Tip:
Highlight text to annotate it
X
Announcer Ladies and gentlemen, I would now like to introduce Irene Dorner, President and CEO of HSBC Bank, USA. Please take your seats [Applause] Irene Well, well good morning, I don't know what anybody else made of the previous panel but I thought it was absolutely storming and I expect that the smaller businesses that are gonna come on next are gonna do as good a job as the big guys. So Chairman Hochberg Fred, I am delighted to be here representing HSBC and participating in what I thought was going to be a small event. All I can say is Fred you got this right, what a fantastic turnout and I don't even mind that you stole my taxi story. So today I have great pleasure in introducing the small business panel and it's certainly a pleasure to meet you all this morning. By the end of the panel or at least by the end of the day, I can count you among HSBC customers are sitting next to Peter last night, unfortunately we lost him, I am on a mission now Peter we want you back. I think that you will find that small business is going to be the leader of the future. But before I turn over to the panel to give you their fantastic insights I am sure, I would like to share some perspective from the international banking sector on the outlook and opportunities that we see for small business in the global arena. And I just want to touch upon some of the global economy and the trade trends that we have been seeing and I would also like to give a few insights on how small business can take advantage of the global connectivity that exists in the world today and harness the international market place for the growth ahead. So some perspectives on the global economy and the trade trends. Well global connectivity and you heard it in the previous panel is actually part of HSBC's DNA because we currently operate in 87 countries with more than a 100 million customers. Our roots go back more than a 165 years and we started as a trade bank in Asia and we continue today to follow our customers around the world to focus on growth through global connectivity and whether that's here in the US or over in the international market, its all the same to us, its all about our customers. And what was said about financial engineering and real engineering absolutely dead right - we don't make anything, you do, we help you get there. So HSBC sees the best opportunities in today's global economy with businesses large and small that think internationally, that don't see the barriers and look to grow where the economies of the world are strong or rebuilding or developing. Now we recognize that the signals that come out of the market place today and all you have to do is open the newspaper certainly in the first quarter of this year. We recognize that there are mixed signals all over the place. We recognize that there are global economic and also political risks, challenges, opportunities all around the world and they are in the headlines every single day. But we believe strongly in global connectivity because we believe that that is the key to unlocking business opportunities. You can't hold it back, globalization is here, don't put up the barriers. It was always like this, it's just moving faster these days and the question is how do you get on board, how do you take advantages of it. Now we expect global growth to accelerate and that's primarily from the contributions of what we used to call emerging markets, but I think we should prefer to call them developing or growth markets, simply because they are there, they are on their way. And some of the points from our recent research at HSBC, I would just like to pull out one or two things to give you some examples. Developing markets would be growing 3 times faster than developed markets this year and by 2050 they will be contributing two thirds of global growth, two thirds. And also by 2050, 19 of the 30 countries by GDP, some of whom are at the conference today will be those we currently describe as emerging, developing, growth. They are more than emerging, they are on their way. And the south south trade flows that have all started to happen while nobody was watching between for example Brazil and China, they are gonna become more and more important. We at HSBC now have Chinese staff in Brazil and we have Brazilian staff in China. Why? Because that's what our customers need. We need to get used to these ideas that things are moving without us even being involved but we need to know where that movement is. And intraregional trade in Asia is now worth US $7.2 trillion, trillion and that is more than double the value of trade with North America and even I, a lowly banker, am judged by the amount of income and revenue that I can generate with my customers in the US but also I am measured on the amount income that those customers make for HSBC around the world because they are international. So what can a small business do? How can you take advantage of this? And actually, ladies and gentlemen I would like to phrase it more of a call to action for business. We believe that these trends and statistics represent a fantastic opportunity for all business. But especially the nimble which means probably smaller to take advantage of growing internationally. And our businesses tell us this too and the interesting title here about, 'Government At The Speed Of Business'. Since I have been here at the States working for HSBC, what I have discovered is that our customers get it and they got it a lot quicker than the government did and now we are in catch- up mode. In our HSBC trade confidence index which was published in September last year, the businesses surveyed said that the developing markets and in particular Latin America and China will provide strong future, trade opportunities for US businesses. It also showed which is even more interesting I think that among the nations that we surveyed Canada, China, Hong Kong, India and Mexico all included the US amongst the top 3 most promising regions for trade growth. So they have got it too. And when we turn our attention to the small businesses insights which we will do at the panel this morning, HSBC small business confidence monitor pointed out the top barriers which companies described, which put things in the way of them doing business internationally, and I don't think you are gonna be surprised, I certainly wasn't. Small business are worried about local regulations and the complexities of doing business overseas. They are worried about just certain markets being more difficult than others. They are worried about dealing in foreign currencies and although I would say these concerns are real and need to be broken down, they are only perceived barriers because if you are looking to grow and you are committed to grow, you will address these matters as you take a look at the opportunities that exist for you and your company. So what do you do, well ladies and gentlemen it's not rocket science, its about relationships and building them quickly. Our experience shows that if you are really committed to doing new business then you will learn about the market where you want to go. There isn't anything that's written down, there is no piece of economic research or market background piece of paper that is going to tell you everything you need to know to make informed leadership decision as to where to go to grow internationally. There is just no