Companies that export are more innovative, productive, profitable and risk resilient. This, the third in a four-part series which talks about exporting and profitability. (See also: 1st part – Innovation, 2nd part – Productivity, 4th part – Managing risk)
After moving to Canada from Pakistan, Nadeem Ahmed founded his company, North American Grain Corporation and within two years, he was selling to Japan, his first export recipient.
“It took 18 months of hard work sending samples and finally, we were successful,” Ahmed, said of the Saskatchewan and Manitoba grain he exports.
Today, he sends his grain to Turkey, Pakistan, Colombia, Costa Rica, and Gambia, making it part of his business plan to avoid the U.S. market, which he considers saturated. He has also made inroads in South Africa. From nothing, his company now has revenues of roughly $5 million, a nice bottom line for a guy who emigrated to Canada in 2001, after taking early retirement from the Pakistan Air Force.
“I was always interested in the trade business,” he said during a phone interview from Senegal, where he was exploring new markets. “After my retirement from the air force, I wanted to pursue my dreams of becoming an entrepreneur.”
Ahmed’s experience in profitability is no surprise to those who study the success of exporters.
“Exporters are more profitable than those that don’t export,” said Bill Currie, Vice Chair and Americas Managing Director at Deloitte. “In Canada, which is a relatively small and relatively thin market, the competitive intensity isn’t very strong.”
Studies by Statistics Canada, Industry Canada and the Conference Board of Canada have reached similar conclusions and are backed up by observations by Export Development Canada’s (EDC) research expert Todd Evans.
“When you’re looking for growth, exporting is an excellent strategy if your company has saturated its Canadian market and sales are flattening out,” said Todd Evans, Director of EDC’s Corporate Research Department. “You’ll not only increase the size of your potential market, but may also gain other advantages that will allow you to invest in further expansion. You can, for example, amortize investments — such as research and development (R&D) and capital expenses costs — across a larger sales base and revenue stream. This can make new growth and profit-enhancing strategies, domestic and international, financially feasible.”
An Industry Canada survey supports Ahmed’s experience and Evans’ analysis. Ten per cent of Canada’s SME exporters grew at an annual rate of more than 20 per cent between 2009 and 2011 while the growth rate for non-exporters was only eight per cent. Exporters were also more focused on increasing market share and revenues than non-exporters. The average annual revenue for the exporters in the study was $3.4 million, compared with $1.6 million for the non-exporters.
The Conference Board of Canada conducted a study with all of Canada’s companies with 500 employees or fewer.
“We looked at companies that are exporting and compared them to companies not exporting,” explained Danielle Goldfarb, Director of the Conference Board of Canada’s Global Commerce Centre. “We controlled for other factors and found that as a direct result of exporting, Canadian companies boost overall sales and profits. If they’re not exporting, they’re not growing their sales and profits. It’s important to understand this is a causal relationship. Regardless of company size, exporting boosts your profitability.”