Euler Hermes Survey: Exports Critical to U.S. Small-Medium (SME) Business Growth
Two-thirds of U.S. small- and medium-sized enterprises (SMEs) feel that exporting has contributed to their business growth, according to a national survey released today by Euler Hermes, a global provider of trade credit insurance.
Exporting SMEs also estimate, according to the Euler Hermes’ 2015 U.S. Export Survey, that they could increase revenues by 26.3 percent in three years and 42.4 percent in five years if armed with the right risk management tools.
At the same time, there still are risks: the survey found that non-payment issues and uncertainty about international customers are companies’ biggest concerns.
According to Euler Hermes, 62 percent of U.S. SME exporters have increased exporting activity over the last five years. Surveyed companies believe exporting is most beneficial for increasing sales and profits and in providing a competitive advantage.
The majority of U.S. businesses export to fewer than four markets, with Canada and the United Kingdom being the most common destinations. When asked which countries these companies would like to begin exporting to, China, Canada, and Germany top the list.
“In today’s global marketplace, it has become increasingly important for U.S. exporters to expand their foreign market sales to remain competitive,” said James Daly, president and CEO of Euler Hermes Americas. “Understanding different markets, especially China, can be challenging. But many companies have already experienced real growth exploring new markets, and as long as they have the right risk management tools in place and access to solid information about local trade practices, they can export and expand safely.”
On a global level, U.S. exports fell three percent in the first half of 2015 due to a stronger dollar and a slowdown in global demand. These factors, coupled with ongoing volatility in China, Russia and Latin America, as well as a flat recovery in Europe, did not create strong incentives for U.S. companies to expand to new markets. However, Euler Hermes estimates that there is still an additional $58 billion possible in U.S. goods exports in 2016.
Despite U.S. government efforts to stimulate exports, global economic volatility has caused U.S. businesses to be wary of international markets and focus instead on domestic opportunities. Long-term consequences to domestic-only consumption include limited innovation, reduced risk diversification and a potential market share loss to competitors.
One of the main barriers to export entry for SMEs is non-payment. One-third of surveyed SME exporters said they’ve experienced the non-payment of an export shipment in the past year, with an average of four non-payment issues per year. Two in five SME exporters believe their international customers are more risky, and 37 percent indicate their domestic and international customers are altogether different.
“It is vital companies develop a sound risk management strategy, which includes understanding each country’s payment culture and collections practices,” said Daly. “We have found exporting companies are most likely to view exports as a means of increasing revenues with little incremental cost, making operations more efficient.”