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Think global, state urges small firms


Robert H. Roche, satisfied that his Westminster-based company was performing well enough at home, hadn't really thought about taking his products abroad.

Then the calls started arriving from around the world.

Dealers from Asia to Europe had read about Roche's business, CTRL Systems Inc., in trade publications and on the Internet and wanted to buy the firm's hand-held ultrasonic diagnostic tools to resell overseas.

"That started us thinking that maybe it wasn't such a bad idea," said Roche, the CTRL president.

With just 40 employees and annual revenue averaging less than $5 million, CTRL is one of thousands of companies fueling growth of small-business exports.

As states such as Maryland look to international business to boost their economies and the United States works to narrow its trade deficit - $369 billion last year - by peddling more goods globally, many experts see small companies playing a vital role.

The amount of small-business exports has been increasing each year. In 2000, they accounted for $300 billion, or about one-third, of the $1 trillion in U.S. exports, according to the Small Business Administration. Even so, only 1 percent of small businesses sell abroad.

While Maryland doesn't track small-business exports, state officials estimate that small businesses accounted for just $500 million - 10 percent - of the $5 billion in Maryland exports last year.

"We're not taking advantage of it as we should," said James McLean, executive director of the Governor's Office of Business Advocacy and Small Business Assistance. "There's still the assumption that only the Fortune 500s are the ones who export. The small guys who don't think about it should be doing it, too."

Trade officials said technology and trade agreements such as NAFTA, which lifted some restrictions, have made it easier for businesses to expand beyond U.S. borders. Now they're hoping that a slowing U.S. economy will propel businesses to search for new customers worldwide.

"The U.S. market isn't what it once was," said Thomas Cox, director of the U.S. Export Assistance Center in Baltimore. "There are markets overseas that small companies are going to look at as business slows down here."

But many small-business owners think exporting is beyond their capability, experts said. They worry that small staffs limit their chance to expand, or they are intimidated by language differences, exchange rates, tariffs and the limited protection of international laws.

"Small businesses have the largest growth potential," said Pete O'Neill, a state manager of international business. "They often have some of the best chances for exporting but lack the managerial or financial resources to do it."

A strong dollar - which makes U.S. goods costlier abroad - or a weak currency in other parts of the world may not make exporting worthwhile. Maryland's and much of the rest of the country's exporting dollars, for instance, dropped from 1998 to 1999 because of currency crises in Asian and South American economies, O'Neill said.

Roche knows about that firsthand. His first attempt to take CTRL global in 1998 was thwarted by currency devaluations in several countries. Manufacturers wanted the hand-held devices that detect defects in the bearings or gears of equipment, but buying them became too costly.

"Devaluation hit, and it basically just stopped the business," Roche said. "It was too expensive to import the product."

A year later, with the economic turmoil settling, Roche hired someone to focus on exporting. The company now has a presence in eight countries and expects 20 percent of its sales to come from overseas markets this year.

But Fred Mirmiran, of the engineering consulting firm Johnson, Mirmiran & Thompson in Cockeysville, said it was too difficult for his 330-employee company to compete with bigger firms with name recognition overseas. Countries such as France and Germany also are more aggressive than the United States at finding jobs for their firms, he said.

Plus, the company had all the work it could handle at home.

"We also didn't have the people to spare with the booming economy here," Mirmiran said. "We put it on the back burner for now, but it's something we'll probably want to pursue later."

Maryland faces unusual obstacles in tapping the small-business niche because it has a disproportionate number of the tiniest businesses compared with other states, O'Neill said. These businesses tend to have fewer resources and less experience at the international trade game, O'Neill said.

The state's office of international business created the "Export Maryland" program specifically to assist firms with annual revenue under $15 million. From 1996 to 2000, the department aided small businesses in exporting $145 million in goods through grant programs, staff assistance and business missions. Mirmiran, for instance, explored overseas opportunities during a state trade mission to Brazil, Argentina and Chile.

"We want to get their feet wet," O'Neill said. "Typically the first export sale may be small, somewhere in the $15,000 to $20,000 range. But ... they can grow later."

Maryland's high concentration of technology and biotechnology firms could provide a niche for exports. Even the smallest firms in these industries can break into international business, sometimes in their first year, as they create new products that may not be available overseas, some experts said.

"I definitely think more so than other industries when you have a product in the biotechnology area, even the smallest company can have a global market," said Bob Eaton, president of MdBio Inc., a nonprofit industry promoter. "If you develop something that is better than what is currently available, the market is going to demand it."

About 40 percent of Owings Mills-based BioFX Laboratories Inc.'s business comes from overseas sales. The company, which produces chemicals that change color in a diagnostic kit that spots diseases or viruses, sells its product in Western Europe, Japan, the Middle East, Australia and New Zealand.

"I really do think that if a small business does not think exporting, they will continue as a small business," said Steve Mefferd, president of BioFX.

Some international business scholars said it's not enough to provide tidbits about a country or a contact overseas. More must be done to cut back on paperwork and offer financial incentives.

Gary Hufbaer, a senior fellow at the Institute for International Economics, a Washington-based think tank, first examined the impact of small and midsize businesses on exporting in the 1980s. Hufbaer said that although government agencies talk about their interest in helping small businesses, he believes much of it is rhetoric.

He said paperwork, particularly in customs, can be overwhelming for small businesses. He suggested offering tax credits for exporting and encouraging banks to offer export credits. "The system is friendlier than it used to be, but it still is a burden," Hufbaer said.

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