substitute for getting on a plane and going and having a look yourself, meet with your potential customers, meet with the regulators, meet the government, get a feel for the vibe on the ground, make the personal connections that will still make all the difference to your business. You came here today because you wanted to hear about it, if you wanted to expand from San Francisco into Massachusetts, you wouldn't ring up Massachusetts you would go and have a look. So if you want to go to Malaysia or India, you get on a plane and you go and take a look. But here is some of the best news because even though I do believe that this has to be self driven, you have to be your own champion and you have to get out there and see what these markets have to offer you but equally what you have to offer them, you don't have to go it alone. There are lots of peers in here today who you can speak to, we are gonna hear from them on the panel, you got strong partners around you and you could and should engage with those. It's clear that EXIM is totally committed to growing small business. HSBC is excited to be on board with that and to be part of EXIM's new global access program and to help small businesses build their exports and international growth plans and you can find key banking partners as well. As I mentioned in the beginning it's in HSBC's DNA to assist small and medium sized businesses to take advantage of the opportunities that overseas markets have got to offer. We are here to help you talk through your ideas. Never a month or a week goes by, I used to be the CEO of HSBC's operation in Malaysia. But a customer from Malaysia who now knows me and knows me well sometimes, sometimes its just an acquaintance, comes into New York and may come and see me. So why do they come and see, apart from the fact that I am very nice, why do they come and see me? They come sometimes just to talk because we did really make friends, but mainly they are coming to see me to keep their network going because the next time I speak to somebody I remember who was in my office last week and if an opportunity comes up I will make that connection on behalf of the Singaporean customer, a Malaysian customer and Indonesian customer, whoever. That is what networking is about and if I was to offer one piece of advice it is I have never given out so many business cards as when I worked in Asia and this is a percentage game and incidentally if you are in Asia, its two hands, its very respectful and make sure its facing the right way. Even if without your glasses you can't read what you are being given, its got to look right. So I have come here today and I find that I am giving out more business cards than people are giving me. You need to leave a piece of yourself behind, you need to make sure that everybody knows that you were there. These are the small things that you need to think about when you are out, it is a percentage game, there are a lot of people out there, you need to be remembered and then you need to work at it. So this is kind of a call to action, you need to get out there, you need to get the information, you need to make the contact and then you need to keep that network going. But please remember that there are people out there to help, there are people who will connect with you - EXIM bank, ourselves, other banks, business partners, you can actually make it and you can actually do an awful lot before you even get out there in reading what's available in terms of packages and help. So consider this to be a call to action, small business get out there, show us what you can do and then you will be on the panel next year explaining why you are now no longer a small business that you have actually grown into something quite special and quite big. And now with that I am looking forward to the panel's discussion today, which is going to be moderated by Mike Hofman of Inc Magazine. Mike's been with the magazine for 15 years of award winning business journalism and currently serves as the editor of Inc.com and deputy editor of the magazine. So Mike its over to you. Thank you very much [Applause] [casual chatting and laughter] Mike I am the only guy in the room who is not looking for finding outside but [laughing] we are a land of credit but thank you. So, on behalf of everyone at Inc, I am delighted to be here today and we are really excited about this panel. As Irene mentioned I have been with Inc and writing for the magazine for 15 years. And when I joined Inc in 1996, I have to say the exporting was not a topic that was top of mind. Small businesses did not export at high levels, the thought was that the US market was so large that all your opportunity was here. And there has really been a change over the past 15 years in terms of the excitement and the enthusiasm amongst small businesses and really we need to be global very quickly. When you think of a company like Twitter, obviously they probably were a global business that we see in terms of their user base, you know on day one or day two. And so its really been an interesting sea change for us journalists to cover. Now I am very excited about this panel and let me call up my co-panelists to join me. They include Howard Dahl who is the President of the Amity Technology, Peter Baranay who is the President of ABRO Industries and John Baumstark who is the Chairman and CEO of Suniva. And I will introduce them to you as we get ourselves up here. [Applause] So Howard we will start with you now. Amity Technology is a farm harvesting and equipment business and you are based in Fargo, North Dakota, why don't you tell us in just a few sentences what the business does, you are a manufacturer and give us a little bit of sense about what percentage of your business is exported? Howard Dahl Well you would know the company that my grandfather started and perhaps some of you own a Bobcat loader And in my home town of 200 people there is still over $2 billion Bobcats being built everyday. There are now 900 people in the town. Our family's been in the equipment business for three generations, we are the world leader in sugar beet harvesting, a niche product and we do planting, seeding and tillage equipment, and so agriculture machinery. And about 50% of our business is export in the aggregate over the last 8 years. Mike And these are big pieces of equipment right? Howard Very big. We make 60 foot wide seeding machines and sugar beet harvesters that harvest 20 tons in 4 minutes. Mike And what country do you [voice fading off]? Howard Russia, Ukraine, Kazakhstan, Romania, Australia, China are the major markets but a few other markets that we sell individual pieces. Mike I know your business is private but can you share with us in the sense of the size of the business and number of employees? Howard A little over a hundred million of sales and a little less than 300 employees Mike And what about your growth rate? Howard Apart from 2008 when it was flat, its been a very steady probably 30% per year growth Mike Oh great Howard And we are looking at a very significant growth this coming year Mike And John your business is based in North Cross, Georgia and you are a manufacturer of solar technology? John Baumstark Yes that's right Mike And so can you tell in a few sentences, what part of your business is export driven and can you give us a little bit of background? John Sure, Yes Suniva is a solar cell and module manufacturing