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If there's one thing Terry Bergan, president of Saskatoon-based International Road Dynamics, has learned doing business abroad for the past 20 years, it's that you can never tell what's going to happen next. Like the time IRD built the weigh-station technology for a toll road just outside the teeming Indonesian capital of Jakarta. Government officials claimed that IRD's system was failing to flag overweight vehicles, and threatened to have the company employee who was overseeing the project arrested if he attempted to leave the country.

Bergan had little choice but to make the exhausting, 16-hour plane trip to Jakarta. He quickly figured out that the glitch wasn't with the technology, but with the country's entrenched system of illicit payoffs: Local police had rewired the system, adding an extra switch that, when pressed, gave overweight trucks the green light to go ahead. Truckers would toss a matchbox full of money out the window to the police, who then signalled to someone farther up the road to override the system. "I had to tell the government officials that the problem was the police," he explains matter-of-factly. But rather than disciplining the officers, the government proceeded to negotiate its share of the spoils, noted Bergan, who is quick to point out that IRD steers clear of "improper" practices. "It's just the way they do business," he says. "The economy wouldn't work otherwise."

With stories like this, it's no surprise that many a small business owner opts for the tried-and-true highways and byways of home over maneouvring through the potholes and pitfalls of international markets. "The unknown is scary, and it's not for everyone," admits Bergan. "I know lots of CEOs who don't want to get on a plane." But the way he sees it: "One person's inability to move forward is an opportunity for someone else." And IRD, which has implemented its toll road and weigh station technology in more than 30 countries, from the deserts of Saudi Arabia to the frozen highways of northern China, has capitalized on that opportunity—growing the company from a one-man basement operation in the late 1970s, to a $40-million venture with a staff of 350. "You have to be open to whatever comes your way," says Bergan.

And there's no time like the present. With China surpassing Canada in recent months to become the No. 1 exporter to the United States, and with the American economy in the doldrums and the skyrocketing loonie outpacing the U.S. greenback for the first time in 31 years, Canadian companies are battling the twin challenges of rising costs and increasing foreign competition on their home turf. In some cases, Canadian manufacturers have given up domestic production altogether, importing merchandise wholesale from overseas, notes Bob Armstrong, president of Atlas Trade and Logistics Advisory Services, a consultancy based in Pickering, Ontario, that specializes in trade training and shipping. But it's only a matter of time before the Americans and the Chinese, attracted to the Canadian market by the high dollar, "figure it out and just start doing it themselves," he warns. "Canadian companies are faced with more competition than they realize—and not just from China, but the world."

It doesn't have to be that way. While Canadians fret over cheap imports from developing markets, they could be lev­eraging significant competitive advantages—quality products and resources, a strong client base and knowledge of the North American market—that foreign rivals can only dream about. "If Canadian companies are losing business to Indian, Chinese and Mexican competition, whose fault is that?" says Radha Radhakrishnan, a native of Sri Lanka who started his own Toronto-based financial consulting company, RK Global Consultants, after working for banks in Asia, Europe and Canada. "My advice is to go there first, and become your own low-cost supplier while you still have your client base—before foreign competitors come here and take it away."

Instead of packing their bags with sunscreen, a bottle of Imodium and a book of common phrases, however, would-be outsourcers, exporters and investors need to have a plan. All too often, neophyte traders parachute into complex new markets on nothing but the seat of their pants, and the results are predictable. "A lot of companies, especially small ones, figure it's a piece of cake," says one veteran trade commissioner. "They get an order over the Internet and figure anyone can do it. So they don't do the background research and then they fall flat on their faces."

While there's no question that doing business abroad can be daunting, trade consultants reel off a list of mistakes that Canadians commonly make, from failing to properly manage risk to choosing the wrong business partner. But they all agree that the biggest mistake, by far, is giving up too soon and too easily—either at the first sign of trouble or before a venture has a chance to take off, something that usually takes years rather than months. Which is why it's crucial that businesses are properly suited up with a strategy, the proper funding and the right mindset before making the leap into international markets. "Companies don't analyze the market properly and then they just quit," says Armstrong. "If you fail, you have to figure out why you failed so you can do a better job next time. Because there has to be a next time."

