Necessity is the mother of invention. Lisa Marshall was also a mother when she started American Pet Diner in Eureka, and she didn’t want to leave her kids with babysitters while getting a job in town. Luckily for Marshall, and her kids, she came from an entrepreneurial background – her father and grandfather had run an insurance business – so when she moved to Nevada where her husband was in the family hay business, she started looking around for what she could do with a background in business management while living in a town of about 1,000.
The answer was right under her nose: Hay.
“I realized the commodity my husband’s family produced – hay – was a high quality product,” said Marshall. “We had buyers coming from all over the world to look at our hay and I thought we must have something special if they’re coming from Korea, Japan and Taiwan, all the way to Eureka, Nevada to look at it. So my husband and I developed a hay product for small animals and started adding products.” Fifteen years later, American Pet Diner is in the global market with a line of herbivore products for rabbits, mice, rats and chinchillas.
“We developed it as a need, and I think in this economy that’s what other people need to do: get creative. Do what you’re passionate about and maybe that will evolve into a business. That’s what we did so I could stay home with the kids.”
Now that the kids are old enough to help, the business is worldwide. That’s a Nevada global business success story.
What makes Nevada a good place for global business?
According to Lt. Governor Brian Krolicki, global trade, especially with an eye toward Asia, is one of the bright spots in Nevada’s current economic malaise. But Nevada businesses probably shouldn’t turn to exporting products as perceived salvation just because the Nevada economy has fallen on hard times. There’s a learning curve, and getting established can take money as well as time.
“When the economy goes down is not the time to get excited about international business as a savior,” said Bill Cline, director, U.S. Commercial Service, Reno (U.S. Department of Commerce). “But those companies that have spent the time and effort through the years to develop an international presence are doing very well. Export trade is one of the things that really helped us weather the storm as best we could under the circumstances. Not to say those companies already established in global trade didn’t have problems during the recent economic downturn, but that without the global markets, our own market might have been even more soft.”
Companies that have been doing the homework, researching target markets, have, in many cases, been able to survive or even thrive through the recent recession. This has resulted in deals based out of Nevada becoming somewhat more prevalent during the recession.
Nevada is doing very well in the global market. Exports in 2010 grew by 25 percent over those in 2009, and 2011 year-to-date figures for exports through the end of the second quarter show exports are 20 percent over 2010, according to Alan Di Stefano, director, Global Business Development, Nevada Commission on Economic Development (NCED).
According to a U.S. Chamber of Commerce report in August of this year, Nevada ranked number one in export intensity growth and export growth, took second place for state and local tax burden and small business survival index, and fifth for entrepreneurial activity.
More good news: according to a report from Ball State University titled “U.S. Export Adaptability at the State Level,” Nevada ranked number one in the country for refocusing export attention on rapidly developing economies in Asia and Latin America.
“Global business has been one of the brighter spots in Nevada’s economy for the past several years,” said Krolicki. “Certainly the bulk of our international business has been with our immediate contiguous neighbors Mexico and Canada in particular, and outside of commodities our trade with greater China has increased almost 900 percent in the last decade.”
Why go global in Nevada?
Going global matters to businesses. After all, 95 percent of the world’s population and 70 percent of the world’s purchasing power resides somewhere outside the U.S., said Di Stefano.
So why Nevada, an inland desert state with no sea ports, a place that business owners in other countries may not be able to immediately locate on a map? What makes Nevada a good place for global business? … Everything that makes Nevada a great place for business.
The Nevada business incentives are well known – no corporate or personal income tax, no franchise tax on income, no inheritance or gift tax, no unitary or estate tax, as well as competitive sales and property tax rates and minimal employer payroll taxes for business owners. Nevada offers sales tax abatement and deferral programs, payroll tax and property tax abatements for companies that qualify.
But there’s more to it than that. In addition to the low cost of doing business, there’s the ease in getting business where it’s going. Northern Nevada has close proximity to West Coast ports like Oakland and Stockton, and Southern Nevada has easy access with Southern California. Major interstate highways, rail services and air service (approximately one-third of the air traffic out of the Reno/Tahoe International Airport is cargo) makes Nevada the perfect distribution hub for the 11 western states, a good place for products to come into and depart from.
“We’ve seen a growth in tourism which is not economic development but key to basic businesses and we’ve seen the growth of Chinese visitors who come to Nevada during a trip,” said Krolicki. “Those numbers have increased from about 100,000 a decade ago to this year when we anticipate one million tourist visas to the U.S. The majority of those visitors will visit Nevada during their stay.”