company based outside of Atlanta, Georgia. The difference from Suniva with other companies is we get better power density at the right price point than our competition does. So more power in the same area, its really a great US story, we spun out of Georgia tech's University Center of Excellence for photo voltaics which is a DOE funded center. So the Department of Energy actually helped to create this center and continues to fund it today so the technology that we based the company on came out of this center. We manufacture, in Atlanta we created about 200 jobs over the last two and a half to three years and about 75% of our business in 2010 was export. Mike How old is the business? John About three and a half years old. Mike So you are sort of a start up that's gone very rapidly to, you know, several hundred jobs it sounds like John That's right Mike And primarily export driven John Yeah, yes Mike What markets are you big in? John China has been a big market for us, India has been a big market, Europe, some in South America as well and Canada is starting to grow now for us as well. Mike I feel like Oprah [laughing] Mike So give me a sense of, in terms of I know you are a private company as well, but can you give us the size of the company in terms of revenue? John Yeah my CFO will be cringing when I throw numbers out, but we did an excess of a hundred million in revenue last year Mike So in 3 years an excess of a hundred million and 75% as exporter, Oh that's really quite amazing and finally Peter Baranay is the President of ABRO Industries, now you are based in South Bend, Indiana, is that correct? Peter Baranay We are. Mike And your business does branded products, automotive, industrial consumer products, right I think, what percent of your business is export driven? Peter Actually we do a 100% of our business is international. We sell nothing in the United States and further more we have always concentrated on what is politely referred to as the developing world. Everybody wants to go to Paris, Rome and London, not a lot of people want to get on the plane and go into parts of Africa, Middle East and Central and South America. We will do business for sure in 185 different countries and again a hundred percent of it is international. Mike And this is for all of you, we can start with Howard. Can you just talk about when you first decided to become an exporter, I mean is this something that you saw as a business imperative or was it driven by you personal interest as CEO? Howard I have to confess I got a taste of it in the early 60s when the Bobcat was going international and actually doing some joint ventures in Italy and England and so I would host people, take them out pheasant hunting and so I got a view of the world even though my world was very provincial. But the significant exporting for us really began with my first trip and a first business when it was still the former Soviet Union and we saw the very large farms and we were the leader in what was called, "no till air seeding technology in North America" and I saw the size of the farms in Russia and I said, "Someday that's going to be a great market and so it was a strategic move and that was really the key to opening the doors for us and that began in early 92 and so I had now made.. tomorrow I will make my 62nd trip into Russia. Mike Wow. And what about you, sounds like it was part of a strategy right the get go John Yean it was. The renewable energy market was much bigger overseas than it was in the US in 2007. So for us it really was a business mandate that if we were gonna grow substantially, not knowing the size of where the US market would go, we needed to go international. So our first sales were international. Mike And where did you start? John India was actually our first market that we entered into as we looked at the market place, Germany at the time was the largest solar market and as a very small start up company we could have been probably the 50th may be 100th largest solar company in Germany so we chose not to go to Germany and do battle with the much larger competitors and as we evaluated market places we looked at India and felt very strong about India regardless of government policy, you had a huge need for energy and we believed in India in the long run so India was the first market that we went after and think it was a smart decision in the long run. Mike And Peter for you, was it driven by your interest in exporting? Was it driven by business imperative? Peter Actually we trace, so the company roots go back to 1939 when our founder put out a shingle, those days you didn't have the internet, I am not quite sure how he did it and he opened up with a translation service. And as he started to translate letters from American companies they said, "Hey Bob, that's a great letter from Mexico but you know they want to buy our machine tools, you know they want to buy our generators, what do we do?" and he was an entrepreneur and he said, "Hey, I will help you out." And you talk about being gutsy, he incorporated his business and left Shoebaker Corporation in 1944 to concentrate on international trade. The world is at war, ladies and gentlemen and he starts a business in international trade. He's got nothing on any of us frankly as far as I am concerned. So its in our DNA, as Irene said from HSBC its all we have ever done and we go out there and get on the airplane and develop our markets Mike I think its interesting that you say its in your DNA because I wonder, is there... What do you, as a manager have to overcome in terms of internal concerns or opposition about doing business overseas, if anything? Howard The leader of the company has to say this is important and have to bring people along and some of the most painful things that I heard was in our assembly, people said, "We don't have to do as well for this because this is going to Russia." And may be 20 years ago expectations were a lot lower, but today we demand and require the same quality everywhere, the same attitude and so I think most of our people understand how important every single customer any where in the world is and the attitude that you can do it. it involves translation of a lot of manuals and I have to say couple of our larger competitors, major corporations in our space didn't have their equipment designed to fit in a 40 foot container. And if our engineers work on a product and it doesn't fit in a container, I tell them to rip up the drawings, start again everything we do is got to be done at up front so that it will fit in a container and so its priority. And so it takes that attitude throughout the company. Mike What about you John? John I think for us having started internationally, its definitely in our DNA and we continue, we like emerging markets, markets where renewable energy hasn't been heavily penetrated. We like to be early in the market get the relationships, get a foothold before others so we are always thinking and looking at new market places where we can expand. Mike As you are assembling a management team, I am curious what did you look for in terms of people who would have that you know sort of export DNA in them? John Ah well like a lot of smaller companies, as you are starting a business you go to those that you worked with before. So about half of my management team are people who have been with me in 4 prior companies and we have exported in those