AS THE FEDERAL BUDGET SHRINKS, BELTWAY GOV’T SUPPLIERS LOOK TO EXPAND INTO FOREIGN MARKETS

The 2013 federal government shutdown and mandatory federal budget cuts (or “sequestration”) are prompting more Beltway companies to look to foreign markets, building on the export growth already occurring in Maryland, Virginia and Washington, D.C.

“Companies are realizing that they have to do something to diversify where they are selling their products because they can’t rely on U.S. government procurement,” says April Redmon, senior international trade specialist in the Arlington, Virginia, office of the U.S. Export Assistance Center (USEAC), which also has offices in Washington, Baltimore and 116 other cities. “You have a lot of defense contractors in this area and they were really hurt by sequestration and by defense spending cutbacks.”

“We were affected by the government shutdown,” admits Cynthia Peters, CFO of Annapolis Junction, Maryland-based FiberPlex Technologies LLC, a manufacturer of secure fiber optic communications equipment that has relied on the federal government for 80 percent of its sales.

The company also was affected by the sequester, she says, with a “serious decline” in government sales during the summer, followed by “the largest September bookings that we’ve had since 2006, and then in October we started over again with no [government] spending.” She notes that government sales can be both volatile and seasonal.

“These companies need help,” says Redmon, “and they’re coming to us for assistance in commercializing their products, maybe selling them to foreign militaries overseas but also taking those products and expanding them into the security environment.

In addition to USEAC, District Export Council (DEC) and Small Business Development Center (SBDC) help in Maryland, Virginia and D.C. “You’re seeing state legislatures dedicate funds,” Redmon says. “Virginia appropriated [in August 2013] $2 million for Going Global to help the state’s defense-related companies export.” She says the Virginia SBDC received an SBA portable-assistance grant to provide export assistance to small businesses impacted by defense contract cutbacks. “We’re all trying to focus on helping these companies grow their business internationally as Pentagon cutbacks occur and sequestration continues.”

Companies that relied on federal government contracts not only are starting to find success in exporting, they are finding that their past successes in selling to the U.S. government help foreign sales.

“We’re really excited about launching international [sales] because we think that’s going to mean exponential growth for us,” explains FiberPlex Technologies President and CEO Buddy Oliver. “And supplying equipment to the U.S. military and the State Department is great to point to when going overseas.

“When talking to foreign entities, we can say we’ve had stuff on every ship in the U.S. fleet, that every U.S. embassy in the world has our stuff and all of the agencies in the United States use our equipment. That certainly carries a considerable amount of weight for us to break into those markets.”

Oliver says exports currently account for only 10 percent of total sales, but with the help of USEAC and other federal programs, FiberPlex Technologies is starting to make sales in the U.K. and continental Europe.

“We’re executing a plan to be more proactive in [foreign] sales and expect to see a significant amount of business because the market is very strong for our products,” he says. “We’re really excited about launching internationally, because that’s going to be exponential growth for us.

“We’re starting here, right near the Port of Baltimore,” he adds. “And there’s lot of freight forwarders all around the airport here. It’s just a great location for exports.”

Similarly, Robert R. “Bobby” Patton, president and CEO of Patton Electronics, a manufacturer of wireless routers, ethernet extenders and other electronic products headquartered in Gaithersburg, Maryland, says his company’s Beltway presence alone is helping as it seeks to further increase foreign sales, which now account for 70 percent of his business, with shipments going to some 130 countries.

“We have been able to leverage a lot of resources here in the Maryland region,” he says. “We have a pretty close working relationship with the U.S. Export Assistance Center and, as we identified market opportunities in regions of the world, we’ve been able to leverage some of their services, and we pretty extensively utilize the Ex-Im Bank.”

In spring of 2012, Patton testified before the Senate in support of the re-authorization of the Ex-Im Bank. Convenience, he says, was certainly a factor in being chosen by the U.S. Chamber of Commerce to make the argument.

“There are probably tens of thousands of companies that would have been equally qualified to testify, but I’m only half an hour away,” Patton says. “So it’s easy for me to be available for that kind of thing. And I’d say the Ex-Im Bank is probably the most important federal government relationship that we have because we wouldn’t have been able to do what we’ve done without that resource.

“And when we’re doing business with a company that hasn’t heard of us,” he adds, “and they look us up and see that we’re a real company and in fact the CEO has been in front of the Senate, that helps our legitimacy.”

USEAC’s Redmon notes that much of the upsurge in foreign sales by federal government contractors is in the technology and security areas.

“Some of our best prospect sectors include information technology, healthcare, environmental technologies, renewable energy and security and defense because we are seeing client demand from those areas,” she says.

“Cyber security is a big priority here [in the U.S.] as well as overseas,” she says. “Western Europe is a big market and markets in Asia are also prominent. Health IT is also a huge sector. And it kind of overlaps with ICT or information communications technology where U.S. firms are viewed as technology leaders.

“The refocus by a lot of the defense companies around here has been dramatic,” Redmon concludes. “These companies have some really great technologies and great ideas on how to sell them overseas.”