The decision to embark on an international expansion can be both exciting and frightening: seemingly endless growth opportunities exist, but there can be significant risks involved.
The checklist for setting up international operations is lengthy and varies country to country. And what's worse, one missed detail could mean serious negative consequences for your business, in the form of fines and frustrated employees.
Not sure where to start? Here are 10 tips to keep in mind when thinking about international expansion:
- Define your motives and do your homework. Many companies are looking to overseas expansion today, but is it right for your business? What are your goals in setting up international operations? Prior to international expansion, perform some thoughtful research to ensure you are making a sound business decision. Explore all facets, ask the right questions and avoid chasing short-term financial gain at the expense of long-term rewards.
- Start small and don't overextend yourself. Identify which of your core competencies make the most sense in a given country or region, rather than trying to duplicate domestic operations wholesale. Start with one or two key goals for your business in a small slice of a foreign market so you can manage your growth and easily evaluate your success.
- Create a detailed plan for setup. Determine early on how you will structure your company overseas-wholly owned subsidiary, joint venture, branch, representative office, etc. Make determining the corporate entity a first priority, as things like hiring new employees and putting them on a payroll, and opening overseas bank accounts cannot proceed without it.
- Resist the urge to standardize. One of the big mistakes companies make when trying to do business overseas is adopting a 'one-size-fits-all' mentality. Just because it works in Boston doesn't mean it's the right model for Beijing. Be aware of the specific needs of the market and act accordingly.
- Know going in that almost everything will be different. Hiring employees, issuing stock options, opening a bank account, filing taxes, setting up insurance and other benefits for new staff- every country has completely different requirements for each. Even international expansion into the United Kingdom, which may seem familiar for U.S. companies, poses challenges. Anticipate that there will be many differences as you set up international operations.
- Don't underestimate the effect of culture. Just as operations are different country to country, business culture and practice are also diverse. It's imperative to respond appropriately to divergent work customs, traditions and attitudes when in a business setting. Pouring the sake out of turn at dinner with a partner or customer in Tokyo is a faux pas, for instance. Educate yourself and your staff accordingly and identify local business partners who can help guide the company.
- Prepare realistic budgets and contingency plans. Spending on international expansion can start out slow and restrained, but it is not unusual to see spending mushroom in the future. Be sure budgets for overseas expansion are not set unrealistically low, and have built-in contingencies for the unexpected.
- Recognize that you'll need initial and ongoing support. Your finance and HR departments at headquarters will need to be involved, especially as the company negotiates leases and contracts, determines how to pay foreign suppliers, determines the company structure, sets up accounting and tax reporting processes and supports human resources. Even where there is in-house knowledge of the myriad administrative and compliance issues involved when moving cross-border, there often isn't time to apply it all well. Outsource functions where possible.
- Be patient. Develop your overseas presence slowly, so you can discover what works and what does not. Extremely rapid growth can mean equally fast failure- proper planning, measured decision making and a stock of patience can go a long way to facilitating successful international expansion.
- Get help. Even if you have the best product, service or team in your industry, your time is likely best utilized focused on what's important - your company. Purchase local services from quality providers and retain an experienced international business services firm which specializes in international expansion and operations to help implement and handle the day-to-day operations.
Though often complicated, the potential rewards for international expansion can far outweigh the risks. And you can mitigate those risks with proper preparation and quality execution.