Which may not sound like it has anything to do with global trade, but the key, Krolicki said, has been to cross-train tourists into commerce aspect. It must be working – our trade with mainland China excluding Hong Kong and Macau has grown more than 3,000 percent in the last decade.
“There are opportunities,” Krolicki said. “We have retained representatives for economic development in Asia and they’re our eyes and ears for points of contact to educate communities which have heard of Nevada but never heard of Las Vegas and never heard of Northern Nevada or Reno. We educate with opportunities.”
Case in point: Krolicki returned in September from a trip to China with representatives from Reno-Tahoe International Airport; many of the conversations during the trip were about cargo services. “Reno-Tahoe Airport is north of San Francisco airport and west of Los Angeles, so if I’m flying air freight from Asia into the western U.S., Reno provides a significant discount in terms of fuel costs,” said Krolicki. “You land at a major interstate highway system and rail line and a perfect distribution point for anywhere in the western United States.”
Airport decision makers are also looking at South American trade routes. Currently cargo can’t be flown from Asia and South America back to Asia without stopping somewhere. “We have airports that are extremely competitive and this creates jobs, it creates opportunities for businesses. These are things we can specifically focus on,” said Krolicki. “Government doesn’t make private sector jobs – that shouldn’t be a controversial statement and I don’t intend it to be – but government can harness and inform certain industries as to the merits of the place they govern and that’s part of what we do.”
Tourism works for Nevada in the world of global business in another way, too: by being a destination, both Northern and Southern Nevada host international conferences, from the International Bowl Expo due in Reno in 2012 to the International CES Convention which will be held in Las Vegas this coming January. People come, see Nevada and see opportunities.
In addition, Northern Nevada has a Foreign Trade Zone (FTZ 86) (goods that come into an FTZ are not subject to tariffs until they leave the zone and are formally introduced into the U.S. market.)
Nevada companies exporting into the global market are only part of the global market picture. There are also foreign companies coming in to buy and companies importing international products. NCED’s mission is to retain Nevada businesses in the state and to assist other businesses in locating here, and then staying.
Foreign companies importing into Nevada fall into NCED’s purview, and toward that end the Commission has created an easily navigated website for foreign investors along with a 96-page guide in English, Spanish and Chinese.
Resources for Going Global
Taking those first steps into the wide world of business can be baffling. Not only are there U.S. rules and regulations that need to be followed so companies stay in compliance, countries that Nevada companies export to have their own procedures.
But there’s no reason for businesses to go it alone. Nevada has a strong network of organizations that partner with each other in order to reach Nevada businesses with their services. For most foreign companies looking to import into Nevada, the first point of contact is often NCED, chaired by the Lt. Governor, Brian Krolicki.
NCED offers a variety of international programs: Export Readiness; Export Seminars and Counseling Services; International Trade Shows and Trade Missions; Inbound Buying Missions; Administration of federal export grant programs.
Trade missions utilize grant money to subsidize costs of food and travel while introductions are made and hopefully matchmaking occurs. Organizers lead business principals to trade shows in other countries to meet potential buyers.
Last month, a trade mission headed to China for a trade show, then off to Thailand, Bangkok and the Philippines because, said Di Stefano, once you’re halfway around the world you might as well get as much out of the trip as possible. The flip side of a trade mission is an inbound buying mission where federal grant monies are used to bring in buyers from other parts of the world to meet with Nevada businesses.
Also creating inbound opportunities is the U.S. Commercial Service under the U.S. Department of Commerce. “Our agency is constantly rounding up foreign buying delegates and bringing them for trade shows in Las Vegas and sometimes we go to Las Vegas and help buyers find U.S. sources of product and supply they’re looking for,” said Bill Cline, director, U.S. Commercial Service, Reno. The agency runs the offices in U.S. embassies to support American businesses seeking help abroad.
There are also two U.S. Export Assistance Centers of the U.S. Department of Commerce, located in Reno and in Las Vegas. “We’re a federal agency office, kind of the export promotional arm of the U.S. Department of commerce, U.S. Commercial Service, or assistance center,” said Andrew Edlefsen, director, Las Vegas Export Assistance Center. There are offices in over 100 locations nationwide and in 78 countries worldwide, with the overall objective of boosting U.S. exports every year.
