When your business has done so well that you’ve reached the limit of your market capitalization, it is a good time to expand overseas. On the other hand, sluggish local growth and limited scope for expansion may also compel you to consider going international. Whatever your reason, the keys to starting a successful business abroad are information and planning. Here is an outline of things to consider.
1. Taxes and laws
Tax regimes can make or break businesses. For many firms taxes are the prime reason to setup a foreign office. To avoid surprises you must gather all the information about your tax considerations in your proposed location. Next, check if you may become eligible for any local exemptions on income earned abroad. Other legal aspects worth investigating include registration procedures, licensing fees, IP rights, and other obligations for foreign firms.
2. The business climate
The political conditions of a region greatly influence entrepreneurship. An impending change in a country’s leadership can mean many different things for business starters. Some nations are prone to ad hoc changes in business laws, taxation, investment norms, and the like. To make sense of such things, scholars at the World Bank Group created something called an Ease of doing business index. It considers pertinent factors such as time, cost, transparency and procedures. The applicability of this index to your venture may vary depending on the type and size of your project. Another resource you may find useful is the Corruption Perceptions Index (CPI) published annually by Transparency International.
Regardless of the type of business you plan to start, you require electricity and other utilities, transportation, banking and various infrastructure services. It is also advisable to ensure that the management and employees of your business have access to appropriate housing and healthcare, as well as education for their families, among other things. The quality of internet connectivity is highly variable across geographies. In some regions basic services are prone to outages owing to floods, landslides, overuse, or simply poor management. Plan ahead to avoid the negative effects of missing or inadequate infrastructure.
India was the first place in the world where McDonald’s outlets did not sell any beef. Dell opened its first ever physical store when they came to India. Brazil is one of the largest exporters of beef to the GCC region despite the fact that less than one percent of Brazil’s population comprises Muslims. When moving your business into a new geography, cultural sensitivity counts. An important aspect of culture is language. Your business is unlikely to succeed if you have total dependence on interpreters. Moreover, customs and mannerisms do matter in business settings. Every aspect of your business including branding, pricing, and marketing is influenced by culture. Today’s fintech and gadgets can get your new business unit setup in no time. However, culture is something vital, and it takes time to absorb.
When you are a foreign entrepreneur, nothing can make your life easier than a well-placed, well-informed, well-connected local partner. A strong business relationship with complementarities of skill can multiply your profits and mitigate your costs. For example, if your local partner can source cost-effective talent and you can bring (partly tax exempt) foreign investment, you have the right ingredients for a potentially very profitable production unit. Many businesses are founded and thrive on the strength of partnerships alone.
6. Organizational culture
An often neglected part of business and also the reason why many startups fail is the company’s culture. Culture originates from the founder and flows from the top down. An organization’s core values, mission, and vision are not just buzzwords. Your employees must know where you draw the line. What will you do to develop and retain talent? How will you keep people motivated and productive? Will yours be a business where employees are driven primarily by fear and greed? Can you create a culture where people are self-motivated to do their best work every day? You must have conviction about what kind of culture you want in your business and clarity on how to create it.
7. You – the entrepreneur
One of the most (if not THE most) valuable commodities in any new business is the entrepreneur’s time. You must decide how much time you will spend abroad. Will you manage remotely or delegate? Who will you delegate to? What and how much? What will be the reporting format and frequency? These are important questions that an entrepreneur with geographically separated business units must answer. In extension to that you must be prepared to give your business time to grow and become profitable.