Don't do it the Mattel way

"Going global" is the new catchphrase, but what does it mean? Before grabbing your passport and hopping on the next Midnight Express, ask yourself how international markets can best serve your company. Do you see overseas markets as a way to make your company more competitive, by manufacturing goods offshore or as a source for cheaper components? Or are international markets an opportunity to expand and diversify your client base beyond Canada? Do you want to import, export, go offshore or outsource? "A small business shouldn't be afraid to explore all the options," says Armstrong. "You could be outsourcing a part or moving your operations lock, stock and barrel. If you're smart, you'll keep the know-how in Canada—the R&D, marketing, sales and some distribution—and license someone else to do the manufacturing."

The good news is that you don't have to limit yourself to one narrowly defined role. Trade is a two-way street, and you should always be thinking about how to capitalize on operations or contacts in other countries to expand new business channels back here in Canada. "Maybe you represent your foreign partner in Canada and market and sell their product here," says Armstrong. "Or maybe they invest in you here and help you improve your production capacity." Just make sure that whatever you import, license or outsource meets the same quality standards as those in Canada—a mistake that American toy manufacturer Mattel learned the hard way this summer, when it had to recall more than two million Chinese-made toys sporting lead-
based paint.

Go there, at least twice

Once you've decided what you'd like to do, the next question is, where? Bigger markets are not necessarily better. While much of the world has piled into China to take advantage of its cheap labour or to service its 1.3 billion people, a small firm might be better off targeting smaller markets like Singapore or the Czech Republic, where the competition is less cutthroat, says John Gruetzner, the Canadian-born, Beijing-based vice-chairman of Intercedent Management Consultants. His firm advises companies on country selection and market-entry strategies. "Why go into a heavyweight boxing match and try to be a prize fighter in Las Vegas, when you can win and get valuable experience in other, less competitive fighting circuits?"

But before deciding on a market, you need to go there—at least twice—and get the lay of the land, by meeting with potential distributors, suppliers and industry contacts. You need to get a feel for the competition, both foreign and domestic, and never assume that just because it's an emerging market, the competition is inferior. By the same token, don't underestimate ostensibly "poor" countries like India, which boasts a consumer class approaching 600 million people. More importantly, figure out if you even have something they want to buy. What is your unique value proposition, and what do you need to do to adapt it to local tastes and culture?

This requires doing a lot of homework, and a good place to start is the Canadian Trade Commissioner Service, with a network of 1,000 counsellors, specialized by industry sector, posted in Canada and in embassies and consulates around the world. The service can help firms identify customers and competitors, research customs duties, packaging and labelling requirements, and sort out what trade agreements individual countries have in place. Trade commissioners in foreign postings can provide advice on the local regulatory environment and on the likelihood of your actually getting paid.

Small and medium-sized businesses (SMBs) can also tap into resources like the Canada Ontario Business Service Centre, the Canada Export Centre in Vancouver and the Saskatchewan Trade and Export Partnership (STEP), which can provide market-entry strategies, custom market research and business leads.

This will cost way more than you think

Money, including how to spend it wisely and when, is one of the greatest chal­lenges for any small business looking to go international. All too often, SMBs don't properly factor in the financial costs of a long-term commitment, or spend like drunken sailors at the beginnning only to later realize that it wasn't the market for them. Intercedent's John Gruetzner recalls one mining equipment company that began negotiating a joint venture in China without waiting for the results of a business analysis of the market. The firm spent $100,000 in legal fees setting up the venture, only to find out there was no market for its product.

Consultants routinely tell companies that they should go in with enough cash flow to keep them afloat for at least two years, because it's unlikely they'll see a return on their investment before then. But how much money they'll need will depend on what kind of investment they're making: Gruetzner estimates that firms looking for a distributor or agent in an overseas market should expect to spend $50,000 to $100,000, while those interested in establishing a sales office will need roughly $250,000 a year. Companies interested in making an equity investment should factor in at least $150,000 for legal fees, a business plan and trips back and forth—plus, of course, the capital costs of the project. Finding the right factory can also cost at least $50,000 if you include research, travel and quality checks.

