In the movie Field of Dreams, Kevin Costner is told that if he built it they would come. He wasn’t at all sure who they were but he went ahead and built the baseball diamond anyway. Luckily for him they did come, ghosts from the past, and like all good Hollywood movies it had a happy ending. Such is not the case for small British Columbia businesses who want to get involved in their own field of dreams and become international entrepreneurs. Because in the world of international business if you build it, they will not come until you market the hell out of it. And if there is anything Canadian business is bad at it is extolling the virtues of their products and services. We are just too polite and self-effacing. This is the main reason very few small local companies, and most Canadian small companies do not get involved in international business. Like the proverbial boys’ locker room, everyone talks about it, everyone says they are doing it and everyone wants to do more of it. And most are not telling the truth. Over 98 per cent of all small businesses (a small business in Canada is defined as a firm with less than 50 employees) in British Columbia do not export at all. When they do, they mostly sell to the United States. According to a 2005 report from the BC Ministry of Small Business and Revenue, two-thirds of British Columbia small business exporters shipped exclusively to the United States in 2003 and another 17 per cent exported to the United States and at least one other country. This is not surprising as 87% of all Canada’s exports go to the United States. Only 18 per cent of small businesses that exported did not ship any goods at all to the United States.
Of the two per cent of companies that do export, over 85 per cent export to the United States. The next largest market is Asia at 18 per cent, followed by Europe at eight per cent.
Exports are critical to Canada’s economy. The Canadian Manufacturers and Exporters Association notes that exports account for two thirds of our national industrial output. Canada’s exporters employ over two million Canadians directly and another three million indirectly. Moreover, one in every three jobs in Canada depends on exports. These jobs and economic activity are largely driven by commodity producers in forestry and mining, not by small business. Yet small business accounts for over 95 per cent of all businesses in Canada.
In spite of the provincial government’s various award programs for exporters, the Pacific Gateway program, and the Premier’s trade missions to India, China and other points, the message that there are international markets that would welcome BC products and services does not seem to be reaching BC small business. British Columbia ranked third among all provinces in Canada in terms of the value of goods exported by small businesses with about 14 per cent of the national total.
Here on Vancouver Island some entrepreneurial companies do appear to be catching on. With a vibrant tourism sector, which is an export industry unto itself, and a thriving technology industry, there are a number of local firms that are enjoying success on the international stage.
Environmental Sensors Inc. (ESI) is one of the early successes in the Victoria technology industry and continues that success to this day. Since 1973 ESI has been developing and selling environmental sensors and systems used in the monitoring of water and moisture. Its technology is used to measure water content volumes in the oil, agriculture, golf, and waste management industries.
If you had walked into the offices of ESI a week ago you could have been forgiven for thinking they were moving. Packing material and boxes were strewn about everywhere. The boxes and tape, however, were all in preparation for a major international trade show taking place in San Diego. With new CEO, Blair Heffelfinger, and Director of Sales and Marketing, Dave Porter, they are taking the company into the international marketplace. It is a slow and deliberate road according to Mr. Porter. “Breaking into the export market takes time, money, patience and above all else planning. The trade show in San Diego is one of the first major steps.”
ESI has been involved in a minor way in exporting and has had some success in the Middle East through its local agent who is connected to the Royal Family in the United Arab Emirates. According to Porter, “the contracting process in the Middle East is very formal and takes a good deal of collaboration with both business and government in the region.” Given this, both Porter and Heffelfinger prefer the use of agents in a region rather than direct selling. “You need to find the right person and develop the relationship so that they can represent you to the best of their ability,” notes Heffelfinger. “Supporting our agent network is the key to success for ESI,” suggests Porter. “We like to have a formal business relationship with our agents and provide all the support we can to them.”
ESI has plans to examine the Middle East more closely in the coming year and is looking at the South American and European markets for their potential. China is not on their radar screen for as Heffelfinger says, “it feels a little dangerous to do business in China and you are never sure you are not giving the house away. Our goal is to have a disciplined focus on our marketing efforts and we are only prepared to work in markets in which we feel comfortable.”