businesses as well and had good success in those. So, much easier to move quickly with those people that you know can execute and will be successful. And then beyond that we have hired people that have international and global experience to complement the team. Mike And Peter you mentioned you are hiring you know people who have global experiences as well, how do you know that? Have you got them in South Bend? Peter Actually we don't. We actually look for people who have creativity, that are good with people that are not of their same nationality, they can communicate in what we refer to in the organization as foreigner's English, the ability to speak to someone patiently because you are at a disadvantage because you do not speak their language. When you do business in 185 different countries even though we have lots of language skills on staff, we are not gonna be able to speak all those languages. And we want somebody who is not afraid to get on a plane and cold call the Ivory Coast for example. As we move into.. we are not going there today, ok laughing] Peter But we have been, we were there. But we looked for people who are creative and understand that it is a global market place and you cannot just think South Bend, Indiana, United States of America. Mike How much time do you spend.. how much of your personal time is spent on traveling visiting these markets? Howard I average 4 trips overseas a year and typical trip will be 10-11 days. Now this trip I have got, there is lot of complexity to juggle as I am going to spend one day in Dagestan which is, I have had 4 people send me emails don't go to Dagestan and so some of the terrorists in Russia come out of Dagestan, so it's a culture that's very interesting. So I will be there for 24 hours so those of you who believe in prayer you can [laughing], we have put up Mike And John about you, you have just returned from a trip to Europe? John Yeah just flew in from Europe last night, I think at about a 100,000 miles so far year to date. So I am spending 50 - 60 percent of my time internationally, really trying to spend time in front of customers Mike And Peter? Peter I am traveling less today than I did 30 years ago when I joined the organization but still about 4 major trips every year. We also do a large trade show every year in Germany. We do it in Germany because its easier for our African and Middle Eastern customers to get visas to visit Germany unlike the US trade shows where visas an enormous challenge. So ironically we have to export ourselves to Europe to be able to meet with our customers and when we get them all together, they get really excited as a group like this, you feed off the people that are with you and we like get our distributors together. We would like to do this in the United States, but we had to start to do it overseas Mike So what are the challenges, I mean you know well exporting obviously is a great opportunity, but there must be some difficulties and headaches to it. What do you guys find really difficult? Howard Well, lots of stuff. At present couple of key customers, couple of their key managers getting money from some of our competitors and Mike And that is taking bribes Howard Yes [laughing], its settled. So we... when you try to run a squeaky clean business you are gonna lose some business and lot of countries don't have the same culture, the same attitude that's an issue. And in our case the more equipment we have, now we have.. The Wall Street Journal last week cover story featured 5 Russian companies that are all revenues of 500 million and above farming operations and 4 of the 5 are our customers. Each has 60 plus sugar beet harvesters and to give the same service there that we do here, its very very difficult and so our greatest challenge is to service the product that we have there. We have about 7 service engineers on the ground but its probably not enough and so constantly trying to match our customers expectations with our performance Mike Are these expats or they US port engineers? Howard One is an American all the rest are Russians Mike And John tell me about you, what are the challenges that you are facing? John Yeah I think I agree with a lot of those points. Its .. we have grown very fast and in some cases I think in markets we have probably got a little ahead of ourselves and its having the people in region, even though we have distributors like any business or any distribution relationship, you have to have people working closely with the distributors to ultimately make sure that your customers are successful. So for us its hiring and making sure we have people on the ground that are supporting the distributors, making sure that the business practices are followed like we need here in the US, that's probably one of the biggest challenge Mike So Howard's had some of those issues in the international markets, [indiscernible] John I think as you.. throughout Asia and throughout other markets in Asia, its understanding the business practices and understanding how you can support those and how you can make sure that the way you need to do business is enforced Mike And you are looking for people that has some level of expertise, you go by region or how do you go about building up that in-house expertise? John Yeah absolutely looking for people in region with experience, we also look for advisors, through a board of advisors. We have a great investor group NEA Warner Goldman Sachs. They all have people in region, they have been incredibly helpful and sometimes we probably don't ask enough but when we reach out we always get very good in-country help Peter The truth is, I never make anything. I am a private label and buy from American manufacturers. We put our label on it and we are virtual reality manufacture and market it overseas and I finance my distributors. And our biggest challenge has always been finding the financing to be able to extend the 120, 180 day terms to my distributors, committed group with Abro brand and distributors and be able to pay domestic terms. Most manufacturers in the United States are not gonna extend those kind of terms to me so I have got a little bit of a shortfall. Didn't have a lot of working capital, I had to turn to financial institutions and because of that 10 years ago we began to work with the Export Import bank. They look at our customers, they had the guarantee, started with a single buyer policy for our Nigerian customer who is here today. We have grown to multi buyer policy and used the EXIM working capital guarantee and with that guarantee from the Export Import Bank, my financing becomes a heck of a lot easier. I paid the bank a fee but within the ten years that I have done business with the Export Import Bank they never have a loss, they never have to pay me and worry about collection. Over those years an aggregate that's probably about $500 million worth of total sales, we have paid a lot of fees to the Export Import Bank, happily paid, happily [laughing] Peter The zero corporate tax with over the [laughing] Peter But that's been our greatest challenge and we have been able to meet it because of the skills of people here at the Export Import Bank Mike John, what about you, you mentioned you had a significant outside investment in your company, but what about your access to capital? John Yeah, I agree there. Working capital has been an issue for us. We make some of our product in the US