More than ever small businesses have the capability and resources to connect with global suppliers and expand to international markets. During my 25 year tenure at UPS Canada, I've been fortunate to work with several startups and SMEs, learning about their business practices and growth strategies. My ambition is to educate small businesses in Canada about the rise of international consumers with an appetite for Canadian goods, to help them grow internationally.
E-commerce has made it exponentially easier for businesses to expand abroad, grow revenue and build partnerships across the world -- the possibilities are endless. While there is plenty to learn about the different nuances of each new market, there are experts, including other entrepreneurs who can guide you.
Recently, I attended Startup Canada Day on the Hill in Ottawa and got to speak with a number of small business owners who shared their stories of both success and failures. Not surprisingly, some offered similar tales of the struggles associated with expansion abroad, keeping up with demand and managing operating costs.
Understandably, most entrepreneurs pursue global markets with a focus on growth, with efforts put into sales, marketing and distribution, but there is a list of other considerations that are often overlooked that jeopardize the success a "Canuck-preneur" can achieve in new markets.
Inspired by my conversations with these small business owners, I've developed a list of key factors, beyond the obvious market research, that small business would benefit from knowing as they grow their business both domestically and beyond:
1. Foreign currency exchange: If your business participates in international transactions, be it through imports, exports or managing an international operation, you are dealing with foreign currency exchange, or 'forex' (foreign exchange). Small businesses need to be savvy when managing forex, as the market is one that can change from day-to-day based on political, social or economic developments.
Luckily, as financial technology (FinTech) continues to grow and compete, small business owners have a wide selection of services and institutions to help them manage their foreign currency exchange, offering competitive exchange rates, real time international transactions, and locked in exchange rates (hedging). Managing the flow of funds (in and out) of Canada is a key component of your supply chain and it needs attention.
2. Customs harmonization: The classification of the products your business is importing and exporting can dramatically affect profit margins. For example, if your company is making flip flops, and the sole of the shoe is shipped with the strap secured in the toe, the product is taxed as footwear. However, if you can import the sole and the strap separately, and assemble domestically, the tariff classification will be significantly different.
Small businesses can save money and improve profit margins by learning how to properly, and logically categorize their shipments. Without knowing, if your import is incorrectly labeled, your business could face immense costs.
3. Red Tape: If you are not an expert and try to do this alone, estimate how much time it will take to get your product across the border. Then multiple by 100. OK, that's a tad dramatic, but the potential costs associated with international shipping can be so significant that the Canadian Federation of Independent Business (CFIB) created a 'Red Tape Awareness Week' to challenge governments to reduce the fees and road blocks associated with running a small business.
I always recommend that small business owners speak with customs to get detailed information on shipment requirements, and work with a logistics company to ensure compliant, cost-efficient tailored shipping and delivery solutions that suit their international business needs and budget. For instance, numerous entrepreneurs exporting to the U.S. are unaware of programs that are designed to make cross-border trade easier. FAST, CANPASS, ACI, C-TPAT, CSA, and PIP).
4. De Minimis: De...what? Not only a tongue twister, but a bit of a mind bender. The de minimis threshold is the value below which international shipments are exempt from customs processes, duties and taxes. For Canadians, looking to grow in the U.S., the de minimis threshold is now $800 -- up from $200. Therefore, if the retail price of your product is less than $800 USD, you have just saved your business the cost of duties and taxes.
To manage sale price and profit, it is important to know what the thresholds are for any country that you are expanding to. Combine this with our current U.S. exchange rate and you can now better compete for new customers.
5. Tech Turns: Keep your eyes and ears open to new technology and digital enhancements which could improve your business. With customer experience a top priority -- ensure international customers are able to shop online, select a flexible delivery option and get a price in local currency.
Furthermore, entrepreneurs need to look past the shopping cart -- order confirmation, real-time tracking information and clear return policies are vital. In this fast moving world, be open to change and utilize new technology as it is available. Small business owners who are nimble are often able to reach their goals quicker.
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