According to Wood Industry’s November 2014 survey, 79 percent of Canadian respondents expect revenue growth this year — a figure that approximates a similar survey in the States by the Milwaukee, Wisc.,-based Cabinet Makers Association (CMA). There, just over 86 percent of respondents to the CMA’s survey said they are anticipating revenue growth this year.
Today, that growth could come from almost anywhere on the globe. This may be the year, as the saying goes, to “go big or go home.” If you really want to grow your shop’s business, as a manufacturer, it’s not enough anymore to think locally, regionally or even nationally when you ask yourself, “Where is my next sale coming from?” It is vital to look beyond our borders globally, says Gregory Trippenbach, the light manufacturing sector vice-president for Export Development Canada: “The bottom line is that you have to look outside of Canada to sustain growth, to create a long-term, viable business,” he says.
Whether your shop is a small one or a large one, in Saskatchewan or in the Maritimes, you are playing in a global arena, whether you realize it or not, says Trippenbach. “The reality is that you’re already competing on an international stage, because somebody in your area is selling Ikea knock-down cabinetry and you’re competing against these guys right next door to you.”
Free trade spells opportunity
And things are only getting more global. There are now four major free trade agreements in Canada, each of which is double-edged. On the one hand, they mean you’re competing against more foreign manufacturers; on the other, they have the potential to open many new doors for you if you do things the right way.
First there was the North American Free Trade Agreement (NAFTA), which has been around since January 1994. In just the last few months, two more big agreements have come into effect: one with Honduras in October, and one with South Korea on Jan. 1. The Canada-Korea Free Trade Agreement is our first international trade agreement in the Asia-Pacific region. And by 2016, the Canada and European Union (EU) Comprehensive Economic and Trade Agreement (CETA) is scheduled to be in force. Foreign Affairs and International Trade Canada describes CETA as “by far Canada’s most ambitious trade initiative, broader in scope and deeper in ambition” than NAFTA was 20 years ago.
“The opportunities are certainly there,” says Trippenbach. “Certainly for light manufacturing exporters, the lower Canadian dollar will bring a little bit of a competitive edge for them.”
Have an export mindset
The first “must” for getting into the export game is having the right mindset — rather like the fabled Little Engine That Could children’s story. Exporting is a mountain to get over, but it’s not insurmountable. “You have to believe in your product, and have the right goods at the right price,” says Trippenbach.
Trippenbach believes every manufacturing business owner should be thinking about exporting from the day their doors open for business. “I would assume that you’d be thinking about it from Day One – from the day you start manufacturing goods that you know would have a market outside Canada,” he says.
Getting into the right frame of mind is one thing. Then there’s having an exporting strategy. Practically, it’s absolutely crucial, says Trippenbach, because you’re adding a whole new dimension to your business.
Developing an export strategy
Trippenbach says these are the crucial elements of an exporting strategy:
• Knowing how you’re going to access the market and what the distribution network is going to be;
• Building relationships with people in the foreign market you want to export into. “You need to know who you’re dealing with on the other end,” says Trippenbach. “That is key.”
• Knowing and understanding the supply chain, and how to approach it; and
• Determining whether you have the capacity — both the skilled labour and working capital resources — to expand your business globally
In its Step-by-Step Guide to Exporting, the Canadian Trade Commissioner Service points out these six things you need to do:
• Determine whether your business is ready to become an exporter;
• Build an export plan;
• Pick a target market and do the necessary research;
• Figure out the best ways of delivering your product to your target market;
• Create a financial plan for exporting; and
• Make sure you get an understanding of the key legal aspects of international trade. “You need to know the export regulations with a particular good,” says Trippenbach.
Take advantage of available support
Trippenbach acknowledges that preparing for, and getting into, exporting can be a daunting experience. “It can for sure, because you’re going outside your comfort zone. There’s no doubt about it, it can be a giant leap,” he says.
