Growthink Blog

Selling Services Overseas: A Happening Gold Mine for U.S. Small Businesses


Shrouded in the drumbeat of negativity that passes as international business reporting these days has been the bursting growth in U.S. Service Exports – increasingly from U.S. startups and small businesses.

Contrary to the image of imports and exports being only “stuff” flowing in and out of places like the Port of Long Beach, last month the Census Bureau noted that services accounted for 32%, or $60.3 billion of total U.S. exports in August.  And unlike our huge “hard goods” trade deficit, in the value of U.S. service exports is 47% greater than that of imports, and growing.

Business, professional, and technical services are now the fourth largest U.S. export category, and represent close to 15% of global commercial service exports, making America hands-down the world’s dominant service exporter.

Of many, let me flag three main drivers:

1.    Purchasing Power Parity. Purchasing Power Parity (PPP) posits that with free-flowing markets wages and prices worldwide approach parity.

Protectionist types interpret this to mean that “our wages will get pushed down to “their” levels – or more viscerally, “if this keeps up we’ll all soon be making $2 dollars per hour.”

Well, let’s leave for now the huge economic fallacy of this thinking and concentrate on the fact that the narrowing of the relative wealth differential between the U.S. and the rest of the world has allowed for phenomena like a Ukranian manufacturing company hiring U.S. advisors to help them define strategic growth opportunities in Poland and Eastern Europe

Why? Because on a dollar-for-dollar (or better yet, hrvnia-to-zloty) basis, it was a better value for them to import services like these from the U.S. then to purchase them locally.

2.    U.S. Services are Increasingly Exportable. The drumbeat always goes on how “we here in the U.S. don’t “make anything.” Well, beyond the fact, that as I note in my “Made In China” post that very few Americans dream that their children will grow-up and work in a factory, we here in America “make” the most important stuff that has ever existed and we do it better than any society has ever done so.

That stuff? Ideas and Innovations. Strategies. Or more prosaically, Brands. Websites. Entertainments in all their wondrous forms – Movies, Video Games, Social Networks.

Even our favorite whipping boy industry – financial services – continues to bring us world-bettering innovations like Venture Philanthropy (i.e. applying market principles to solve the world’s humanitarian challenges), Super Angel Funds (overcoming the “outlier” or “Black Swan” conundrum of startup investing) and Crowdfunding (democratizing fund-raising and investing in ways never before even dreamed possible.)

3.    We are all Transparent. Perhaps my favorite, namely that business best practices worldwide are visible and replicable to and for all.  And the corollary, the really screwed-up and ineffective ways of doing things are totally transparent too.

From lists like the “Most Business Friendly” countries to California now having a portal where parents can see teacher’s ratings to the U.S. Senate studying Chinese Technocrats to the simple reality that the Internet makes it crystal-clear to all who is winning and losing in the world (see North Korea, Iran, etc.), transparency breeds competition which breeds innovation which breeds the cream rising.

And who, when it comes down to doing business right, is the richest cream, the sweetest soup?

It is, of course, U.S. startups and smaller and emerging companies.

And as they, like the U.S. economy as a whole, continue to become increasingly services-focused, the best of them will continue to profit handsomely from the world of selling opportunities growing all around them.

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Bill Billeaud says

Couldn't have said it better myself. The entire article is right on....
Posted at 11:44 am