For a company that had incorrectly assumed it would be cheaper to buy, say, a large quantity of metal piping in China, the high costs may cause it to rethink its plans. Similarly, factory workers in India may only make $100 a month, but because of lower productivity, it might take workers twice as long as their Canadian counterparts to do the same job. "You think you're saving money, but unless you are getting significant value out of the deal, you may be better off trying to cut costs somewhere else," says Gruetzner.

A key area where companies can save more than they realize is in logistics costs, says Armstrong. If you're exporting to the U.S., for instance, and your main market is the southern states, don't take your product to Buffalo for distribution across the country. Take it to the closest point-of-sale first—say, a central hub like Atlanta—and ship it out from there. To get the most for your dollar, make sure you have the right freight forwarders to handle the shipping and customs work required of importers and exporters, as well as insurers that have strong international networks. In some cases, you may want different service providers for different countries. "And never take the first quote," says Armstrong.

While you'll want to keep an eye on costs, don't be cheap. One Ontario construction manufacturer learned that lesson the hard way when it offered to host a lunch for a delegation of senior South American executives interested in the company's product. The manufacturer balked at paying the $600 price tag for eating in a recommended Toronto restaurant, and instead opted for a cheap, buffet-style meal. The South Americans, who judge potential business partners on their wining and dining prowess, were not impressed. The company saved $400, but lost the account.

By the same token, companies often underestimate the value of training their staff to be export-ready, notes Armstrong. The Forum for International Trade Training, for example, offers workshops on international trade finance, market research, logistics and distribution, and the culture of doing business abroad, through the network of world trade centres around the world and at many community colleges across Canada. "Let's face it: Our lifeblood is trade, and every company should have one or two trained people in-house," says Armstrong.

Companies should also invest in good marketing talent. More often than not, Canadian companies are run by engineers who understand how a product works, but underestimate the importance and skill required to properly promote it. You may have the most innovative product on the market, but if you don't have a salesman's instinct for selling, it will stay on the shelf. Moving into a foreign market, with its cultural subtleties and different tastes, means companies may have to adjust how they train workers. They may also have to customize their brochures or even change the colour of their packaging. General Motors stopped selling blue cars in China, for example, after it learned that in China the colour blue signifies death. Frustrated with Canadians' lack of emphasis on marketing, one trade commissioner noted: "If you are not willing to put resources into marketing and promotion—what are you thinking?"

The challenge for many small businesses, however, is finding the capital to do business overseas. Export Development Canada is the most obvious port of call for firms looking for trade financing. Organizations such as STEP also provide 90-day preshipment financing of up to $150,000. For those looking for less conventional backing, Toronto-based RK Global Consultants works with both Canadian and foreign banks that specialize in trade finance. Typically, banks use a standard, formula-based approach to commercial lending based on the borrower's inventory and receivables. Instead, these trade-finance-oriented institutions have the flexibility to provide a hybrid-financing package that takes into account the nature of the transaction and related cash flow. This package may include a margin-based letter-of-credit facility that provides the buyer with the ability to pay suppliers for materials that may take several months to arrive, without having to pay cash up front, explains Radha Radhakrishnan. "They work outside the box because they have an in-depth understanding of the nature of trade financing as well as the business cycles of those regions."

K9 Pro Wear's Linda Lazarowich asked business students from the University of Manitoba to help her design a marketing plan. Manitoba Trade and Investment also chipped in with display material and money for trade shows. "It's very difficult to get EDC funding for small companies," Lazarowich says. "In many ways, that's good because it's important to commit yourself first. If you're not willing to go the extra mile, why should they?"

Make friends with everyone

As the saying goes, "It's all about who you know," and networking is one of the most powerful (and inexpensive) tools in your business arsenal. To get a handle on a new market and its key players, SMBs need to get out there and meet and greet—and they can start right here in Canada.