and some of it is assembled in Asia as well and the product is heavy and moves by boat and we tie up a lot of working capital and Export Import Bank has been fabulous at working with us to help us finance some of those receivables and its helped us add jobs, its helped us expand manufacturing, they have also worked with our customers to finance projects which gives our products a competitive advantage when you are looking at a competitor product that's made somewhere else in the world. They may have India for example very high interest rates and the Export Import Bank interest rate is much more attractive. So the customer overall looks at our product versus a product manufactured somewhere else, looks at the total project and the financing that EXIM can bring and it gives our product a huge competitive advantage. So its actually part of our go to market strategy is to introduce Export Import Bank into it and they have been a fabulous partner Mike [indiscernible] John Depends on market, by market and what tariffs are paid by the government, what the level of support is for solar products, but historically European margins have been better than in the US Mike What about you, do you think Europe is better or is it US? Peter I have never sold in the US. Do you guys make any money? [laughing] Peter But we work on an enormously skinny margin, isn't that right Josiah. But we make a small margin, we make it up on bond as the saying goes. We will do about a $180 million this year, we have 22 people and we support a lot of American jobs, we have lot of people making stuff for us, but the reality is South Bend, Indiana we got 22 people. 25 years ago South Bend, Indiana we did about $7 million worth of sales with 16 people. So do you want to scale up, that's not bad, we're kind of excited about that. Mike (inaudible) per employees, is it pretty large? Peter Our revenue for employees is very high and what follows from that is our gross profit per employees is very high, our fee that we paid EXIM bank per employees is very high [laughing] Peter Taxes for employee is very high, do you want me to go on? Mike Think you also talk about zero corporate tax benefits Peter I have zero corporate tax benefits Mike Howard where would that leave access to capital? Howard We have done 3 straight years now,$10 million line of credit without a bank guarantee to publicly traded agri business company in Ukraine and its been wonderful for them, about half the equipments been ours, half other American companies and its worked out great for them. And so all the EXIM work we have done has been medium term. We partnered through other companies in Turkmenistan and Azerbaijan in the past but out of the 4 leading Russian sugar beet companies that are all these huge agri business holdings 3 of them have used EXIM financing with our equipments. So its been primarily the medium term financing for us and its been very very helpful Mike What's your typical bill size? Howard The largest to one customer probably would be 10 million of equipment, but I would say our average sale we write with somebody would be 2-3 million Mike And what's a typical sales side, when do you get the sale? Howard It's a seasonal business here, either planting or harvesting and so you basically try to get the sale soon enough to get it built and get the parts ordered and so its basically 6 months cycle. We try to get orders 6 months before shipping and its not easy to do Mike And then do you have sales forces devoted to those markets or how does that work? Howard We do, we do. The relationships with the owners of these large agri holdings are the people I personally have to see and now they expect to see me and so, but I have another team of people that are full time managing relationships at other levels in those businesses. Mike And Peter how are your sales forces? Peter I have 6 individuals in the United States that work directly with our distributors. For example our Nigerian distributor is here, [name not clear] motors they have close to 250 people dedicated to the sale of ABRO products in market. They have 7 warehouses throughout Nigeria, they have trucks, they have distribution as I said, they have got sales people. So as you can see we are selling him a significant quantity, he is then going into market place and delivering 5 cases, 10 cases or even 3 pieces of our product. And unlike Howard and John, my products are consumable and repetitive, we sell masking tape, we sell super glue, we sell automotive or spray paint, we sell waxes and polishes, the kind of products that are used, consumed and repurchased. So in that respect, we are the blade of the razor and blade approach Mike John what about you, what's your typical sales cycle here in the US, how many sales did you have abroad? John Sales cycles depends by project. We have some of the smaller projects, if they are approved, permitted can be very quick like it be a customer calling and wanting product within 30 - 45 days. There is other projects where you are working through government approvals and they might be over a 12 month period. So really just depends, size will vary, half a million US to tens of millions of US, some of the contracts we do will be multi year as well, so you get very large contracts over couple of year period of time. Sales force we have is actually pretty lean, we have about 5 sales people that are full time and then I would put our senior management in the sales force as well. We all spend time with customers and I am sure like these guys, the customers want to see the senior management that's behind the company and they want to know that you are committed. Mike How many people would you [inaudible] John In terms of seeing customers, everyone of our senior managers, our CFO spends lot of time with customers all the way down our Chief marketing officer obviously all kind of products Mike [question inaudible] John Yeah about 10 people Mike Ok. And so Howard, may you had some [inaudible] particularly early on as an exporter, can you talk about that, would you share that with us you know what happened and how did you sort of [inaudible]? Howard If anybody was doing business in Russia 1998 when the Ruble crashed, and had credit out there you know what a dark day is when overnight you seen 80% change in the value of or the ability of your customer to pay what they owe you and.. I am a risk taker and so I had been giving some credit, the early days of complexity was doing barter deals and so you would take train load of rapeseed, take it to crushing and you give them a machine for that, so and in the early 90s before any company had a balance sheet and an income statement and they didn't even know what it was, it was, you either did a government deal or some sort of barter deal. And knowing what I know now, I could have been very wealthy if I understood that the nature of that barter arranged, I turned down some deals that were really too good to be true but. In Soviet Mike What was the best one? Howard Well you know that Mike, 30,000 polar fox pelts I have no idea what I do 30,000 polar fox pelts and I found out later what they were worth and it would have been chance to make about $6 million on a transaction but I was young and I didn't even know what I was gonna do with it [laughing]. But the rapid currency changes were the wild thing for those of you who traveled in Russia in the early 90s and when the ruble