Amex Eyes A Revenue Opportunity Too Good For SMEs To Pass Up

The future looks bright for small businesses in the U.S., particularly for those that have taken to globalize their operations.

A new report from American Express examines just how solid international SMEs’ futures appear to be, with evidence revealing the financial benefits of looking overseas for sales opportunities. According to Amex, the data suggests that cross-border trade is worth the risks and challenges.

“Our research shows that, despite potential challenges, many companies still see international business as an important growth opportunity,” said American Express Export Advisor Ed Marsh in a statement, who added that “getting started can often be the hardest part.”

That may be true, but Amex analysts found even SMEs that find themselves on the global stage by accident can benefit from the move.

Unintentional Globalization

For SMEs surveyed that reported selling internationally, American Express found that the majority (78 percent) of them did so intentionally as part of a strategic growth plan. Most (63 percent) also agreed that they felt well-positioned to do so based on their knowledge of international business operations.

But a significant portion of SMEs said their international sales operations were never intentional; 21 percent said they expanded globally simply in response to an opportunity that “fell into their lap,” according to the report. While these small companies took the chance they were offered, entering the international stage without preparation can be tricky. According to researchers, 37 percent of internationally selling SMEs said they don’t have sufficient expertise on cross-border exporting.

When broken down by what American Express dubbed as “intentional” versus “unintentional” international sellers, SMEs’ knowledge gap in this area widened. Only 44 percent of unintentional global exporters said they are well-informed about doing business globally, compared to 69 percent of SMEs that intentionally went this route.

Similarly, less than half of unintentional exporters said they are well-versed on the markets in which they sell, compared to 51 percent of intentional exporters.

The International Opportunity

Whether part of a strategic growth plan or a response to an offer too good to refuse, SMEs that export internationally have an opportunity to strengthen their businesses. Nearly all companies surveyed by American Express agreed that international markets offer an opportunity for growth.

But small businesses are also aware of the challenges that come with overseas sales. In addition to the knowledge gap of global expansion — understanding how to export internationally and how the markets to which they sell operate — SMEs cite cultural differences in business practices, language barriers and political instability as top concerns about entering into a new market overseas.

Remaining compliant with local and international law, trade rules and logistics costs also remain at the top of the list for companies looking to sell globally.

The U.S.’s SMEs are looking mostly at Canada, Mexico and Europe to take their first steps on the international market, according to American Express. But in the next five years, researchers found evidence that SMEs plan to explore markets in Asia, too, and most are exploring their financing options as they do so.

Researchers found that 80 percent of SMEs selling abroad report revenues higher than last year; a quarter said that revenue increase is due to international sales alone. And over the next five years, more than three-quarters of SMEs said they expect revenues to continue to rise due to international operations — by an average of 30 percent, they said.

The knowledge gaps that persist in how SMEs trade internationally pose a threat to businesses’ ability to take advantage of the benefits of international sales. But according to American Express, the financial gains possible from cross-border trade make the burden of education seem well worth it.