Reach new markets - exporting for small business - includes related article on helpful publications and foreign trade poll results - Cover Story

Nation's Business, Dec, 1990 by Albert G. Holzinger

Reach New Markets

The Arbor Crest Winery sits on a cliff 450 feet above the Spokane River valley in Washington state, a location that co-owner David Mielke describes as "the center of the world."

That global view extends to the winery's marketing efforts, as well. Its award-winning white and red wines are exported to Canada, Western Europe, and several Pacific Rim nations.

But just 10 years ago, international trade was far from the concerns of the brother-owners of Arbor Crest. David Mielke was a fruit-grower, and Harold Mielke was doing medical research at the University of California at San Francisco.

"I got interested in grapes, which are fascinating to grow," says David Mielke. "At the same time, my brother was becoming very interested in wine. We discovered our common interests one day and asked each other, `Why not go into business?'" Arbor Crest Winery was soon launched with financial assistance from the U.S. Small Business Administration (SBA).

Seeking a niche in a highly competitive business dominated by large vintners, they decided to concentrate on dry, high-quality varieties of wine.

Their strategy proved successful. Within four years, says David Mielke, "we were selling wine in small amounts in a lot of places in the U.S.--in pretty much all of the states." Success at home prompted the Mielkes to consider reaching out to new markets abroad. "I guess no one told us that we couldn't export, so we did," David Mielke says.

Today, about 10 to 15 percent of Arbor Crest's production is shipped to overseas distributors sought out by the Mielkes, and they say the export share could increase substantially this decade.

David and Harold Mielke typify the increasingly common breed of U.S. business owners who are turning to overseas markets to bolster sales and profits.

As recently as 1983, no more than 10 percent of U.S. businesses exported the goods and commodities they produced, according to U.S. Department of Commerce statistics. But two developments in the late 1980s spurred exporting: U.S. economic growth slowed, and the value of the dollar fell in relation to many other currencies.

From 1985 to 1989, the value of U.S. producers' exports increased 66 percent, to about $364 billion. American exports last year consisted of about 80 percent manufactured goods, 11 percent minerals and fuels, and 9 percent agricultural products and other commodities. Also last year, U.S. exports of business services totaled about $105 billion. Travel-service receipts and passenger fares accounted for about one-third of that total.

The U.S. government does not collect data by size of exporter, but the conventional wisdom among federal trade officials is that small and mid-sized businesses such as Arbor Crest are leading this U.S. assault on foreign markets.

"Anecdotally, we have seen a tremendous surge in interest" in exporting among small businesses, says Catherine Marshall, the SBA's associate deputy administrator for special programs, which include international trade. As an example of this heightened interest, Marshall points to an SBA export conference last year held in Seattle. "Nobody left," Marshall says, referring to the small-business owners and managers from across the country. "They all attended even the specific sessions. It clearly had come to their consciousness that [exporting] is an important thing" to consider for long-term health.

As further evidence, Marshall points to the SBA's answer desk in Washington, D.C., which she says now receives "thousands" of trade-related calls a month. Just a few years ago, toll-free calls to the desk "were almost exclusively about loan programs," Marshall says.

These signs of small business's prominent new role in global trade are supported by two private-sector studies.

According to a new survey by Dun & Bradstreet, a large, New York City-based provider of domestic and international business services, only 8.5 percent of firms with fewer than 100 employees currently export. Yet firms of this size so dominate the universe of U.S. businesses that they account for 25.7 percent of total exporters. In comparison, while 54.9 percent of firms with 10,000 or more employees export, they make up only a slightly higher share of total exporters--31.6 percent--than small firms, according to the survey. It was conducted of the Dun's 5,000, a statistically representative portrait of U.S. companies.

Readers of Nation's Business, approximately 73 percent of whom own or are otherwise affiliated with firms with fewer than 100 employees, are even more likely than small businesses as a whole to be involved in international trade. Some 43 percent of respondents to a recent "Where I Stand" poll attributed at least some sales to foreign buyers, with the largest share of respondents--26 percent--pegging overseas sales at 1 to 10 percent.

Consistent with the perception of the SBA's Marshall that small-business interest in international trade is a new phenomenon, about 19 percent of respondents to the Nation's Business poll have been engaged in export or import activity for less than three years, with 8 percent having begun trading only during the past 12 months.