went from 1 to 1 to 30 to 1 and to 120 to 1 in just 12 months and it was just total chaos and so you buy a plane ticket out to Siberia if you are Russina for $4 and sugar was costing at the world market price. So it was just.. any country going through transition like that you have to step back and try to better understand and I expect some people working in the Middle East right now, you know some of the difficult transitions. You just have to keep your eyes focused and ask the big question as to what you should be doing Mike Yeah Peter did in 180 ... you must be lot of chaos and conflict and some difficulties, you know. What are some of the most formidable moments that you have heard? Peter Just in the last couple of months, let me bring up Egypt, Libya. We have two very dynamic distributors in those two countries and we were in constant communication with both of them and both of them said, "Ah its not as bad as you see it on TV, just ship." [laughing] Peter Ok Mike [inaudible] Peter We do, thank you Fred very much, we have continued to ship to our Libyan distributor and he is paying us, he is in Ben Ghazi by the way, he is not in Tripoli. So he's been in Ben Ghazi so I think he is gonna be fine. But we knew if we stop shipping, here is the guy when we started working with him about 10 years ago, did a lot of other things and over the 10 years like many of our distributors began to dedicate his business to our business. He became exclusively an ABRO distributor, his livelihood depended on our products. If we had failed to ship him we would have essentially have put him out of business. And I didn't want to do that, so we have continued to ship to him. Same thing with our guy in Egypt, now the Egyptian market is stabilized, the banks have reopened, money is coming in on a regular basis, so we have done the right thing. But I have been whipside by currency transactions as well. its been an interesting run, to say the least Mike And John I know that your company is relatively new but have you had [inaudible] John Well when we were raising some capital early in the formation of the company, I was in New York raising capital and had sort of walk out on the street because the cameras were there when Leiman shut down. So that was we were saying, "This is gonna be fun raising money in this period." When we launched our product, was right in the heart of the financial crisis so we had a huge booming renewable energy market that sort of put the brakes on and came to a screeching halt. And fortunately our product was differentiated so we had even though we were the newest supplier to many people, they wanted our product because they could make more money on our projects with us. So fortunately we were differentiated and actually did well and were able to grow and achieve our business plan during that time but. Yeah in about three and a half years we have seen lots of up and downs. Currently we don't do any business in the Middle East so we haven't, that has not been an issue for us but the Middle East certainly should be a good market for us over time. Mike Yeah being in space like solar reverse spot activity invention, do you worry about intellectual property and you know, what comes with that in the market? John Well one of our key philosophies as a business, we believe in American innovation so we spun out of the US out of Georgia Tech, out of the center of excellence there. Our research is all done in Georgia so we feel good about protecting our intellectual property there and we export overseas. We do have some factories overseas that do contract work for us but the nature of our product is very hard to reverse engineer so when you see a solar cell or a solar module, very hard to figure out because there is recipes and temperature and time and those sorts of things so we are always concerned about intellectual property but based on how we innovate and the new products that we develop we feel very good about the US innovation and manufacturing supplemented by some other regions as well. Mike Howard, do you have anything to say about intellectual property... [inaudible]? Howard We have had a number of Russian copycats and over the years and none of them have been able to copy really well and so they have all failed but probably 5 or 6 times, people started. And we have one product that is being replicated in some sales but generally you have patents that are issued and then you have all the details of every single material strength and dimension and tolerances and when you get a complex enough product with let's say 3000 different parts its hard to copy it exactly but we nevertheless are concerned. But I would like to, John said earlier about adding value to a customer, I think one of the greatnesses that has in the.. previous panel said it well.. that greatness of South America has been innovation when we have done it really really well. And that attitude of constantly innovating, doing things better but knowing it has to add value tangible value to the customer and if you can't do that, its hard to sell here much less trying to go into a new market. So I think that that's something that we all as leaders have to be always cognizant of, am I adding tangible value to my customer? And does the customer really see that? Mike Is your competitions in those markets other US firms, other exporters from rest of the world or home grown industry? Howard In the sugar beet equipment, its strictly European competitors, on our planting and tillage its European and American. A few home grown companies that are starting to get much better, each year they are getting better at what they do Mike John, what does your competition look like overseas? John We have most of our competition is overseas, there is a few US companies but not many are manufacturing in the US. We see a lot in China in fact about 70 or 80% of the world's solar cells will be manufactured in China this year. So we see most of our competition in Asia Mike What about you Peter, what competition do you see? Peter We see home grown manufacturers that are competing against us but in the intellectual property stand point, one of the most interesting things that happened to us about 10 years ago is that a Chinese company popped up at a trade show and China put up Abro industries and had duplicates, absolute counterfeits of every one of our products and they represented themselves as the low cost alternative and it was a straight out counterfeit. And it took us a number of years to shut them down, we got great support from the Chinese government. This fellow just was too egregious and ultimately his hubris brought him down. Again ours is not very technical, we don't have a lot of, you know, solar panels hey they are sexy, sugar beets they are sexy too, masking tape you got to be kidding me [laughing] Peter Alright, come on guys masking tape, you make a living selling that stuff. But we have a name, if you go into the Middle East today, you go into Pakistan, India and ask for roll of masking tape from the equivalent of a Home Depot or Lowes, they will look at you kind of like a, "you are looking for what", you go and ask for a roll of Abro [clapping] you got it guys, you got the delivery of masking tape, that's what you need. We are the Cleanex and Xerox machine of masking tape and a couple of other products as well Mike How did that brand position come about? How did you cultivate