Companies should first register with the federal government's virtual trade commissioner, an online database of export-oriented companies, that will put them on a mailing list to receive the latest news in their sector. Locally based trade commissioners can alert companies to events and incoming trade missions, and even arrange meetings with their foreign-posted colleagues when they come to town. At the same time, firms should connect with the embassies of the countries they're interested in, to find out about incoming trade missions and visiting business associations.

It's also a good idea to join industry associations to meet with peers, get advice and even find partners with whom you can go abroad. An organization like the Canadian Chamber of Commerce has a network of representative offices in several countries, while a regional trade council like the Canadian Council for the Americas—with chapters in Toronto, Ottawa, Montreal, Halifax, Calgary and Vancouver—publishes a weekly newsletter and sponsors events across the country with visiting ambassadors and entrepreneurs. "Exporting is about networking, and you have to start networking here," says the council's vice-president, Alma Farias.

Once a company is ready to hit the road, one of the best places to make contacts is at trade shows. While it's often expensive to set up your own booth, you can rent a hotel room where you can meet with potential clients—and make sure you've got your "elevator pitch" ready. Your goal is to eventually build up a new network of connections that will help you develop business in new markets, says Judy Bradt, a former trade commissioner with the Canadian government who has used her finely honed U.S.-style marketing skills to launch Summit Insight, a Washington, D.C.-based consultancy dedicated to helping Canadian companies win U.S. government contracts. "You want to have contacts who will introduce you to the guy who knows the guy who will help you meet the guy."

but don't necessarily trust your friends

It's sometimes difficult to discern who "the guy" is, especially when a company is operating in a vastly different culture like China's, with its complex language and a tendency to hide its decision-makers behind a phalanx of go-betweens. One way for Canadian companies to bridge the gap is to hire a Chinese-Canadian immigrant who has the cross-cultural skills and connections to help navigate the new market. Another option is to go with a locally based partner who will know how to avoid corruption and costly bureaucratic delays. But be wary if they promise too much, says Raymond Lai, a Hong Kong-born Canadian with two mainland Chinese businesses: Maple Leaf Reforestation, a tree-seedling venture with greenhouse operations in Inner Mongolia, and a manufacturing plant in the southern city of Guangzhou that produces power-surge devices for the telecom industry. "Don't go with someone who says he has all the connections," Lai advises, "because 99% of them are not real."

Which is why choosing the right partner is critical: Too often companies jump into bed with a local partner without checking their business and credit history and ensuring their vision, values and financials are in alignment, says Farias, who heads up Trade Partners, an Oakville-based trade advisory firm specializing in the Mexican and Brazilian markets. "You've got to ask some basic questions about what a potential partner can afford or is willing to spend, and talk about expectations—if they are different the partnership can fail," she says. "It's like a marriage."

To keep a partner from straying, it's important that he is invested in the success of the venture. It may mean coming up with more flexible arrangements than are common in Canada, such as offering your partner a handsome share of the profits. But it doesn't mean being
naive. Telesystem International Wireless, the now-defunct, Quebec-based mobile phone company, made the costly error of not signing a shareholders' agreement with its Brazilian counterparts, a mistake it likely would never have made in Canada. The company subsequently spent years wrangling in the Brazilian courts after its partner colluded with other shareholders to take control of the Brazilian joint venture.

Annie Chong Hill, the owner of Richmond, B.C., food manufacturer Global Gourmet Foods, learned a painful lesson about the pitfalls of partnering after she opened her much-celebrated Annie's Kiosks in Beijing back in the late 1990s. The kiosks, christened by Prime Minister Jean Chrétien during a Team Canada trade mission to the People's Republic, were to sell Canadian-style fast food at bus stations around the Chinese capital. But plans for a 300-strong chain fell through a year into the venture when the Beijing government advised Chong Hill's partner in the deal, the Beijing Bus and Trolley Co., that it didn't have property rights to the land it was renting out to the kiosks. Chong Hill had no choice but to pack up and leave. "It was a shame," says a trade commissioner familiar with the venture. "She followed through and got the job done, but her partner was not very sophisticated. When you pick a partner, you have to make sure they can do what they say they can do."

