Expanding globally may be the ultimate goal for some entrepreneurs, but when is the right time to do it? Tempting opportunities like trading in currently hot markets such as China or Brazil may be the deciding factor when it comes to expanding globally, but many companies make the mistake of expanding too quickly. If you’re not prepared when you expand, you could risk using all your resources from your home turf in order to succeed abroad, causing your current business to potentially suffer or halt in growth.
Here are some key questions to ask yourself before you decide to take the plunge and expand abroad!
Is my home foundation solid enough?
Before expanding abroad, make sure your home company is stable enough to handle another branch of business utilising it. A new overseas company will cost a lot of money to build and bring back little return in the first 6 months or so. Is your home company financially stable enough to float the cashflow of both businesses as well as bringing in ROI? The new company will take the same structure and foundation as your original company, and it will look to your current business for support, financial funding and guidance when it is first starting out. Will your home company suffer in your absence? Do you have the correct team in place to continue to run your home company when your efforts are divulged in your overseas expansion? These questions are worth thinking about as a lot of your time and effort will go into the expansion, so make sure your home foundation won’t suffer if your attention is taken away from it for a period of time.
Do you know the market well?
Foreign markets can differ, especially in Asian and non-westernised countries. Make sure you do your research and plan how your product or services will fit into a foreign market before you take the plunge. How will you market your product? Who will you target? Is there a high demand for your product in that market and how much should you charge? Finding customers to target in a new market can be difficult, therefore Creditsafe offer international marketing prospects, so you can hit the ground running with a customised marketing data list that have already been pre-credit checked.
Are you going to need allies?
If you are planning to partner up with another company to have an ally in that market, make sure you do your research on them. Having a partner in a new market can really benefit a foreign company, but research their reputation among the people you want to target before you sign any contracts. It’s worth looking into currency exchange and your competitors in your overseas market before you decide to invest a lot of money into an overseas company, ask your local partners to help you with this.
Will you find the right employees to handle your overseas business?
You will need to employ senior staff as well as general staff when you’re moving your business abroad. Some companies like to move someone senior from their home office to the new office to start off, but think whether you can afford to lose them on your home turf before making the transition, and also consider the restrictions they may face such as visas. It’s always good to have an employee who knows the business inside out help set up a new one, but it is also good to hire someone who has the relative experience in your chosen country and market as they can guide you on how best to utilise it. You could also find hiring local staff challenging, as some countries don’t have enough skilled candidates that would be suitable for the job. You will also be competing against established companies that know how to hire local talent and already have a good reputation in the market. Sign up to a local agency to help you hire, and it is also an idea to look for suitable candidates from universities or graduate programmes.
Can my business adapt to a different culture?
Closing a deal abroad could be different to closing a deal on your home turf. Negotiations may be handled differently and a different approach to selling might need to be taken. Adapting to this can be difficult, so make sure you have a team in place that is ready to be flexible and learn new ways of selling, especially if they aren’t local. Payment terms may be different, for example a country’s average invoice term may be shorter or longer than what you’re used to, your Creditsafe international credit report can tell you this information so be sure to credit check your prospects before doing business with them. Find out a company’s payment behaviour, credit score and credit limit on Creditsafe’s international credit reports. There is even a standard international credit rating that allows you to compare all of your companies- local or international, keeping your criteria for who you do business with consistent.
There are many, many factors to consider before you decide to expand abroad, these are just the starting point. Trading abroad and smashing through that international barrier is a massive deal for an entrepreneur, so make sure you do it right and explore all your avenues beforehand.