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Export as a Scaling Strategy

Export as a Scaling Strategy

Technology Sector Educational/Training

Seeking new markets can grow your business — and help your country.

Exporting your product or service can be an effective growth strategy, and the government is here to help. Why? Because it’s in Canada’s best interest to support you in reaching new markets.

Exporting contributes to Canada’s economy by increasing the amount of goods produced, which in turn leads to job creation, increased tax revenue and a boost to the overall GDP. It facilitates innovation by exposing entrepreneurs to new ideas and best practices from other countries, driving the development of new products that are more competitive in global markets. Exporting can help raise the profile of a country’s “brand” in international markets, thereby attracting foreign investment, tourism and other opportunities. It can even have diplomatic benefits by strengthening relationships between countries. 

Pro Tip: Export Development Canada (EDC) has excellent resources for business. EDC, a federal Crown corporation, was created in 1944. Its purpose: “Make Canada and the world better through trade.”

For entrepreneurs this means that you have a group of skilled and knowledgeable civil servants who are there to support your export goals and dreams. EDC does this through a suite of support tools, including: 

• Credit insurance: This protects your business in the event of nonpayment by your customers. It helps you access more credit through your bank, and allows you to offer competitive payment terms to customers.

I used this service as a chief financial officer when our company decided to distribute its products directly, all around the world, rather than work through our existing American distributor. It required setting up a network of individual distribution companies and customers in different countries, quickly and without any payment history. EDC insured our accounts receivable for a small fee, which increased our ability to access our line of credit (assurance for the bank for those receivables). Essentially, it was a guarantee to be paid for these shipments, by the customers or by EDC.

• Direct lending: EDC has a high tolerance for risk, backed by experience all over the world. This allows them to lend to foreign initiatives more easily than a traditional bank. A great local example is DeeBee’s Organics, which secured $500,000 in EDC financing to expand into the U.S. But it’s not just about the money.

“EDC has been one of DeeBee’s biggest supporters,” says Dionne Laslo-Baker, DeeBee’s CEO. “They took a chance on us in the early days. Now, by guaranteeing a percentage of our loans, our bank has greater confidence in lending higher amounts of money. This has helped accelerate DeeBee’s already exponential growth.”

• Education and counsel: Access to EDC representatives is free, and their educational programs are practical and worth the time and cost.

Observes Jill Doucette, founder and CEO of Synergy Enterprises: “EDC was fundamental in building our capacity to access international markets. The Trade Accelerator ProgramTrade Commissioner Services and CanExport were game-changers for us. We have now received international investment, and work in multiple countries.” 

Pro Tip: Try the massive market due south.

The United States has approximately 11 times the economy of Canada based on GDP, and eight times the potential consumer market. Whatever measure we choose, the United States represents a significant opportunity. And, geographically, it’s just next door.

Legal, Tax and Other Considerations

Before exporting your product, there are several things to consider:

• The customer: Your new, foreign customers will be different from your existing customers. Be prepared to navigate language and cultural differences. This may involve product testing in the new locale, hiring local staff, working with translators and possibly hiring cultural consultants.

• Distribution channels: Rather than establishing your own bricks-and-mortar store, consider working with a distributor, using an e-commerce platform and employing third-party warehouse and shipping services.

• Logistics: Transportation costs, as well as customs requirements, can add up. Do your research and find the right fit for your product or service.

• Legal and regulatory issues: Find a knowledgeable lawyer who can identify risks, including intellectual property rights, safety standards, labelling, hiring practices and banking regulations in the new market. A few hours with an experienced lawyer is your ounce of prevention. 

• Accounting and taxes: Similarly, spending some time with a knowledgeable accountant can save you money in the long run. In addition to income taxes, information on duty, transfer pricing, sales taxes, payroll taxes and withholding taxes on dividends are crucial to understand. 

Finally, talk to other entrepreneurs. They can help you find the right legal and tax advisers, identify risks and areas for further research, and connect you to the right people, here or abroad. 

And remember, when you export, you are also contributing to Canada’s economic growth. It’s a win-win-win for you, your country and your trading partners. 

Mia Maki is an associate dean, faculty outreach, at the Gustavson School of Business at UVic; a professor of finance, accounting and entrepreneurship; and a principal at Quimper Consulting. Maki has helped raise over $50 million for international initiatives, including acquisitions, strategic partnerships and joint subsidiary creation projects.

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