get me wrong … the United States is still Canada’s largest trading partner by a country mile. However, with more and more legislation around the “Buy America Act”, tariffs and political instability, it may be time for Canadian companies to minimize their dependence on the US.
3.) Emerging Markets – By definition, these countries are growing at a faster pace than more developed and established countries. Entering these countries or selling to these countries still comes with more inherent risks. Yet they may also bring an opportunity for exponential growth.
A good indicator is the growth of the middle class around the world
According to the European Commission – The global middle class is expected to reach 5.3 billion people by 2030. This means an additional 2 billion people with increased wishes and purchasing power than today. Most of this growth will be in Asia. By 2030, China and India together will represent 66% of global middle-class population and 59% of middle-class consumption.
4.) Costs & Logistics – this was also mentioned as a reason not to export. However, if you are a company that is currently outsourcing your manufacturing, then you may be better off selling to countries that are closer to your manufacturer. For example, a lot of companies manufacture their products in China. It may be cheaper to ship to countries within Asia, than it would be to ship overseas to Canada or the USA.
5.) Trade Agreements – USMCA (NAFTA) is by far the most important trade agreement that we have as Canadians. However, in an effort to broaden our horizons, the Canadian Government has signed multiple other trade agreements. Although I am far from knowledgeable enough to preach the benefits of these agreements, suffice it to say that they provide advantages around customs, tariffs & regulation.
Naturally, you are saying to yourself, this sounds AWESOME! But where do I start? Well ... here are a few resources to check out:
Information & Connections
Export Development Canada – EDC’s website provides a portal specific to each country. This includes a high-level overview and EDC’s position for these countries. For more detailed information you can reach out to their export help group at [email protected].
EDC also builds a list of Canadian capabilities which they refer to when making introductions to large foreign buyers when they see fit. It may be worth getting registered.
Global Affairs Canada – GAC’s Trade Commissioner Service is a great resource. They provide insight and connections worldwide. Their Trade Commissioners are experts in their respective industries and/or countries. They have representatives located around the world and can help you with the local knowledge you may need to enter a market.
Protecting yourself against credit risk
Accounts Receivable Insurance – Most international buyers will expect payment terms when they buy from you. This means that they will only pay you at a specific date after they receive your product (i.e 30 or 60 days after delivery). This creates an Accounts Receivable.
Prior to agreeing to these terms, you can get an insurance approval from one of the credit insurers in Canada. If your buyer is approved, you can be insured up to 90% of your receivable.
So, if you are looking to sell internationally, but you are concerned about not getting paid, this is a great option. Once an insurance claim has been paid, the insurance company takes over the receivable and tries to collect. This saves you the headache of having to litigate or chase a buyer in a foreign market.
Here are a few companies that offer Credit Insurance in Canada.
1.) Export Development Canada
2.) Euler Hermes
3.) Coface
4.) Atradius
International Trade & Exporting may not be right or even relevant to some businesses. However, if done right, it can mean the difference between a stagnant/low growth business and an exponentially fast-growing business.
As my good friend Buzz Lightyear would say – Export and watch your revenues grow to INFINITY & BEYOND!....... sorry had to do it.
Here’s to your continued success,
Elias Beaino
Managing Partner - Bolster Growth Capital
O: 604-332-1884
C: 613-294-6312