FOCUS ON EXPORTS 2018: Prosperity over the horizon

Many wood-industry manufacturers have businesses that do well in their own back yards — where customers are never farther than a tank of gas in the company pickup truck.

But there comes a time when a cabinetmaker or furniture manufacturer wants to expand beyond its municipality to the next province or even another country.

To just ramp up production and hope for the best in new markets is, of course, foolhardy without a solid plan in place. Luckily, wood-products manufacturers in Canada can turn to some great financial and business organizations for advice and services. Export Development Canada (EDC), Business Development Bank of Canada (BDC) and Export Quebec all have services and programs that can help you take the next steps to increase your business.

STANDING BY with ANSWERS

Philip Turi, director, Advisory Services at EDC in Ottawa, Ont., runs the organization’s Trade Advisor Team, which it operates like a service centre. Turi’s team is standing by to offer answers to the myriad questions that exporters might ask, as well as provide information on issues they might not be aware of yet (exporthelp@edc.ca).

“My team is set up to answer all of those questions about how you find customers in a foreign market, in addition to agents and distributors,” Turi says. “Questions such as ‘how do the regulations apply to me?’ and ‘which tariffs are relevant for my business.’”

In the province of Quebec, wood-industry businesses can turn to Export Quebec for many services, including expenses in traveling to key events in the U.S. and Canada, such as the Canadian Furniture Show in Toronto, NeoCon in Chicago, Ill., High Point Market in Charlotte, N.C., and the Las Vegas Market Salon in Las Vegas, Nev. According to Pierre Richard, president, Quebec Furniture Manufacturers Association (QFMA) of Montreal, Que., furniture manufacturing in Canada represents 63,000 jobs (roughly half of the total in the highly subsidized Canadian automotive assembly and parts manufacturing industry).

When Richard assumed the leadership of the QFMA about four years ago and did a “walk-through” of government ministries in Quebec City and Ottawa, he found the industry was barely visible. “It really surprised me considering how important our industry has been and continues to be.

“We started looking at ways of working closer with government at the provincial level to help governments make informed decisions. We’re not looking for handouts from governments. We’re looking to make them understand what the consequences are of certain decisions and how they could impact our industry. When you talk about Export Quebec as an example, we were not on their radar screen at all.” Luckily, after a consultation process was put in place, the situation has gradually changed.

“We managed to develop a program with the government for the last two years providing assistance to our exporters to participate in these fairs,” says Richard. “The reality is there are many government programs in Quebec at the provincial and the federal level that aren’t well known by manufacturers. The smaller you are as a manufacturer the more difficult it is to understand the programs and the forms you fill out.”

Simon Bouchard, president of Montreal, Que.-based Ateliers Jacob and the Association of Manufacturers and Retailers of the Quebec Kitchen Industry (AFDICQ) of Levis, Que., has taken advantage of Export Quebec programs for his own business. Cabinet manufacturer Ateliers Jacob has four locations across Canada and one in Florida. “If you hire a sales representative they pay 50 percent of the salary,” says Bouchard. His company recently acquired Quebec competitor Tendances Concept, effectively doubling the size of the business. Plans are to have as many as 20 cabinet showroom locations across North America.

EVERY MARKET is DIFFERENT

For Ryan Neumann, president, OnSite Group of Companies in Edmonton, Alta., expanding his commercial cabinet and millwork business has meant navigating interprovincial, not international waters. “If somebody is in a saturated market they might spread their wings a little bit and come to Alberta,” says Neumann, “everyone is hungry. It doesn’t matter if they are from Alberta or Prince Edward Island or B.C. or wherever.”

Neumann has noticed that the culture in each province he’s worked in is different. “The expectations are different too. When you get the actual business out of the way people do different things.

“If you don’t know your customer and you don’t do your due diligence, and you don’t assess your risk properly, then you don’t know if you are going to get paid.

“Let’s say you do a job and they don’t have the bankroll to pay you. Even though there is nothing wrong with your work, they are waiting for the customer to pay them. You can get stretched out to 60 to 120 days. They are in a different province. What do they care?”

When things go south, Neumann notes, “How do you put a lien on something when you have to go hire a lawyer from that province? Then that lawyer has to put a lien on it for you because you are working in different jurisdictions. You might have to pay a premium for that lawyer who is willing to work with a new customer from out of province. It’s happened to us.”

END of the FOOD CHAIN

Another tricky issue working out-of-province are delays at the job site, something of particular concern to cabinet installers like OnSite where it is the last trade in to complete a project. “The millwork is the last to go in so if the trades use up an extra day or two or three days of slope time in the schedule, then it shortens your installation,” Neumann explains. “But the client still has the same expectations.”

Being from out of province, it is too expensive to fly in reinforcements from the shop, so OnSite has come up with a creative solution to overcome project performance penalties.

“What we did before we started the project was qualify some local contractor and upholsterer just in case of a few deficiencies. So, we didn’t have to continue flying people out. It worked out really well.”

The logistics of performing out-of-province work includes more than just shipping material and manpower to project sites, according to Neumann. “Make sure you have the proper insurance. Like if you need to have your truck drive to Vancouver and suddenly disappears with $250,000 worth of product.” Other issues a business has to educate itself about are who is responsible provincial sales taxes on goods and services, as well as jobsite safety regulations in that particular province.

When out-of-country doing business, however, other issues crop up that can be handled by Canadian trade commissioners dedicated to their foreign market. “It is their job to find networks locally and to maintain those networks, to maintain lists of services providers that you are going to need to work with if you want to get your product into the market,” says Turi. “Some of those services providers would include individuals like customs brokers to look after clearing customs, oftentimes in a cost-efficient way. Local accountants, local lawyers, local suppliers which can become relevant when you look at your local supply chain.

“You may need to rejig your supply chain for a certain country or region to take advantage of rules of origin requirements that are a result of trade agreements. You may need to see that a certain proportion of your product is manufactured in either Canada or there to take advantage of that 0 percent tariff.”

Turi points to a program called CanExport that is run by the trade commissioners’ services. The program provides funding to companies that have some export experience or little to no export experience. “The funding can be used to shoulder the costs of travelling to a trade mission,” says Turi. “There are a whole bunch of qualifying expenses that are associated with setting up a booth, having marketing materials travel to and from that location. CanExport does provide matching funds for companies that are thinking about spending that kind of money to go over to a foreign market.”

Another recommendation that Turi makes is to explore partnering with a large logistics company for in-market assistance abroad. “They don’t just include helping you to ship your product to market. They also help you find organizations or suppliers to work with you further down the production process in market.

LINE UP your PARTNERS

“I always say that the export strategy should be lining up your company’s production processes. That includes your supply and value chain with the partners that you are going to need to work with if you want to sell into a market. That includes the customs broker, shipping firm, logistics firm. Those are the benefits of being with a larger shipping firm. But that comes at a price.”

Turi notes that you shouldn’t feel isolated in the process of setting up an export business for your products. “It is daunting if you are thinking of about going at it alone,” he says.

“My main point is that there are lots of partners around and available that you are going to have to work with one way or another to get your product into market. What probably makes it daunting is that folks fail to realize that those partners are out there.”

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