It’s unlikely Harry Weiler, CEO of AXYS Technologies, pictured his buoys as appropriate resting places for seals. But when the buoys are out in the middle of the ocean the seals must see them not as sophisticated scientific instruments that measure and monitor ocean and air movements, but as a comfortable refuge.
Monitoring the global marine environment is becoming an increasingly important activity for AXYS Technologies Inc. As Mr. Weiler notes, “if there is water, AXYS is there.” AXYS designs and builds oceanographic monitoring systems and sells them around the world from India, to Brazil to Egypt and Italy. It is has taken a long time for this international success to be achieved. “Our overnight success took us 10 years,” notes Weiler. “We had to set up the company to be successful which meant exploring new markets, taking advantage of opportunities, planning for the long term, developing a strong team all working towards the same goals and put in place proper business processes so that we knew what we were doing all the time. The technology is the easy part; it’s the marketing that is tricky. If you are going to work internationally you have to learn a whole new way of doing business. Understanding local cultures and international rules is a must. We made a sale of our buoys to Libya but the sensors in them were deemed weapons grade under the International Traffic in Arms Regulations rules and they were sent back.”
Being based on the Island does have its drawbacks. Not too many people know exactly where it is,” notes Weiler. A Brazilian agent of AXYS was sending some equipment back and somehow it ended going to Sydney, Nova Scotia. Without the help of a local airport employee who apparently understood Canadian geography better than the Brazilian agent the equipment would have remained lost.
AXYS takes full advantage of the export related organizations that help Canadian business succeed internationally. The company participates in government led trade missions and uses the full services of Export Development Canada and the Department of Foreign Affairs and International Trade. “These organizations are a huge help to us,” says Weiler.
Sometimes the most astonishing experiences happen in the most unlikely places. For Rick Quinn, President of Terra Remote Sensing, the unlikely place was Tehran. Tehran, the capital of Iran, is a city of some 15 million people and what seems like twice as many pollution spewing cars. At the very least it is not a place where you would likely find a Canadian businessman to be out for a morning run. But when Rick Quinn was there he wanted to continue his running regimen. Coming up to a huge roundabout with cars coming from all directions he stopped and wondered, “How am I ever going to get across here?” In the middle of this mayhem was a lone policeman valiantly trying to direct traffic. Seeing Quinn wide eyed and apprehensive he lifted his arm, blew his whistle and the cars all around the roundabout stopped. With a wry smile at Quinn and a short wave of his hand he motioned for Quinn to continue. As though the Red Sea had parted, Quinn sprinted through the middle of the roundabout and continued on his way. This would have been extraordinary if it had happened only once but Quinn is an inveterate runner and every day of the week he was in Tehran, Quinn and the policemen parted the traffic. “It reminded me of the importance of personal relationships and linkages in international business. They are the key to success. You have to get to know your clients on a personal level and understand the idea and concept of face,” Quinn recounted.
Terra Remote Sensing Inc. designs, develops and sells state of the art airborne mapping, hydrographic charting, marine geophysics, and GIS support services. And they are successful at it. They have worked on every continent and in over 20 countries from Ireland to China to Sierra Leone.
“Success is based on identifying the right markets and the right clients,” noted Quinn. “You can get mesmerized by the all the opportunities but you need to target specific regions and understand the market potential in each one. You also need to understand the political and corporate risk for each market you enter. But it takes time to develop relationships. It’s not just about selling; it’s about working with clients to provide solutions over the long term. If there was anything I have learned from my international experience,” Quinn notes “it is you have to work at a human level but never assume anything. Having a contract in hand does not guarantee anything but having a personal relationship makes the way forward much easier. You have to satisfy the person who is the client as they have people they report to.”
Taking full advantage of the organizations that provide international export assistance is key to their success. “We work closely with Export Development Canada and each of the Embassies in the countries we work in. Without them, our work would be much more difficult and risky,” says Quinn.
When Bill Collins, Vice President of Quester Tangent (QT) was contacted on his cell phone to talk about this article, the first question was, “Where are you?” “In Germany,” was his reply. He could have been in India, Chile, China or any of the thirty countries where QT does business.
