The notion of a small, family-owned business in Nashville exporting Italian-style pasta to customers in Europe may sound unusual, but it’s just one example of how local independent businesses are beating the recession and growing internationally.
“It’s possible for any small business to do business in developed countries anywhere in the world,” said John Aron, president of The Pasta Shoppe. The company’s 24 employees make specialty pastas at its headquarters near 100 Oaks Mall and send shipments to distributors in Europe, Asia, Central and South America and the United States.
Chile is the latest country on the list, and Aron hopes soon to add customers in Brazil, South America’s largest country and a place where consumer spending is powering economic growth.
“When you complete a deal in one country, it spreads to other countries,” he said.
While there are no firm estimates of the number of Nashville-based small businesses engaged in international commerce, The Pasta Shoppe and 64 others are members of the Nashville chapter of Entrepreneurs’ Organization, an international organization that facilitates worldwide networking.
Those companies represent combined annual sales of $235 million and employ almost 1,800 workers. Globally, the organization says it has 7,000 members with total sales of $101 billion and a combined payroll of 924,000. To join EO, an entrepreneur must be younger than 50 and be a founder, co-founder or controlling shareholder of a company with gross annual sales exceeding $1 million.
Joe Freedman, founder and partner in Music City Tents & Events, said EO helped him find a reputable supplier in Shanghai, China. He wanted assurances that the workers in the factories that produce flatware, tables and other items for the company were being treated fairly.
“You have to be cautious of human rights abuses,” he said.
Freedman, who also is chairman of recruiting firm American Legal Search LLC, attended an EO leadership conference last year in Dubai, the largest city in the United Arab Emirates. There, he met face to face with some of the firm’s international clients.
“We solidified our relationship,” he said.
Before Emma, the popular e-mail marketing and communication service, invested in a partnership with a mobile messaging business in New Zealand, founding partner Clint Smith sought advice from EO members around the world.
“EO works as a global message board. I asked if anyone had similar experience. I heard from someone in South Africa, Canada, the U.S. and the United Kingdom,” he said. In the end, “I felt a bit smarter going into the partnership talks.”
Emma, which has customers in Europe, Canada, the U.K. and beyond, sees its presence in multiple markets as way to grow. He also attended the EO conference in Dubai and said such meetings help business leaders see past cultural differences.
“You end up talking over dinner with someone from Saudi Arabia or the U.K,” he said. “Business is business. We all have things in common.”
Keeping up with a changing world
In today’s world, a business can participate in international commerce without ever leaving the United States. Douglass Financial Services doesn’t have offices or customers overseas, but it does have clients who have immigrated to the United States or who are making investments in foreign markets.
Founder Cullen Douglass said participating in EO helps him better serve his international clients.
“It opened up my world, how I saw things, how we process information differently depending on culture,” he said. “I have a doctor client who moved here from the Middle East. I have a lot of clients from India. Nashville was a WASP community, but Nashville and the world have changed.”
Local businesses that participate in international commerce are ahead of their peers, said Jeff Cornwall, professor of entrepreneurship at Belmont University and author of a popular blog, The Entrepreneurial Mind.
“We are woefully behind. Only about one-third of U.S. businesses do business internationally,” he said.
Those who do have to balance the risks and rewards, he warned. New markets mean new economic opportunities, but, as The Pasta Shoppe’s Aron and Music City Tents’ Freedman agree, a lot can go wrong.
Before The Pasta Shoppe will fill an international shipment, it requires payment up front, said Aron.
“We will not load a 20-foot container that pulls up to our door until the invoice is paid,” he said.
Getting paid by a foreign customer isn’t the only problem, Freedman said. Getting what you paid for yourself can be a challenge, as well. Quality control is essential when outsourcing to a foreign manufacturer.
“There are horror stories. They send you a prototype; you send the money. They send you a product that isn’t anything like it,” he said.
The solution is to have a representative, “someone you trust,” on site, said Freedman.
Ed White, an executive vice president at Pinnacle Financial Partners, cautions clients to be realistic about their expectations when seeking a deal on goods or services internationally.
“If something looks too good, be extra careful,” he said.
Overcoming negative stereotypes is another challenge, said Douglass, who recalls his own culture shock while visiting the Middle East for the first time.
“Is that a terrorist?” he remembers thinking. “We all have viewpoints. Doing business internationally can change your perceptions.”
Distrust runs both directions. Americans often are surprised to learn that people in other countries may have their own negative stereotypes of us, said Cornwall, who recalled speaking through a translator with a wary audience in Hungary.
“It’s kind of that Bernie Madoff and Enron thing,” said Cornwall. “We have this reputation as unscrupulous and can’t be trusted. It’s alarming to them.”
Weighing the risks
Despite the obstacles, international business isn’t just for large corporations anymore, said Cornwall. A Web site gives even the smallest business a global presence, and direct-to-consumer shipping opens the door to profitable international “microcommerce.”
In fact, the risk of not participating in global commerce may be greater than jumping in, he said. You might lose your domestic market to a more agile foreign competitor, he said. It’s happened before.
“Our automobile industry was happy with its captive market. Then the rules changed,” said Cornwall. “The same is true for small business owners. I wish more could get out there in the world market.”
Time and distance no longer separate small businesses in Nashville from the wider world, said Douglass.
“The world,” he said, “is becoming flat.”