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Sterling Firm Exports To Nigeria And Beyond

6/20/2007 - Sterling, VA
Sterling Firm Exports To Nigeria And Beyond

By Megan Kuhn from Leesburg Today

The international transaction between a Sterling and Nigerian company began with an e-mail inquiry.

Kayode Thomas, the Nigeria- and UK-based CEO and managing director of Bell Oil & Gas, contacted Inovex Industries about distributing its Virginia-made products in the oil-rich west African nation. Thomas found Inovex online and wanted to distribute its tire sealants first in Nigeria, and then in other African nations, he wrote in an e-mail.

Inovex executives were initially hesitant about Thomas' inquiry.

"Of the 200 countries in the world, Nigeria is in the last 20 countries we'd go to. Why deal with that headache?" Inovex Vice President Hormoz "Harry" Farkhan said in an interview.

But after meeting Thomas in person and reviewing his references and business plan, the tire sealant and tire pump manufacturer began exporting its Ride-On TPS products to Lagos, Abuja and Port Harcourt in February.

"Don't be afraid of international markets," Farkhan said.

While top trading partners for Virginia exporters in 2006 were dominated by established markets in Canada, Germany, Japan and the United Kingdom, commonwealth companies were also exporting to emerging markets, including Nigeria, Brazil, Russia, India and China, which is Virginia's third largest trading partner, according to the Virginia Economic Development Partnership. The Richmond-based partnership helps Virginia's service providers and manufacturers, including Inovex, export their products.

Nigeria was the first African market for Inovex, but not the company's first emerging market.

But "when we first looked at Nigeria, I said, 'You've got to be kidding,'" Inovex CFO Andrew McCabe said. "'Why don't we expand in the United Kingdom, France and safer markets before we go into Nigeria?'" Besides the concern about stability in the region, Nigeria was a question mark because of the notoriety of online fraud schemes purportedly originating from the country. "Everyone's gotten that e-mail. I was nervous at first but we met him and checked his references," he said.

Thomas acknowledged the "bad reputation that Nigeria has in many parts of the world," but he cautioned against stereotyping.

"Treat each with deserved respect and openness of mind. There are very credible individuals and businesses/potential partners all over the world," he wrote in an e-mail.

Thomas alleviated McCabe's concerns with his detailed answers to an Inovex questionnaire and with his experience: Thomas used the same U.S. suppliers as Inovex and had a thorough Web site and references. He also called and flew to Dulles Airport to meet Inovex executives within two weeks of sending the initial e-mail.

Also bolstering his cause was Nigeria's substantial reduction in external debt and GDP growth. Coupled with April's general election, it suggests there is a lot of economic potential in the country, McCabe said, adding that Chinese companies have recognized the potential and entered African markets earlier than American counterparts.

"Don't be afraid of expanding your horizon beyond the U.S.," McCabe said. "There are a lot of lucrative opportunities if you structure it correctly.

"[It is] surprising how many medium-size businesses don't take advantage of resources available to help you get going internationally. Virginia is helpful in that respect, and I'm from Maryland."

Proper structuring includes background checks and calling references. "Make sure you understand with whom you're doing business," McCabe said.

Thomas' advice for Loudoun companies considering international partners includes looking for a company or individual with a clear vision and ability to follow through. In addition to face-to-face meetings, Thomas said in an e-mail that he recommends visiting the country before or soon after an agreement is signed.

For companies determining where to send exports, Terri Noll, client services manager for VEDP's Division of International Trade, recommends against embargoed countries or countries with excessive tariffs. She also suggests looking for countries with similar cultures and values as the United States.

But if a company insists upon entering an emerging market, Noll said VEDP can help principals with finding in-country consultants. Would-be exporters can use up to $5,000 for in-country research per fiscal year through the VEDP, she said.

Noll stressed the importance of going beyond research.

"You need to have a face to face with these companies. You need to understand the local side of things. If you think, 'This is how we do things in the U.S., they'll do it there,' you run [a] risk of committing an egregious error," she said.

An international query resulted in the startup Inovex Industries. Farkhan and his brother, Mehrdad "Mark," started the company in Vienna after a friend in South Africa asked if they knew about tire sealants. It was 1995 and post-apartheid South Africa was opening to international trade. The Farkhans' friend wanted to introduce competition to the existing tire sealant market.

Out of curiosity, the Farkhans began testing existing products and found that many sealants did not work well for high-speed use or had corrosion problems. The brothers spent two years working on research and development to create a preventative product rather than something to be used after a tire becomes flat.

The Farkhans moved their manufacturing operation into a 3,000-square-foot space in Sterling in 1998 and now are looking for space in the 9,000- to 12,000-square-foot range.

While Harry Farkhan said he was confident that Inovex offered a breakthrough product, there was a lot of consumer mistrust of tire sealants because so many other tire sealants did not work.

"Our impetus was to legitimize this line of business," Harry Farkhan said. McCabe agreed, saying, "It's worse than being first. We're in a burned-out market."

The company used demonstrations to win over skeptics, including John Liberkowski, director of purchasing for the Westhampton, NJ-based New Century Transportation. Liberkowski said he understands why there is "a lot of skepticism about [the] product" in his industry because many had experienced tire sealants that did not work. Another challenge is that some repair shops won't repair a tire filled with sealant because it is messy, Liberkowski said, but he still recommends the product. New Century has doubled its fleet size, but the number of breakdowns or road problems has not increased since the commercial trucking company began using Inovex tire sealants in 2003, Liberkowski said.

"Tire maintenance in the trucking industry will break a person, will cripple a company," he said. New Century budgets $1 million yearly for tire repair because the average cost to repair a tire is between $400 and $500 and there are roughly 12,000 tires in the company's fleet. About 80 percent of New Century's 800 plus vehicles have tires filled with Inovex tire sealant.

Overcoming consumer skepticism has helped the company grow its customer base. Today, Inovex products are sold through distributors to waste haulers, recyclers and businesses that provide mining and oil field services in the United States and at least six foreign countries. Commercial fleets and motorcyclists in Brazil, Colombia, Singapore and the United Arab Emirates use the company's tire sealants and pumps. Expansion plans call for Inovex executives to enter the Mexican market within the year, and Farkhan said he is in negotiations with companies in 10 to 12 countries.

While the company began because of an international query, foreign markets have not always been a priority. Inovex has exported products to foreign markets since the late '90s, but Farkhan said international opportunities were not a focus until 2004. Initially, "we weren't attracting the right companies. [We were] just selling to whomever came through the door," Farkhan said.

As more international distributors contacted the company through its Web site, Inovex executives said they realized they needed to be more deliberate about finding the right company to distribute their products in foreign markets.

For example, the company receives several inquiries weekly from individuals or businesses based in Nigeria-so much so that Inovex executives do not have the time or will to respond.

"We've kissed a lot of frogs," Harry Farkhan said. "We don't like to say no to anyone, but right now thank God we're busy enough to go after the cream of the crop, not yesterday's leftovers."

He prefers to work with an established or experienced distributor abroad rather than a startup.

"Nothing against the new guys starting a company ... but a lot of the times, they're not realistic about what they want to do," Farkhan said, noting the irony because his company was also once a startup.

If you have any questions or comments regarding this article please contact Mark Farkhan at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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