Why Export? Six great reasons, the last two are surprising…here is the second surprise!

HIGHER VALUATION

By selling into multiple economies exporters reduce their market risk. With lower market risk and stronger margins they tend to enjoy higher valuation multiples.


EXAMPLE:

Consider two similar companies with identical revenues, however, one exports while the other doesn’t. The exporter enjoys higher margins that yield a higher EBITDA. When the higher multiple is applied to the higher EBITDA, then the relative valuation of the company goes up significantly, by 50% in our example.  For the same revenue sized company, the exporter is much more valuable.

Why Export? Six great reasons, the last two are surprising…here is the fifth of the six and the first surprise!

EXPORTING SPURS INNOVATION

Many companies become more competitive after they begin

exporting.  Within two years of exporting, companies file seven times the number of patents and deliver four times the number of new products as compared to peers who do not export. As employees travel, they are exposed to more new knowledge, which the employees then turn into new ideas and products

Source: Salomon, R. M. and Shaver, J. M. (2005), Learning by Exporting: New Insights from Examining Firm Innovation. Journal of Economics & Management Strategy, 14: 431–460. 

Why Export? Six great reasons, the last two are surprising…here is the fourth of the six.

STRONGER LABOR POOL

In addition to higher revenues per employee, exporters also tend to enjoy higher margins on exported goods. This  allows exporters to pay their workers better than non-exporters, which, in turn, enables them to hire from a stronger labor pool.