International Sales - does Bayes' Theorem apply?

Ed Marsh | Jun 29, 2012

Getting cerebral about international sales

bayesFormula"Bayes' Theorem is a theorem of probability theory..seen as a way of understanding how the probability that a theory is true is affected by a new piece of evidence.  It has been widely used in a wide variety of contexts, ranging from marine biology to the development of "Bayesian" spam blockers for email systems."

Today I am going to explore application of this sophisticated analysis to international sales for American SMBs.

You're not for real...are you?

OK.  Don't freak out on me and click out yet.  I'm not really going to bore you with a formula - looking at this nearly makes my head explode.  But here's the point....

SMBs seem to apply an entirely different type of rigor to decisions regarding international sales - compared to the analysis that they do for domestic investments there is often little of the same exploration.  Rather there is often a gut feeling decision - and usually that decision is to avoid export because "we are too busy already."

Theory - international sales are a great opportunity for SMBs

But humor me for a moment...

The National Export Initiative is built on this theory - and the corollary that if exports are great for SMBs, they're also great for the country.

Now, if I can start to list new pieces of evidence that, according to Bayes' Theorem will increase the probability that the theory is true, will you forget about your overflowing email inbox for an hour and take a look at the opportunity for your business?  (Even if you already have some international sales, you may be an "accidental exporter" and putting a strategy around your program could dramatically improve the results!)

The evidence stacks up

What new evidence would tip the equation more in favor of the theory of SMB export?

There's the obvious:
  • 95% of the world's consumers (2,000% increase in market size) are outside the US
  • emerging markets are expected to provide most of the global growth in coming years
  • "Made in America" carries a compelling cachet in many markets
  • American technology, products and services are needed as many markets develop
  • Profits on international sales may be taxed at 50% the rate of domestically earned profits
And then there's the obtuse:
  • valuation multiples can be substantially affected by degree of international sales diversification (and the cash flow that comes from diverse markets)
  • lessons you learn in international markets can make you more competitive domestically (download our free whitepaper on the topic here)
  • statistically companies with substantive international sales pay higher wages and are more resilient and healthier than their purely domestic competitors

It looks like the theory holds

Still wondering if it's the right time for your company to begin to export or to ramp up your international sales?  Download our free eBook "Picking the Right Time to Export."

Or maybe your wondering how to start?  Or how to fix your biggest challenge?  Contact Consilium Global Business Advisors to explore how we can assist.

And download our free eBook on Important First Steps here.