How to Take a Local Business Global
The aim of most startups is to achieve success locally, nationally and, finally, internationally.
Each step has its own challenges but, of the three, moving into international markets can often be the most difficult. At this point in your company’s life, you’ve already developed a product or service. You’ve honed it and your business should be generating a profit. Moving from a local level to a national one means you’ve probably got a good grasp of scaling up a business. This will be useful when you enter international markets. However, there are challenges you won’t have encountered.
One of the first things you’ll need to think about is money. No, we don’t mean making money, we mean the currency you’re dealing in. For example, if you’re planning to trade in France, you’ll need to accept Euros. Target the US and Dollars become a concern. This can often mean setting up bank accounts in different countries so you can process transactions in different currencies. Alternatively, you can have money sent to your local accounts but then currency conversion costs need to be factored in.
Economies Aren’t Equal
Another challenge you’ll face when trading in different countries is economic conditions and local spending power. Essentially, differences in currency values mean you may be paying more or less to import products. Similarly, currency fluctuations can affect the amount you get for selling products/services abroad. The standard for measuring these fluctuations and differences is the US Dollar Index aka DXY. The index measures the value of USD in relation to a basket of six major currencies, including GBP and EUR.
When the index score increases, USD is gaining strength against its counterparts. When the index is decreasing, USD is weakening. The strength of USD can be used as a marker of the US economy’s strength. Given that the US is a primary importer and exporter, the strength of its economy can affect international trade. As a business looking to enter new markets, you need to know the strength of USD and, in turn, other major currencies. This is where the DXY comes in handy. Knowing how to interpret the data gives you an idea of how global economies are performing and, in turn, the purchasing power of businesses in different countries.
Become a Local Expert
Once you’ve grasped the basics of dealing with different currencies, you need to understand local laws and customs. For example, in the UK, companies can have limited or unlimited personal liability. In the US, all companies have limited personal liability. This subtle difference may mean you need to register as a subsidiary in a different country and structure that business slightly differently. Beyond your legal differences, there are local tastes, trends and customs. This is where local partners can be useful. They’ll understand the market and any subtle differences there might be between cultures.
Essentially, taking a company international requires an understanding of international economies, currencies, laws and local customs. The technicalities of your business should be set before you consider branching out into different countries. If you’re not making money, or you haven’t got sufficient infrastructure to operate on a local level, then it’s not time to go international. However, if you’re thriving at home and want to explore foreign markets, make sure you understand that different countries pose different challenges on a variety of levels. Do that and your company stands a chance of going global.