If you own a booming business, you might be thinking about expanding overseas. The opportunity is there, but before you jump head-first, it’s necessary to know the costs and benefits of expansion.
There are several boons to expanding your business to an overseas market. The First National Bank of Omaha discusses several pluses to globally expanding your business.
Three of these advantages include:
- A kinder economy. There could be a much more favorable economic climate in your country of choice. Seeing how the current U.S. economy still isn’t fully stable for businesses, a country with more economic stability could help your business flourish.
- New markets. A new country could have untapped markets for your product or service. Whatever you are offering might be doing well in the American market, but if the product aligns better (or equally) with another country’s needs, the product’s success could climb to greater heights.
- A wider audience. A country that latches onto your product or service could also give your business more exposure. In some cases, this new exposure could revitalize your business, giving you the capital and prestige to expand even more.
While there are advantages to global expansion, there will be some costs to pay. According to Intuit, some immediate costs could include upfront costs like investing in the infrastructure, employees, and the raw materials needed to fully establish your business overseas. Despite the costs you’ll have to pay upfront, the overall business costs could be lower in the long run due to locating less expensive suppliers.
You’ll also need ample time to set up your business correctly. Some things to consider include:
- Recruiting the right talent. Alina Dizik from “Entrepreneur" reports that some countries don’t have the skilled labor some companies require. Also, you’ll be competing with other businesses vying for the same talent. Dizik recommends looking to business schools and engineering programs for potential employees to combat this problem.
- Familiarizing yourself with the culture. For your business to be successful, it will have to blend in with the country. Carl Theobald, chief executive of Avangate in Redwood City, CA, who says some countries, like Japan and France, expect companies to adapt to the culture. Your product or service might need to be customized to suit the local clientele and your business might have to create new advertisements that reflect the cultural flavor.
- Researching the country’s labor and tax laws. It is imperative that you learn the ins and outs of tax and labor laws. Shan Nair, of Nair & Co., told FOX Business that small businesses must create a country-compliant employment agreement. Otherwise, the business could end up in employment court.
- Locating raw materials. Be prepared for a challenge when finding raw materials for your product. According to Entrepreneurship, not all countries provide the same levels of raw materials needed. You’ll have to decide if limitations in raw materials will force you to change your product or service to accommodate the country.
- Retaining U.S. talent. Another consideration is deciding if you want to retain your U.S. talent for your overseas venture. Managing your workers in two different time zones will be a challenge, but your relationships with your employees will provide you with strong relationships domestically and overseas.
If you feel your business is ready for expansion, but not quite ready globally, expanding within the United States could be your best option. Still you have to make sure your company is the strongest it can be.
John Fjeld, executive director of the Center for Entrepreneurship and Innovation at Duke University, says international expansion has a startup-like period that is longer than most people expect. Having a strong domestic business will help allay some of the costs that will arise when expanding. Also, you can explore other business opportunities and partnerships within America that you might not have considered before.