For Nicole Verkindt, founder and chief executive officer of the project-management software platform OMX, exporting was less of a choice and more of a necessity. Ms. Verkindt knew she would find more potential clients outside Canada, and she feared that her company may not survive on domestic business alone.
“It was export or die,” says Ms. Verkindt, whose Toronto-based firm helps businesses in the defence, aerospace, resources and transportation industries access global procurement contracts and analyze the economic impact.
Within a year of starting OMX in late 2011, the business began exporting to the United States, and it has since sold its platform to companies in more than a dozen other countries such as Brazil, Britain, Spain, Norway and Finland.
Exporting is the best way for many of Canada’s small and medium-sized enterprises to scale their operations, especially considering the Canadian market accounts for only about 2 per cent of global gross domestic product.
Nicole Verkindt, founder and CEO of OMX, says she’s constantly learning from customers abroad how to improve her software platform.Glenn Lowson/For The Globe and Mail
“There’s a lot of the world out there that we need to be taking advantage of,” says Lorna Wright, executive director of the Centre for Global Enterprise at York University’s Schulich School of Business.
According to the latest data from Industry Canada, about 12 per cent of Canadian small and medium-size businesses export their goods and services, despite research showing that venturing beyond borders can supercharge a company’s growth, add geographic diversity that can be helpful in volatile economic times and build brand credibility.
Going into another market can also help a business improve its product or service based on the new experience and feedback from customers.
For instance, Ms. Verkindt says she’s constantly learning from customers how and where to improve and update her platform. For example, one overseas client is requesting OMX incorporate blockchain technology, which she says would have longer-term company-wide benefits.
“The nature of having more diverse customers is having more ideas,” says Ms. Verkindt. “If you’re an entrepreneurial business you always have your antenna up on why a customer is saying yes or no to your solution and how you can continue to improve or alter your offering. The nature of going global is that you get that from a wider range of people.”
For many companies, the challenge can be figuring out where to export first. Entrepreneurs are often overwhelmed by the number of opportunities, says Julie Pottier, vice-president of commercial markets and small business at Export Development Canada.
She recommends businesses focus on markets where they will be most successful right away and that can be sustained for the long term.
The U.S. is often the first destination, given its status as the world’s largest economy, plus the language and culture are similar to Canada’s. Businesses also tend to go to markets where Canada has trade agreements, which can make the goods and services flow more smoothly. Emerging markets with rapidly growing economies may also present good opportunities.
Ms. Pottier advises businesses to seek out markets where they can add value, especially given the likelihood that there will be competition from local firms and potentially larger international players. Entrepreneurs need to ask, “What’s the differentiating factor for your business?”
Exporting isn’t for every company, and business owners shouldn’t start the process until they’ve done market research on everything from culture and competition to supply-chain logistics and the country’s tax, industry and legal regulations.
Business owners and experts agree that most of this due diligence can be done online, at least at first.
“It has never been easier to connect with companies and find out what they’re looking for” thanks to the internet, says Ms. Verkindt. “A ton of work can be done in your office. Sometimes you can open and close a sale without even leaving the country, which is really incredible.”
Once a potential market is identified, most business owners should visit it in person and begin building relationships.
“You need to be in the market to test these theories the internet has told you about,” says Hardy Wentzel, CEO of Penticton, B.C.-based Structurlam Mass Timber Corp., a manufacturer of engineered wood products that are exported to the U.S. and other parts of the world. “You need to fully vet your international value proposition, which might be different from your domestic one.”
Mr. Wentzel’s rule of thumb is that exports should make up at least a quarter of overall sales, particularly for companies with physical assets to sell. “Otherwise, it’s not worth the trip … because there’s a lot of cost to do it.”
Business owners also must be nimble, because customers’ needs may vary in new markets.
For OMX, Ms. Verkindt says, a big challenge of exporting is the longer sales cycles in some other countries. She also cites staying on top of clients’ needs across various times zones. Businesses can also face cultural differences. For instance, Ms. Verkindt has been known to fly for 24 hours for a one-hour meeting with an overseas client, while some clients in North America are comfortable with telephone or online meetings and purchases.
One mistake can be expanding to other countries without finding success first in your home market. “If you’re struggling in Canada, don’t look to international markets to rescue you,” warns Ms. Wright of Schulich.
But business owners eyeing export markets shouldn’t wait until they have perfected or saturated the Canadian market either before going to another country.
“If you do, you’ve likely lost out on an export opportunity because someone has beat you to it,” Ms. Wright says. “And if your competitors are out there, and you’re not, you may not be in business much longer.”
Business owners also need to be patient in seeing results.
“You will need to invest a lot before it becomes beneficial. You need to understand it will take time, and be ready to invest that time,” Ms. Pottier says. But she promises, “it’s worth all of the effort.”