One of the Export Assistance Center’s flagship programs is the Gold Key program, a partnership that assists Nevada companies in market research in target market countries, and helps them find distributors or sales representatives or how to work with customs.
Edlefsen’s offices also help guide Nevada business principals through unexpected minefields, like suddenly finding themselves personnel shy. “Companies need to assess the resources they have available to be able to add some exporting work to their company,” said Edlefsen. Adding export business to a company that’s been selling domestically adds a new workload. Someone has to manage the export process, and there are legalities that have to be dealt with not only in the U.S. but internationally. “Each country has their own import restrictions. The company is going to need someone to stay on top of all of that so they don’t get in trouble when they export in the future.”
One way to find the human resources: NCED also maintains a network of international representatives to assist Nevada businesses exporting into China (Beijing, Shanghai and Hong Kong); Brazil, Italy, Germany and the UK.
There are a lot of considerations when looking at going global, Edlefsen said. “It’s not like flipping a switch and all of a sudden you’re exporting. It does take up some human resources and time and often cases some money in order to go from strictly domestic sales to exporting.”
Other agencies that can help a Nevada business become part of the global network, according to Cline, include the University system in Nevada, Desert Research Institute, NCET (Nevada’s Center for Entrepreneurship and Technology) and new organizations starting like NIREC (Nevada Institute for Renewable Energy Commercialization). There’s also Made in Nevada, Inc., a nonprofit cooperative corporation created to promote awareness of Nevada products in and out of the state.
Lisa Marshall works with the Made in Nevada program, which in a state our size means getting one-on-one attention and assistance with business needs. While American Pet Diner was growing, Marshall worked with NCED programs to learn how to put together a professional website and brand her company so it looked professional.
Sable Systems International started out in Nevada as an international business designing and manufacturing instruments for research scientists and the biomedical community. Though initially the company faced challenges recruiting a sufficiently skilled workforce in Nevada, that began to shift three or four years ago when a group called Nevada Biotech & Bioscience Consortium began building momentum here. Now that they’re not the only biotechnology game in town, Sable Systems CEO Robbin Turner is focusing on the ways Nevada makes being in an international business easier, which include being able to work with the U.S. Commercial Service, SCORE (a nonprofit dedicated to educating entrepreneurs and helping small businesses succeed), Small Business Administration, and Nevada Industry Excellence (NVIE), which works with small and medium sized manufacturing, mining and construction companies to streamline processes. Currently NVIE is working with Sable Systems toward becoming ISO compliant (a company is ISO compliant when it follows guidelines set by the International Organization of Standardization).
Trends in Global Business
So just what is it that Nevada is exporting to the rest of the world? A little bit of everything. But one of the newest trends in global business is renewable energy, an emerging technology not just in the U.S., but globally.
“More and more companies are looking to get into solar power and renewable energy,” said Edlefsen. “Nevada is just such a great resource for that type of technology, that seems to be one trend Nevada is seeing.”
Heading into the global marketplace can be daunting for any company. Some companies put if off until the principals feel like they have a firm footing in their field.
“The fact that a lot of companies are moving to Nevada for the tax breaks is another trend we’re seeing,” said Edlefsen. “And hopefully that means we’ll see the export base here in Nevada grow. But one thing I think is holding people back from exporting is basically the stigma of risk attached to exporting. A lot of U.S. companies doing good business here think ‘I don’t need to export, I’m doing good enough domestically,’ and a lot of them think there’s a lot of risk associated with exporting. My office is here to try and mitigate those risks and help companies understand that it’s easier than they think to export. So I think the mind-set people have of staying domestic and not going global is another trend that’s keeping our export numbers down.”
“Our company was lucky in some ways not to feel that daunted initially because we started as exporters,” said Turner. “It’s a very doable thing and I’m very eager to encourage other small businesses to take the opportunity to consider and plan for exporting. [There are] resources available and capable of leading exporters through all the complexities that are excellent in instruction and guidance and it’s well worth it.”
Di Stefano offers the following tips: Apply for all grant programs offered by the federal government through NCED, attend any Export Readiness or Export Training sessions offered, and participate in trade missions whenever possible.
“There are tons of opportunities out there,” said Marshall. “The economy and the recession don’t mean there aren’t opportunities. They’re out there. Get the right product and you don’t have to be so smart, just creative. Pursue business and be persistent.”