Congratulations! You've decided to expand your business into a foreign market.
Years of work await you but if you plan right and execute wisely, there are many benefits to enjoy:
- A business that won't collapse if your jurisdiction's government becomes severely anti-business.
- A more stable, well diversified and flexible business that can adapt to circumstances more quickly and effectively.
- Hard-earned lessons that will allow you to take on other markets with more ease.
Not only that, but moving a percentage of your business into a growing part of the world insulates you from the long-term slow-growth that is likely to affect most Western nations for years to come.
Entrepreneurs are folks accustomed to “trusting their guts” and valuing action over contemplation. Those attributes have served you well as you built your business, and they will do so in the future. Intuition will make your internationalization efforts more successful than those of plodding competitors.
The new challenges you will face though are both literally and figuratively “foreign” and while “moving the ball” quickly is desirable, it is critically important that some strategic planning come before any major moves.
The consequences (e.g. intractable foreign employment contracts, substantial compliance penalties and inadvertent grants of exclusivity) of ignorant, albeit well-intentioned initial forays suggest prudence.
And most irritating is the fact that the “landmines” are not necessarily intuitive even for folks well versed in American Business practices.
That's the reason some companies opt to engage an advisor to assist with this initiative. That's what I do for a living, though self-promotion is not what this, or any other articles I write for International Man, are about.
Rather, the purpose of these articles is to give you a primer on what to expect out there, as well as share some of the big lessons I've learned from nearly 15 years in the business of building overseas businesses in Europe and Asia and helping my clients do the same globally.
So where do we start?
Why Are You Doing This?
Be honest. The answers could range wildly, from emotional to rational to perhaps even 'cause I feel like it'. However, some of the more common reasons include:
- I'm bored with my business and want to make it more interesting.
- I have grave reservations about the outlook for domestic market stability and want to build up another source of revenue overseas as a safety net.
- I have a desire to establish an overseas footprint for personal reasons and want to use my business as a way to get in there.
- I want to diversify my revenue streams to minimize risk – currency, regulatory and tax exposures and political risks.
With the reason “why” identified, you can begin to craft a plan to satisfy your objectives. A few items to consider:
- Available resources to start with.
- Your expected return and how long to achieve.
- Runway time – How long it will take to get the new project off the ground
- Your definition of success both on hard metrics (revenue, net income, etc) but also soft (number of hours personally needed to maintain the organization, amount of travel involved once the preliminary system is built).
- Specific milestones needed to achieve your objectives.
- Which market(s) will allow you to achieve your goals.
So what makes up an ideal market?
Obviously, that depends on your reason why. For people simply looking for a way into a 2nd residency or passport, the dynamics of the market are not as important as say, an entrepreneur looking for a secondary market that will boost overall revenues as his current market stagnates.
However, a few things to consider:
- Ones that run “counter cyclical” or tend to do better when your home market is struggling.
- Ones that have the right fundamentals such as a young population, growing GDP and income per capita.
- Ones that are appropriate for your product or service in its current form (or with minimal localization needed)
- Ones that allow you to meet timeline milestones.
- Ones that are appropriately “accessible”. Language, trade restrictions, travel and visa requirements are to be considered.
A solid plan will include a couple phases – with 3 or 4 markets targeted in each one. While you work to identify target markets, in parallel you can build your internal support functions:
– Trademark Registrations in target markets, local bureaucracy issues
– FCPA Policy
– Export Compliance Program
– Freight Forwarders
– Terms & Conditions (including INCOTERMS) for export sale
- Financial: Building banking relationships to gain easy access to useful products, bullet-proof advice on trade finance and access to competitive foreign exchange rates.
By determining these “infrastructure” steps at the beginning, you can minimize frustrating missteps later.
And as markets are selected you will begin to construct the appropriate channel model for each. Some are well suited to distribution, others to reps and yet others may be appropriate locations for your own employees or a foreign subsidiary.
Now to “Begin”
Like so many aspects of business, the process may initially feel cumbersome and overwhelming but, as the old saying goes, the same way you'd eat an elephant is the same way you approach international business – one piece at a time.
In future issues, we're going to get more practical, but hopefully, I've given you a general idea of what is needed to be successful in overseas markets.
And, by the way, many governments have programs to encourage their resident businesses to expand their business to another jurisdictions (exports create jobs and all that).
As I am US-based and am most familiar in helping American companies expand across borders, I will of course share mostly American resources. However, the underlying principles and strategies outlined within are applicable to virtually any business moving from their home market to a foreign one.
Ed Marsh has in-depth experience on a number of continents, in various capacities and industries. He founded and managed a start-up in India; successfully built channels throughout Latin America; leveraged his German birth and marriage to a German national in his extensive work in Western Europe and has deep cultural experience with Vietnam. Ed's B2B and B2G pan-global experience has involved a variety of products and services including capital equipment, industrial automation, distribution services and homeland security and defense technology. He is a Founder and Principle at Consilium Global Business Advisors.
Tags: offshore company,