It's also always a good idea to have someone from the Can­adian operation on site to make sure your interests are being looked after. To avoid piracy, purchase key technological components in Canada. As a contingency, make sure there are exit terms written into any partnering agreement, says Farias. "If you get frustrated, it doesn't mean you have to give up on the idea; you may just need to find another partner."

To minimize problems, choose countries with a good legal system and use guidelines suggested by the EDC and the World Bank to get a sense of whether a country is too corrupt for your taste. Nevertheless, you should always be prepared to adjust your mindset when it comes to the practice of paying commissions and signing contracts, which in most countries is a signal that negotiations have begun, not ended. "I always tell my Canadian clients to leave their Western mindset here," says Radhakrishnan. "A lot of what we perceive as corruption comes from a Western way of thinking. In other countries, it's just the way things are done—like how Canadians take clients golfing or to the hockey game. The packaging is just different."

CASE STUDY 1

All of the purity, none of the politics

Linda Samis is pretty proud of the fact that she's defied almost every conventional marketing rule to launch her Canaqua brand of spring water. She refuses to sell her product in North America because she's unwilling to play the multinational game whereby big bottled-water players like Coca-Cola and Nestlé pay supermarkets for shelf space. She's eschewed the standard, environmentally inspired green-and-blue packaging, bottling her water in übercool black on the suggestion of her 20-year-old son. Even the company's stock photo—a picture of Samis's turban-clad daughter somewhere in the Moroccan desert—arguably does little to leverage Canaqua's unique proposition: the rights to a natural aquifer in Langley, B.C.

And yet the strategy, or lack of one, seems to be working. Since Finewaters.com ranked Canaqua as one of the world's leading spring waters in 2006 (based on its purity and its low-sodium and high-calcium content), the brand, which retails for between $3 and $8 a bottle, has been picked up by a slew of high-end stores—from Colette in Paris and Harvey Nichols in London to Hong Kong's swanky supermarket chain "cty'super" and Spain's biggest retailer, El Cortes Ingles. In perhaps the company's biggest coup, in July Samis hosted a delegation of Jordanian businessmen interested in making Canaqua the official spring water for half a dozen Middle Eastern royal families.

"They're interested for two reasons: They believe Canada has enormously great water and because they can't drink American water for political reasons," says Samis. "That's why anything Canadian is so hot these days."

But no matter how high-falutin her customers, Samis does business on her terms, and no one else's. If they want to buy her custom-ordered Canaqua, they have to pay up front and in cash; she doesn't pay for shipping and tries to avoid going through a distributor. She attributes her unorthodox tactics to a combination of necessity (the company has been "down for the count" four or five times), a genuine belief the world is willing to pay a premium for quality Canadian goods, and a certain tenacious "nothing to lose" attitude. "People told me it couldn't be done. All I know is my water and what we do," says the serial entrepreneur. "The world is clamouring for more Canada, and if you make [the product] something incredible, people are willing to pay a premium for it."

CASE STUDY 2

Their way, on the highway

Despite India's galloping 9% annual growth and the international buzz swirling around it, the country's emerging market—one of the most dynamic in the world—remains largely uncharted territory for most Canadians. But while Canadian investment into the teeming subcontinent is a piddly $300 million, there is one Saskatoon company that's an old hand when it comes to doing business in the former British Raj.

International Road Dynamics, a designer of computer-controlled toll-road collection systems, truck weigh stations and trucking software, has been at the forefront of India's efforts to upgrade its crumbling infrastructure. In the country since 2002, IRD is the leading provider of toll collection systems in India—it has a 60% market share and operates close to 400 lanes. Yet, with international markets traditionally representing up to 95% of IRD's $40-million top line, the world's second most populous country is but one more pit stop in the firm's impressive global portfolio: IRD weigh stations already blanket Chile and Brazil, while it's toll-road systems run from China, Korea and Indonesia to South Africa, Saudi Arabia and Bolivia.

Terry Bergan, IRD's chief executive, attributes the company's globe-trotting mentality to his father, Arthur, who, while doing his Ph.D research at Berkeley in the 1960s, was able to prove for the first time that trucks weighed differently in motion than when static—a groundbreaking discovery that allowed planners to mitigate the damage to highways caused by trucks. Returning to teach at the University of Saskatchewan, Arthur Bergan established IRD to commercialize his discovery. The company's first sale was to the U.S., and IRD has been on the road ever since. "There are people who say it's not worth going," says Bergan. "But their excuse is our opportunity."

