Six Tips to Start a Business Overseas
For some business people, the opportunity to establish an overseas business is irresistible. Globalisation, increased online communication, the lure of international supply chains, and emerging markets are encouraging businesses from every industry to travel to foreign lands in search of new customer bases and better material sources.
Starting a business overseas in a foreign country is attractive, but the journey isn’t without risk.
Foreign legal structures, customs, and competitors can make your venture rocky.
Do you send key employees to foster connections among foreign partners or do you personally go and take your family? Do you stage your market entry or go ‘full on.’ Do you create a tax presence or try to avoid this by setting up a ‘representative office’?
These complexities must be investigated and understood as mistakes are expensive.
Here are some things you should take into account before starting a business overseas in a foreign country.
Measure Your Expectations
Start by looking for countries where you can have an impact by changing very little about how you already run a business. The less you have to change about your company’s operations, the better. Once you have a destination in mind, ask yourself the following:
- Why are you taking your business overseas? - Are you looking for less competition? Are you hoping to become popular in a new region or tap into existing demand? International business is expensive, so be sure you have a good reason.
- What are you doing that is new and unique in your intended location?- Are you selling a new product or taking advantage of lower costs for raw materials, assembly, or both? Make sure these expectations are realistic. Having a unique selling point is often the difference between success and failure.
- After you meet your initial goals, how do you proceed? - Understanding the next step is how you communicate to your people what they need to do after they arrive. They need to understand your major deliverables and timelines, so you better know what they are.
Get a Feel for the New Environment
You likely grew up in the land where you established your first business, but moving your business overseas is just like starting again. Culture and adapting to it is a major challenge. Employing people from a different culture will be a totally different experience than what you are used to. Marketing campaigns which work in your home country to a culture you are used to will be quite different in your new country of business.
Apart from cultural differences, you and your finance team will need to understand the type of legal system you are moving to. Is it a ‘common law’ or ‘civil law’ country? What is the tax system like? How will you remit profits to your home country? Are their withholding taxes?
Make sure you understand these points for a streamlined entry into a foreign market.
Be Realistic About Your Budget
One of the common reasons a business will fail is because of overly optimistic budget assumptions. Even under ideal circumstances, starting a new business is difficult and expensive. Be conservative in your expectations and outlook. A good rule of thumb is to look at where your ‘break-even” point is then double it. Do you have enough capital to enter the market?
Generally, 80% of all businesses moving into a new market fail within the first 5 years. These general statements exist for a reason! Can you or your shareholders inject more capital into the business if you need to?
Understand the Business Logistics Before Opening Your Doors
Things will not necessarily work the same way they do in your home country.
New regulations should be known, and new government tariffs or state taxes are important to take note of.
In some countries, the United States, for example, many businesses have to obtain licenses to cross state lines. Don’t assume you can ‘go national’ in a foreign country. Bureaucracy matters.
Expect change don’t get flustered by customs that seem foreign.
Form a Group of Local Experts to Help You
Foreign customs are, well, foreign. It’s not something you can learn overnight, and you shouldn’t expect to. Instead, get help from the local accounting firm, local law firm, and a good banker. Join a Chamber of Commerce to get connectivity with the local business scene.
Set Up Your International Banking Connections
Funds management and moving money is the key to success. Even something simple like obtaining a business loan or lease can quickly turn into a headache. Work with a bank that has an international reach and a level of personal service suited to your business. Making payments overseas has undergone a transformation recently, and new anti-money laundering laws complicate and slow down timeframes far more than they used to.
Starting a proper international banking relationship is a must for you and your business.
Finally, adapt or die. The golden rule is if you are going to fail – fail fast – don’t bleed capital endlessly. Going in with ‘Plan A’ but have Plan B, C, and D in reserve.
Even if everything goes exactly as planned, the best-laid plans are still vulnerable to failure. An exit strategy only makes sense.
Your new venture may be the most important (and lucrative) decision of your professional career.
To make sure it has a good chance of success then working through the above is a must.