Most business leaders have known for some time that the globalization of the business world means they'll have to start looking beyond U.S. borders if they want to grow their business. The problem is, many small businesses face steep barriers to entry, and the frustration factor often causes them to bury their heads in the sand and hope that the situation changes.

But that's unlikely to happen, according to recent reports. The global economy is here to stay, and many small companies are already feeling the effects of its widening scope.

INDUSTRIAL DISTRIBUTION'S 58th Annual Survey of Distributor Operations, which questions distribution managers annually on a range of business issues, revealed that globalization is a concern to small companies. "Manufacturers moving offshore" ranked fifth among distributors' top concerns, falling in line behind "economic conditions," "price competition," "customers going out of business," and "increased operating costs."

Forty-seven percent of distributors with annual sales between $5 million and $10 million said they'd lost an average 11 percent of sales in 2003 because they could no longer sell to customers who had moved operations to China, for example.

What's more, 62 percent of those distributors said they think that trend will continue, amounting to a 15 percent loss in sales over the next five years. For even smaller companies, the situation isn't any better. Companies with less than $5 million in annual sales said they expect to lose an average of 18 percent of sales over the next five years as the trend continues.

Exporting seems a logical solution to the problem, but it's more complicated than just picking up and selling overseas. The Office of Advocacy of the U.S. Small Business Administration reported last fall that many small companies have neither the time nor the money to invest in exporting. Based on a study of small businesses in South Carolina, the Office of Advocacy found that most exporting done by small companies is in reaction to customer inquiries, not as a planned strategy. A more proactive stance was seen as too costly and time consuming for most of the firms, the study claimed.

"This study shows that small businesses may face significant barriers to exporting," said Dr. Chad Moutray, chief economist for the Office of Advocacy. "More research is needed to identify the barriers to overcome and how American small businesses can better compete in the global marketplace."

The good news is, there is help for small companies that want to take advantage of global business opportunities. Business associations, Internet sources and government agencies offer assistance that can open the door to what many say is a lucrative field.

James Morrison, president of the Washington, D.C.—based Small Business Exporters Assn., identified some of the barriers small businesses face in a recent ID interview. As leader of SBEA since 2000, Morrison helps small companies develop export strategies and find ways to cost-effectively run an exporting operation. Identifying potential markets, finding export financing for customers, and managing the export function are some of the barriers these companies face, he said.

"Companies that have never [exported] before tend to be most interested in finding customers for the goods they sell," said Morrison. "They're looking for reliable reports on foreign markets—reliable trade leads."

Morrison said there are many places to look for leads, SBEA's trade lead databases being one source. There are good sources on the Internet for companies that know which countries they want to target, he added. Though the Internet is a low-cost strategy for identifying markets, he cautions that just 1 percent to 2 percent of those sources are what he would call "good leads."

"In addition to whatever markets [a company] would like to go into, they should also know what markets are out there where [their products] are in demand," Morrison said. "There are good sources for that, too."

Attending international trade shows and actually visiting the countries of interest are positive strategies, he said. In taking these routes, Morrison suggests companies work with the U.S. Embassy in the target country as well as the U.S. Commercial Service, which is part of the Commerce Department.

Once companies have been involved in exporting for a while, export financing for customers becomes an issue, Morrison added. That's because many of the countries interested in buying from American firms have financial systems that are not structured to purchase from the United States. The result is that many customers ask their American trading partners to help them find financing for their purchases.

"Getting export financing here for your customers is challenging," Morrison explained. "I would say that's the single biggest issue that I deal with."

Finally, managing the export function is an area in which many small firms need help. Morrison says companies often start out by using an export management company—which takes a cut of sales or profits—to manage the overseas portion of their business. Some companies will use an export management company as a permanent solution to that problem.

Morrison also works with companies interested in opening branches overseas. He says there are various sources of financing for this kind of venture—and that it's getting easier for businesses to get money for those projects. The Overseas Private Investment Corp., for instance, has a small-business department that helps companies establish financing for overseas ventures. Though OPIC does not work in China, Morrison said it does much work in Eastern Europe and elsewhere.

Help from agencies like Morrison's is not free, of course. SBEA charges anywhere from $200 to $5,500 per year for membership dues, depending on the number of employees a company has. The fee includes access to programs that offer trade leads, shipping discounts, financing assistance, and other services, as well as one-on-one consulting. SBEA also provides governmental advocacy for small-business exporters and networking opportunities for its 150,000 members across the country.

Though getting into exporting requires a fair amount of homework and a bit of cash, the rewards can be well worth the investment. Morrison says opportunities abound for American businesses, primarily because there's a cachet to U.S.-made goods and U.S. companies that is strong in many parts of the world. Americans have a reputation for providing follow-up after the sale—a valuable service for which many people around the world are willing to pay a bit more.

"That's one of the reasons our guys can often command a modest premium over the competition," Morrison said. "Also, there are big margins in exporting. You can make much bigger margins than you can here. So there's risk, but there's also reward."

The number of small-company exporters has quadrupled in the last 20 years, according to SBEA. And as industrial markets in places like Eastern Europe and China continue to grow, those numbers are likely to climb.

"Ninety-six percent of the world's consumers live overseas," Morrison said. "Every time a company comes to me and says, 'I'm getting killed by imports,' I say, 'What's your export strategy?' The world is globalizing very fast."

For more information on SBEA, go to www.sbea.org ; for information on the Overseas Private Investment Corp., visit www.opic.gov ; and for information on the U.S. Small Business Administration, visit www.sba.gov.