Established in 1983, QT is a designer and manufacturer of software products and hardware systems that allow users to acquire, monitor, validate and process large amounts of data in either historical or real-time. The company’s two key markets are marine sciences and transit electronics.
“Our key to success has been our agent network,” says Collins. “They know the market, the culture and have the local intelligence. We let them orchestrate the business in their region and take their advice seriously. It is a very competitive market out there. We used to rely on the reputation of Canadian technology but that is dying out. Now it’s about having the right people in the right place and supporting them.”
Collins travels about six months of the year. “It’s necessary,” he says. “You have to be face to face to develop a relationship. We work closely with local agents and partners and they have to know you are committed. You can’t do that over the phone or the internet,” he adds. “Travel to exotic far away places has its moments, says Collins “and not all of them fun,” as he recounts being in a taxi in India on a two lane highway in the middle of the night. “There were no lights on the car and we were going as fast as the car could go. Our lives were in the hands and driving skill of the driver. It would have been spiritual if it had not been so frightening.”
Collins noted that “the bottom line is that doing business has certainly changed over the past ten years but the effort is not for the weak.” One story he tells surrounds the events of a vessel commissioning where following two weeks straight of 16 hour days the Quester Tangent team flew to the Andaman Islands to meet a vessel for final commissioning. Quester Tangent’s crew had expected to have a couple of days off before visiting the ship. They were summoned from their hotel upon arrival and told to come to the vessel for a meeting. Once on board the ship promptly slipped her lines and the team without bags, toiletries, clothes or other items sailed between the Andaman and Nicobar Islands for eleven days before being put ashore.
The remarkable thing about his business, Collins says, is that the opportunities are endless. Only three per cent of all the oceans floors have ever been examined.”
Exporting requires a great deal of information and skills that are simply not required if you just sell domestically. You need to be aware of cultural differences, both in business and social settings, trade agreements for tariff rates and other export limitations (Canada currently has free trade agreements with the US, Mexico, Costa Rica, Chile and Israel and is in negotiation for others with countries like Singapore, South Korea and the European Union), other limitations on what you can sell such as the International Traffic in Arms Regulations, how to set up distribution and agency agreements and most importantly how to get paid. The list is almost endless.
Fortunately there are a variety of sources and government organizations where you can get assistance. Unfortunately the days of government financial support to help with marketing and trade shows are long gone. The main federal government agency that all companies need to deal with is Export Development Canada www.edc.ca which provides export financing, bonding and insurance services. They have dealt in 200 markets around the world so will likely be familiar with any country market you are interested in. If the deal goes bad and you have EDC insurance at least you won’t lose much money. Each of the four local companies profiled work with EDC on a regular basis.
If you are looking for training in how to undertake international business, the national Forum for International Trade Training www.fitt.ca provides a variety of accredited courses across the country through education partners including several in the Lower Mainland. Small Business BC has recently started a training program called Tradestart www.tradestart.ca In the mood of full disclosure the author is the developer and deliverer of their export training programs.
Before you start any real effort in getting involved in exporting you need to do some basic market research. The federal government’s various websites under the Department of Foreign Affairs and International Trade www.dfait-maeci.gc.ca provide a wealth of free market information. They can also put you in touch with the trade commissioners in each of Canada’s High Commissions and Embassies around the world. Trade commissioners can provide expertise and introductions to local contacts and be a huge help if you give them enough detail and time to work with you in your export efforts.
The Canadian Manufacturers and Exporters Association www.cme-mec.ca is a member driven organization that provides services for its members and lobbies various levels of government around international business issues.
The Province of British Columbia, after many years of essentially ignoring international markets for small and medium sized firms, provides assistance through the Ministry of Jobs, Tourism and Innovation through the BC Business Network. http://www.britishcolumbia.ca/buy/bcbusinessnetwork.
All of the major Canadian banks provide international financial assistance and each provides business plan templates that are useful for getting started in the export business.
For the dreamers out there, international business opportunities are endless. But as ESI, AXYS Technologies, Terra Remote Sensing and Quester Tangent have found out, it requires great products and services, hard work, good planning, a willingness to work in and accept other cultures, diplomatic skills, a sense of adventure and above all else, aggressive marketing. For if you build it, they will not come unless you tell them about it.