CASE STUDY 2

Putting the bite on a burgeoning market

When it came to starting up her own business, Linda Lazarowich was like a dog with a bone. She tried everything—from clothing for full-figured women and the "vertically challenged" to tea cozies. The Winnipeg clothing and textile specialist was at the end of her entrepreneurial rope when she had a eureka moment: What about uniforms for police dogs?

Lazarowich immediately got to work designing lightweight vests, equipped with pockets and reflective trimming that would not only identify working dogs to the public, but also help protect them from on-the-job hazards such as fire (she makes the uniforms with heat-resistant material) and dangerous crime scenes. This time around, though, she wanted to make sure there would be a market for her product, so she skipped Canada altogether and focused on a security-conscious country with deep pockets: the United States. It wasn't easy. The number of dogs employed by security agencies, such as police departments and the military, and what they are used for, is a "highly guarded secret," says Lazarowich. "It's a hugely difficult area to get into, because these dogs are considered strategic weapons."

To build trust, Lazarowich attended trade shows and got involved with K9 professional associations. She identified areas of the U.S. where large numbers of dogs were used. Three years later, in 2004, she landed her first big contract, with the L.A. Police Department, selling them 13 vests. Her company, K9 Pro Wear, now supplies police forces across the U.S. and is exploring opportunities with the American military. Lazarowich is even looking to expand into South America and Europe, and has branched out into search-and-rescue dogs.

K9's three-person operation, which includes Lazarowich's brother, Michael, who heads up marketing, has yet to turn a profit. But the doggedly determined Lazarowich planned for that. "The U.S. market is so different than what we have here—it's a whole different ball game," she says, noting that the U.S. has a long history of using dogs within the country's broad and multi-jurisdictional law enforcement sector, which ranges from the Department of Homeland Security to private security on railway lines. "It's not for the faint of heart," she says, "but if it were easy, everybody would do it."

A line in the sand

If you've ever been to Beijing, you've seen the effects of desertification first-hand: A thick layer of dust coats the city's puny trees and envelops the sprawling Chinese metropolis in a soupy shroud. The Gobi Desert's relentless advancement, fuelled by deforestation and droughts, has engulfed northern China—including the capital, Beijing, 500 kilometres to the east—in increasingly severe sandstorms that paralyze traffic and send people running for cover. But as an old Chinese saying goes, wherever there is crisis, there is opportunity.

Maple Leaf Reforestation, a Calgary-based seedling provider, is hoping to cash in on that opportunity as China, anxious to clean up its act ahead of the 2008 Olympics, invests billions in planting trees throughout northern China to stave off devastating soil erosion. Since July, 2007, Maple Leaf has clinched more than $9 million in contracts with Chinese provincial governments and privately owned agriculture firms to buy its Canadian-sourced spruce and pine seedlings, which are cultivated at the company's 110,000-square-foot greenhouse in Inner Mongolia. The seedlings, which arrive in China as prepackaged pellets, have a 75% survival rate compared to 25% to 50% for trees planted by local farmers, says Raymond Lai, Maple Leaf's newly named chief executive.

The company is now building a second greenhouse that will more than double its production capacity, but Lai admits that doing business in China hasn't always been easy. Maple Leaf has been through several incarnations since its inception in 2002. The SARS crisis kept the company's owners out of China for a year. Their extended absence from the country prompted Chinese government authorities to cancel the company's land lease and confiscate its deposit. Maple Leaf had to start over from scratch, spending another two years and $2.5 million to complete the construction of its greenhouse. Key to the company's success was a new management team of well-connected Chinese Canadians, versed in the nuances of Chinese business culture. "Government relations are very important in China, and it's a different, more personal kind of relationship than you would have in Canada," explains the Hong Kong-born Lai. "If you miss the opportunity to nurture those relationships, forget it—you may never see them again."