Eyeing the international markets

Smaller businesses looking abroad

By Purchasingb2b staff | March 11, 2009

The majority of Canadian small and mid-sized companies see the benefits of doing business in international markets, according to a recent survey from HSBC Bank Canada.

The study—which involved 250 owners of small and mid-sized businesses producing between $1 million and $20 million in annual revenues—was conducted by Phase 5 Research in November 2008.

According to the data, 45 per cent of small and mid-sized businesses are currently conducting some trade outside Canada, while an additional eight per cent plan to develop some involvement in international markets over the next two years.

"These findings show that even in the current challenging economic times, Canadian businesses understand that their future lies not in retreating into our home market but in continuing to look beyond our borders for new growth opportunities," said Jon Hountalas, executive vice-president of commercial banking with HSBC Bank Canada.

HSBC made suggestions to help offset the risk of going overseas:
• Understand the country, currency, and payment risk. Recent economic challenges have forced some foreign buyers and suppliers to change the level of required guarantees of credit needed to ensure transactions get completed;
• When dealing in foreign markets, up-to-date local knowledge can be key. Understand and plan for the financial risks of small business exports in advance;
• Importers should review their contracts and prepare for ongoing adjustments as markets change. Importing to Canada also represents risks to small business. Even long-standing foreign business suppliers may soon be asking for new types of financial guarantees based on changes to their own banking requirements;
• Look to the future but stay focused on the current business. Establishing new relationships with buyers and sellers in foreign markets takes time, effort and money; all of which can distract business owners from running their day-to-day business.

The survey showed the sectors most likely to be doing business abroad include information services and manufacturing industries. Of the companies currently doing business outside of Canada, 72 per cent sell their products and services abroad, while 28 per cent source some of their products from outside the country, according to HSBC.