WARNING! Global Sales Isn't a Great DiY Project. Risks are Expensive

Santi Lopez | Dec 5, 2011
Lots came out of the Massachusetts Export Expo today about the services offered to Small and Medium sized businesses in New England, but not all of it was rosie.  

Panelists from various seminars shared countless horror stories about SME’s entering the wrong markets or confronting strong international regulatory restrictions regarding their products. Other stories touched on the difficulties of reaching agreement on the right shipping insurance, but warned that without it, one could become exposed to fraud. To illustrate the case, a panelist spoke of a shrimp importer who unknowingly used the bill of lading as the guarantee that everything regarding his shipment of shrimp was on time and in order, and made full payment accordingly, only to receive a container load of crates filled with only ice! The consensus from the panelists was that every shipment should be insured and that the associated costs are actually negligible, often equaling only ¼ to ½ of a percentage point of the entire sale. In some areas of the world, political risk coverage from companies like Coface should also be considered.

Insurance opened the door to a discussion on L/Cs (letters of credit) which all agreed were only being used in deals with emerging economies such as Bangladesh, Sri Lanka and India. The expert panelist offered the advice that today every deal, no matter the country (possibly, with the exception of the UK because of its long-standing trade history and prominence with the US) should be secured by a letter of credit. In fact, he shared a story of a client who recently lost over $200,000.00 in a deal with a prominent Greek firm who defaulted on a deal because of their sizable unpaid receivables form their own Greek government. The moral of that story was that you need to know both your customer and their customers as well.

Another point the panelists emphasized was to only hire in-country attorneys or in-country subsidiaries of US-based firms when registering products and establishing in-country business. In matters of collections, they also added that US Collections agencies would be totally ineffective in recovering any owed moneys as would a demand letter from an US attorney. Only an in-country collections agency would be effective in such situations, given their ability to “expose” the culprit firm to the local community of it’s wrong-doing, and shame them into a quick settlement.

In the wrap-up presentation the general consensus was that:

    1. countless opportunities exist today for SME’s around the world, and as the domestic market experiences stagnation, exports are the answer to growth.

    1. the US government has a myriad of services and financing options available to SME’s, and lastly,

    1. partnering with an advisory firm who can help an SME design, implement and execute an effective international business development plan is the most sensible way to approach an international sales initiative.

Consilium provides Experienced, Actionable and Effective advisory to companies interested in pursuing international business development but constrained by resource limitations or concerned with the range of risks.  Contact us to learn more.