You've created a successful business, have a solid product or service and are now seeking the next logical step to grow sales and profits. For many small startups, that means going global. After all, there are trillions of dollars changing hands across the globe—why shouldn't you have a slice of that international business pie?
Driven by the internet, evolving consumer preferences and trade relationships, our economy is increasingly global. Yet, all too often, we see small businesses rush to trade internationally without really understanding the demands of those markets or the new indirect tax burdens created by cross-border commerce.
Here are some practical steps to give your global expansion a better chance at success.
Ask Yourself, Where Do You Want to Be?
Perhaps the most obvious first step to international expansion is figuring out where you want to do business. The answer will depend on your strategic business goals, as well as the market, logistics and government regulation in each location.
If you want to expand sales, start by researching whether there is demand for your product or service in a given market—and what competition you might face. If you seek new supply or production capabilities, you might investigate the challenges and benefits of partnering with an existing local subcontractor or expanding into new facilities.
What works in your current market may or may not work internationally, so ask yourself whether trade barriers, labor regulations or governmental red tape would hinder your expansion. Is your brand and messaging appropriate for the market? Can you gain access to the talent, resources, distribution and supply chains needed to ensure success? Do you have systems in place that can successfully handle the new taxes that global expansion will bring? Cross-border sales transactions involve an enormously complex amalgamation of import and export taxes, duties, shipping costs and fees. These can be a big burden for small businesses.
Take Cultural Considerations Into Account
Various countries, and often states or regions within countries, have dramatically different laws and business practices. Those differences manifest themselves in many ways, from hiring practices and working conditions, to process and logistics, contract negotiations and community relations.
Local knowledge, or establishing a relationship with a trusted local partner, can be invaluable. If you expect to send personnel to an international location, consider the positive and negative impact of the language, climate, diet and health care, schools, travel and cost of living. By familiarizing yourself with the business and social culture of a prospective location, you can give yourself an important edge.
Choose the Right Structure
Depending on where you choose to do business, international expansion can present significant legal and regulatory hurdles. Companies expanding into new countries must typically set up new legal entities, open local bank accounts and form local partnerships. The structure of the international venture—a new market channel, franchise network, distribution or production facility—will affect accounting, tax liabilities, insurance and risk management.
Internationally oriented accounting and legal firms can help, along with relationships with local advisors who can assist companies in addressing language and cultural barriers. Many firms can also help with more specific issues, such as dispute resolution, currencies and exchange rates and intellectual property protection. Landed cost and transactional tax compliance can be facilitated with automated tax solutions.
Seek Additional Help
Given the complexities of regional markets and the laws governing international trade, you must perform proper due diligence prior to any global expansion. Start by seeking the professional advice and counsel of your own attorneys and accountants, then take advantage of free or low-cost support that is available from federal agencies and other sources.
For example, the Export-Import Bank of the United States provides pre-export financing, loan guarantees and buyer financing, much of which is designed to benefit U.S. small businesses. To assess the risks associated with various markets, consult the CIA World Factbook or political risk maps available from other trusted sources. The Department of the Treasury offers details on countries, companies and individuals subject to financial sanction, while the Department of State offers information on consular support in various nations.
Many countries maintain foreign investment agencies to encourage trade and investment. Those local resources can often help companies find office or production facilities, talent and specialized legal or accounting firms.
Proceed With Caution
When moving into global markets, a go-slow approach can be best. Those counties and markets have been there for years, and they will still be there when you are ready.
Prepare an extensive business plan, tailored to your strategic goals and expected global locations. Expect changes and surprises, and give yourself the flexibility to adapt to new conditions. Investors can be wary of global risks, so you should be pragmatic about the true cost and opportunities of an international venture.
Build a strong team before you launch the expansion. It bears repeating that trusted local relationships can be your most valuable international business asset.
In a rapidly globalizing economy, opportunity can be found the world over, but multinational business poses significant challenges. A poorly planned international venture can waste time and money—and may lead to a real business disaster. By understanding and preparing for the complex nature of global business, you can find growth and success beyond your borders.
For more tips on expanding your business, access Business Growth: How to Survive and Thrive, from MSNBC’s Your Business.