He points out, however, that there’s a lot of support available through the Canadian Trade Commissioner Service, the Business Development Bank of Canada, and Export Development Canada. “There’s a whole infrastructure out there that is rooting for you and wants to see you succeed…that’s generally up and ready to support the exporter,” Trippenbach says.
You must be committed
To succeed in exporting, you have to be committed — you shouldn’t just be trying to test the waters, says Trippenbach. “It’s a long-term commitment. It can’t be ad hoc. It’s an investment of resources, and in building relationships in the market you want to export into.”
There is also a financial investment. When you start getting into international trade, you need to have advisors on trade compliance that can help you make sure you’re compliant with cross-border and international trade regulations. You also need to have a customs broker. You may have to look at working with agents in other countries as well. You may need to hire additional staff, not only to handle production, but also to handle the paperwork that’s involved in exporting.
Sometimes, business comes at you out of the blue — maybe it’s by word of mouth, or perhaps you get an email through your website. But filling an order locally, regionally or nationally for a new customer is a lot different than doing so for a new customer in Florida who has seen your website and wants cabinets.
“You really need to know the supply chain,” says Trippenbach. It is essential to have a handle on such things as who you’re dealing with, how you are going to get paid, what remedies are available under international trade law if you don’t get paid, and making sure those cabinets are installed by professional, qualified installers. “It’s not like selling something on eBay for 50 dollars,” Trippenbach notes.
Be totally prepared
Aside from the legal and financial aspects of plunging into exporting, there are also human resource factors to consider. Once you get into the global marketplace, you’re dealing with different languages, cultures and time zones. You need staff resources to handle these things, and make sure your business is easily accessible to new customers in new markets.
“Orders could be coming in a far larger magnitude than what you’re accustomed to delivering,” says Trippenbach. “You have to build everything you need to be able to support the export sale. And not just that initial sale, but the one after it, and the one after that, and so on.”
Why U.S. is a standard entry market
Trippenbach says when manufacturing businesses in Canada start thinking about exporting, they usually look to the U.S. first, because it’s the easiest market to enter. “I’d imagine that most of the manufacturers in this (the wood) sector are looking to the U.S. as a primary export market,” he says. “When we have largely the same culture, the same language and the same legal framework, it does make it easier to get into the U.S. So if you have someone who has never exported at all, the U.S. is certainly a gateway market.”
For decades, the U.S. has been Canada’s largest trading partner in terms of volume. But CETA is creating an even bigger market opportunity, points out Trippenbach. “The EU is 500-million strong, so it’s an even bigger market than the U.S.,” he says.
How exporting drives your business
Getting into exports can drive and grow your business in ways other than pure profitability, says Trippenbach. “It diversifies your markets; it opens up a world of opportunities. I think it creates the need to be more efficient, and the need to be more innovative.” He adds, “The only way I think you can compete is by growing in scale, by investing in machinery. That is going to make you more efficient.”
Trippenbach acknowledges that if yours is a small shop, you are “dealing with a lot for sure,” from overseeing production and design, to sales. But he believes you shouldn’t let all the things you already have on your plate stop you from adding an export component to your business, especially when that support infrastructure is available to help you through the process. It’s a matter of having confidence, he says. “There’s got to be confidence that what you have is going to be marketable across the globe.”
Starting over worth the risk
For all intents and purposes, you’re starting all over again when you decide to take the plunge and expand your business through exporting to global customers. It takes the same kind of business and financial planning that you had to do when you launched your shop — the same effort, if not more.
Is it worth the risk, poses Trippenbach? “There are no doubt risks in exporting, but there are risks associated with not exporting. Without exporting, you become a regional player that is going to be subject to the huge international importing activity. He adds, “You have to export to be relevant. If you don’t export, you’re limiting the opportunities for your business.”
But there are truths or consequences when you add an exporting component to your business, says Trippenbach. “If you do it right, you have a business that is growing — that is — growing profitably. And if you don’t do it right, if you don’t do the exporting part right, it could be disastrous.”