brands not in the US but elsewhere in the world when somebody thought it's a wrong time? Peter Patience, support of our distributors, we support their advertising, I'll probably be told we don't support our advertisers enough. Our distributors enough we have done it, we are competitively priced and we do good service, it's a good product, its fundamentally a good product. And you ask yourself, "How much masking tape could I possibly sell," you take an average roll of masking tape, start on winding it, walk around the equator, you are gonna around the equator 91 times last year alone. And you are gonna pass through 9 countries all of which buy Abro tape. So you just got to be persistent. Like in 5 years somebody in this room is gonna be able to tell their story of how with EXIM bank support, they have exploded their export sales even though they didn't think they would do it. You can do it. I mean there are great opportunities, the world still looks at American innovation and American products and they respect it. And there are products that you can sell overseas. Look if I can sell masking tape and car wax and car polish, super glue, by God you can sell solar panels and beet machinery as well Mike [inaudible] Peter Yeah [laughing] Mike So do you think that quality is actually a competitive edge for your exports? Peter Oh Absolutely. You know if you are gonna repair your car and take off the head gasket, and I apologize to anybody in the room that makes that gaskets, you take off that head gasket you know you are in the middle of Africa, I guarantee there is not a pep boys where you can buy a new head gasket. So you pull out the tube of Abro gasket maker, it looks like toothpaste, you put it onto head gasket and you squeeze it down and all of a sudden you have a new gasket. Quality is important. What killed the Chinese counterfeits is that people could tell that it was not the kind of quality that we had it. It would shrink, it would harden, it was.. the head gasket, voila and we are not talking about very expensive item. We sell it for a little more than a buck or two, and you are making a repair of an engine that, my goodness, if it's a Caterpillar engine it could be worth of thousands of dollars. So yes quality is enormously important. Howard I think John and I are gonna want to trademark the Abro name and put it on our product [laughing] Peter Well we have done that, we hold 1400 trademarks around the world and in over 160 countries. So we have been pretty methodical about trademark and our Abro name and lots of different classes. I don't have a solar panel Abro and I don't have a beet machinery Abro, but I may next week [laughing] John I think it's a logical extension. Your distributor should be selling solar in those.. Mike You mentioned trademarks, I am curious were you guys spend in legal fees Howard We spend an excess of 200,000 a year on patent, international patent fees because a number of things that were doing, and we do protect in China and most major countries so we do spend a lot on legal fees. Mike And John? John Same, we do spend a lot on patents, intellectual properties is very important to us and we file in multiple countries, US and China and other places around the world and then on the trade agreements that we are doing, we have international lawyers involved as well, so lawyers like us Mike Yeah and then Peter what do you spend typically and how many of these are exclusive? Peter in the last 5 years we spent an average over a million dollars a year in trademark protection, undercover agents, ironically spending money to buy my own counterfeit products, how smart is that [laughing] Peter But indeed that sets the case for legal action. We have had enormous success in countries, we stopped counting but when we put collectively people in jail for over 5000 days, we thought we didn't need to count any more. So indeed you do go to jail, you counterfeit Abro products Pakistan, India, Saudi Arabia, China, you do go to jail and I don't go to a lot of those countries any more for obvious reasons [laughing] Peter But it is all we have and we protect it. We protect the name we protect the brand and obviously we are also protecting our distributor and that's important Mike is your strategy to sell more masking tape now or the products that you already have or is it to develop new products and use that in the market so as to look at particular market for that business? Peter Lot of it is driven by our distributors, we are very loyal to our distributors, most of them are exclusive to their country, we work with them on trading new Abro products. When we started out 25 years ago, we led with masking tape and body filler and automotive thinner. Those were the 3 products, Nigeria was our single most important market back in 1985, fast forward 25 years we are doing over 600 different items. Nigeria remains our number one market. And they are buying all of those products in Nigeria as well. I am not sure what we are gonna have next year, but I know that the creativity of my distributors around the world and the creativity of my staff, they will come up with new Abro products. We refer to it as "Abronization" [laughing] Mike And John for you let's hear it from [inaudible] strategy, keep in what you are doing, right? John Yeah, well keep in what you are doing and continue to expand. There are some new markets that we are pretty excited about. The Department of commerce has actually been very helpful in making introduction in some new markets for us. So looking at new markets, with assistance getting to know people on the ground, meeting partners and then we will decide which market we will enter Mike How about your product line? John Product line its pretty simple. We sell two products - we sell solar cells and then people will buy our solar cells and create their own solar module so they can get better power density. And we sell our own solar modules as well. So those are the two product that we sell, there is different power classes of those but its really two products that we sell Mike The do you anticipate to add into that in the short term or is it just distributing what you have into more markets? John Yeah we are back to the innovation, we are constantly innovating we just introduced a new product so we'll ramp up we are manufacturing. Late this year early next year we have got another product so our goal is to continue to drive the price down of the product, the manufacturing cost and to take power up so continuing to innovate and we have to come down the cost curve as energy prices get closer and closer for solar to energy costs in various markets. Solar is already at grid parity in many markets and moving to other markets as our prices come down Mike And Howard, for you what's your company's best strategy going forward? Howard The word innovation is precisely it and I think the data point that's absolutely fascinating in 1830, it took 300 labor hours to produce a 100 bushels of wheat on 5 acres of land. What was produced by a farmer in 1830, it would take 450 farmers in 1830 to do what our most efficient farmers do today. So basically 45 minutes now and so when you have a 60 foot wide seeding tool that will go into a previous crop residue, you eliminate tillage and you can seed at 10 miles an hour and you can seed 70 acres in an hour. You know you are giving the productivity that's quite remarkable and so we are