As if there are not enough uncertainties being in business, risk factors are multiplied when you expand into international trade. Whether you are importing materials or exporting finished products, you will encounter new issues. Expanding your small business to the international arena is not difficult if you are aware of the steps involved.
While most of the countries where you are likely to be doing business have stable governments, there are concerns that you will confront. All member nations of the World Trade Organization are committed to free trade, but protectionism is still a fact of life with some. Tariffs and quotas may place restrictions on your ability to trade. Import and export licenses, customs duties, and laws regulating currency control are requirements you must explore. You must also be mindful that each country where you do business has a different political and legal system. Theft of intellectual property and illegal knock-offs are facts of life, so be prepared.
One risk of engaging in international business lies with exchange rates. This is not a factor when your business is all domestic, but when your buyer has another currency, you must protect yourself against losses due to exchange rate changes. Foreign exchange markets are fairly stable, and, barring an international crisis, your risk is not great. Managing international transactions requires extra precautions about payments. If your buyer is abroad you must take steps to assure that you will be paid. Foreign credit insurance and letters of credit can alleviate much of the risk of selling your products in overseas markets, since they will provide you with the knowledge of the buyer's ability to pay.
There are several economic issues that you must deal with when engaging in international operations. If you are importing materials or products, you must take extra precautions to insure timely delivery. Geography and economic conditions in the country you are dealing with are factors. Mountains and oceans create international barriers that you must work into your business plan. Economic instability may be an issue if your transactions involve businesses in third world nations. Even if they are politically stable, they may lack the infrastructure to provide a sound economic environment.
To asses the risks of engaging in business overseas, there are practical sources of information available to you. Begin with the State Department Country Fact Sheets. This information provides up-to-date evaluations of conditions in every country of the world. The CIA World Factbook is another useful information source. Check with your area Small Business Administration office to see when it will be conducting a workshop on the import-export business. Consult with SCORE, formerly known as the Service Corps of Retired Executives, for one-on-one mentoring.