Niche-Industry and Internationalism

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There is a lot of talk today about how bad of a state the US is in right now. Of course, gas prices are high, unemployment is high, wages are low, and all signs point to economic recession. However, I have more work to do in my office than I’ve ever had before, and our business is booming. It may not be “personal finance”, but as someone entrepreneurial-minded and always looking at what does and doesn’t work in business, the past several months have really taught me some valuable business lessons that will keep me from making terrible mistakes when I do own my own business.

The economy started floundering around this time last year, even before that. The government was in major deficit due to war spending, and contractors that weren’t for war production started losing money. At the time, I was in a small business whose primary source of income was subcontracting on scientific/engineering government projects with the Department of Energy. However, with more deficit comes less spending, meaning less work for us, even though we bid low. Our problem is that we replaced human labor with automated computer labor, and even though we were low bidders, the government’s role when the economy is dipping is to keep its citizens in jobs. So due to the lack of work, and the inability to quickly navigate to foreign markets, half of us were let go and the other half turned to consulting.

Now, then I found my current job, and even though the economy is dipping even more, we seem to have a lot of work. We even have government work that isn’t war related. The contrast is very simple to make in this case–this company made strides more than a year ago to find partners all over the country and world that would sell our products. Now that the US dollar is so low against foreign currency, those partners can’t get enough of us; we’re now both the lowest bidder and the best equipment for the job. Money from those jobs have allowed us to R&D new technologies that the government (Army COE) is interested in. So by diversifying into foreign markets, we were able to retain the US market to some extent, even in the midst of a recession.

Most people, myself included, are afraid to make the jump into foreign markets, especially small businesses of less than 5 people. However, the way my boss did it was a great idea. First, he found partners that would do all the networking and selling. Then, we would heavily train those partners in our equipment and methods and split any profits. The upside is that we only interface with a handful of people, who in turn interface with the end users. Really, the only inconvenience is having to ship internationally, and since a lot of it is freight it’s really no different than shipping to California. It allows us to focus on building and improving technology, and our partners handle the selling and the first tier of technical support.

It’s not like our stuff is in a massive number of places now either; we’re a niche market and always will be. However, by putting ourselves out there internationally, we’re keeping ourselves at the front of that niche market. If we do decide to grow, it will be much easier, because we already have the partners in place to get our stuff out there even more. Plus, with partners/resellers comes additional feedback to allow us to make improvements.

So, when I start my own business, one thing I’ll be looking to do is make sure it has an international focus. When the dollar goes weak, I will get more international business, and when it strengthens I will have had enough improvements to be more than competitive in the national market too. I’m not an advocate of mashing every country’s governments together into one happy family, and am not even a supporter of the UN. But from a purely business perspective, internationalism makes a lot of sense.

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