constantly trying to improve what we do and again, our customer says, "This has made a difference, I am more profitable because of what you have done," and so we listen to customers and what they want very closely and try to respond accordingly Mike And we obviously have in addition to entrepreneurs and focus on finance, we have policy makers in the room. I am curious if each of you could have a wish list for, on behalf of exporters that the government could fulfill put on that list, you know. We start with you Peter I am not so humble as ... [laughing] Peter Just keep doing what they are doing, I mean in many respects the Export Import Bank has been extraordinary. When we started working with the Export Import Bank in 2002, we were doing about $57 million dollar worth of export sales. We calculate that if we had not partnered up with Export Import Bank by today we would be about $85 million instead we are $180 million. We have created about 500 American jobs, good paying manufacturing jobs that are here today and here tomorrow because our products are repetitive and consumable. To me the best projection to the future is what happened in the past, if we continue to do that and partner with Export Import Bank they add new programs we are gonna continue moving forward. I think it's a little above my pay grade to ask for zero corporate tax rates and other policies like we have grown throughout the greatest recession that my generation has seen, perhaps many generation have seen because of the export market place and for that we feel blessed. At the end of the day if the government could get out of the way, that would be helpful [laughing] Mike John, What would you put on the wish list? John I would increase Fred's budget because Fred can do a lot more and the EXIM team can do a lot more with more budget and some of the countries that we compete against everyday have larger budgets than what EXIM has here so I would like to see the budget getting increased so we can support more exports and I think more US companies can take advantage and ultimately drive employment here in the United States Mike And Howard, how would you like to reform? Howard Let's say the same with John, a lot of our European competitors have tremendous flexibility in their financing and I won't go into which countries but some countries would finance our product totally on their export credit. But I think, for us, if we had done transfer pricing and set up an offshore company and done transfer pricing we would have saved a lot of money over the years. We have used the IC disk which basically taxes 50% of our profits to the dividend rate and that's been very helpful but there was a proposal a little over a year ago to get rid of the IC disk. And if that had happened I would definitely say we would have set up a company and done transfer pricing and shift offshore. So I think the policy makers need to think through what can we do to really assist? If the goal is to develop exports we need to make sure what we are doing is not going in the opposite direction so that would be my idea Mike The previous panel obviously featured CEOs from some of the largest companies globally, this panel obviously features entrepreneurs. You know I am curious that sort of our final thoughts in summation for each of you, how is export different from entrepreneur and why do you do it? Howard An entrepreneur by definition is a risk taker and so I think you have to have that and the DNA has been described and you ideally should have a vision and you understand. I have already spent all the money in our case, on engineering and if I don't have to reengineer but just can sell more of the same elsewhere it lowers my percentage of cost for engineering and all other things so it's a huge win and in North Dakota, we have seen tiny companies $4 million companies double their sales by exporting and in our case we have assisted about 10 of them who had no representation in some of the markets and we said, "We will introduce you and we will help you get started." So we have taken 5 companies that do potato storage, potato equipment of various sizes, put bundled them together and we have got some very significant orders for them and every small company that has a worthwhile product that adds value, can exports and I think part of the doubling the export in the country is finding lots and lots of small companies that have great products. They just have to have somebody hold their hand and show them how they can take it to another place. Mike And the John for you how is exporting different from [inaudible] John I think we have to be very scrappy and very creative and really show our customers how we can add value, how we can differentiate from a service standpoint, be very creative, innovative. We don't have all of the infrastructure and support systems that the larger companies do so, no sleep helps [laughing] John Sleeping with your Blackberry under your pillow also you can be responsive but, seriously I think risk is the big thing. We are taking risk everyday and we are making decisions that some of them especially in the early days when we bet on India, that was do or die for us and failure was not an option and if that market didn't work I wouldn't be here today so you have to assess markets, assess your customers, your product in that market and then make a decision and you know in our team failure is not an option. If we choose to do something we will succeed and everybody has that mindset and nobody goes in thinking that we will fail and fortunately we don't and we execute and make the customer successful. Mike And Peter your final thoughts how is exporting different for companies such as yours? Peter Well its essential. Its all we do but when you think back at my founder that started the business in 1944 with a world at war, people would think that he was crazy. He may be a risk taker, I made me a risk taker, Howard and John are risk takers, but we are not reckless. We utilize the services of Export Import Bank to guarantee those receivables but we are not using Export Import Bank as a collection agency. We are not basically laying off our lousy uncollectible receivables on EXIM, that's not a winning game. And as these markets get more mature and they are more creative on a way they are able to grow the business, it helps us, it helps American jobs, it helps American manufacturers. I don't agree with President Obama on lots of things, but I do agree on the goal of doubling exports in 5 years and if we are able to do that I am convinced we will be able to do that as an organization. We will be $300+ million business by 2015 and we will add into the 500 jobs that we created over the last 7 years, we will add another 750 American jobs. That's 1250 people paying social security, 1250 paying medicare and closer to getting social security and medicare, that's an important thing for me [laughing] Peter I want more people working in America, creating wealth for themselves and frankly paying my social security and my medicare because I have spent the last 40 years paying it for my parents generation and indeed we are gonna have those jobs in America to do that. And that means taking risk but again not reckless Mike Great. Howard Dahl, President, Amity Technology, John Baumstark, Chairman and CEO, Suniva, Peter Baranay, President, ABRO Industries, thank you so much for this panel today [Applause]