Should You Expand Your Small Business Abroad?

World Map

Any small business needs to consider how it is going to progress.

A business providing a local service may not need to look beyond a small geographical location, but businesses that rely on sales or a variety of services may have the option of launching into foreign markets.

E commerce shopping websites, for example, may wish to target a particular region or country through a drop shipping or mail order service. You might not have to leave your current operating premises either.

If what you have is realistically scalable there could well be opportunities elsewhere.

Is There a Market?

It is important to consider if there is going to be a market for the product or service.  Some research before launching elsewhere is essential, as there are many businesses that have folded as a result of poor research. If the product is not in demand, then it may be very hard to find success.

Those who already have a successful product or service will find it a little easier to expand their operations abroad. Being able to reach a wider customer base is one of the major advantages to expansion. It is also a good idea to look at the local culture, as a product which is a success in one country may not catch on if it conflicts with local beliefs or customs.

Communication

Reaching customers around the world is easier now than it has ever been. The internet is now the most popular form of communication and allows businesses to reach a wide audience. Creating a website will tell customers in all areas of the world everything that they need to know about the product or service.

More and more websites offer an online shopping service as well, so products can be sold around the clock without the need to keep staff onsite during all hours of the day.

The internet makes international expansion far easier. It may not be necessary to actually travel to other countries to promote a business when much of the marketing can be done online. By having the right team on board to help with the expansion, this can be carried out smoothly. Staff with language skills can be useful to ensure a good standard of customer service.

Expanding Abroad

If the intention is to actually set up shop in another country, then there are many good reasons for doing so. There are plenty of countries where there is cheap land for sale – ideal for a business looking to start a shop or factory. In many other countries, manufacturing is also cheaper, which is an important consideration for businesses that might struggle to meet labour and manufacturing costs in their country of origin.

It is a good idea to check local authority regulations. There may be a variety of planning laws that need to be adhered to, and taxation will also be a big issue for any business. Many places are now actively encouraging businesses to move to their area of the world, and there are often incentives for doing so, such as tax breaks and assistance with staff recruitment.

If you’re selling digital products in other countries, you need to heed the changes to the VAT laws in Europe and how this will affect you. You might find it is not economically viable to expand your sales reach elsewhere if you’re unable to meet the tax obligations. I’m pretty pissed off over the EU VAT laws and many micro sellers of digital products have suffered for it.

Loopholes

I listen to a lot of business podcasts, and in one of them there was an interview with someone who took advantage of a classic car business tax import loopholes. Without going into too much detail I can say he was able to make a lot of money by operating in Europe. Naturally, everyone piled onto this and the bubble soon burst. If you can in and out of a foreign market easily it might be worth pursuing something like that.

Domestic Market

Conventional wisdom says that before you go expanding into a foreign country you should first conquer the domestic market. It’s true that there are many growth opportunities at home, and if you have financial partners investing in you, there is someone else to answer to.

Generally, it may be best to turn over every stone in the markets you already know before eyeing up countries you’re less familar with. If you did set up shop somewhere else, where should it be?

America

Without a doubt, the good old United States has an enterprising culture perfect for entrepreneurs. With a population of over 300 million and a GDP of a whopping 16 trillion, it’s fair to say there’s plenty to go round. The attitude to business and enterprise over there is celebrated and encouraged meaning a bright eyed bushy tailed Brit could make a bit of a splash if he or she plays their cards right.

You would need to be aware of the differences between federal and state laws. As a non resident, US international tax law, visas and bank accounts present the most problems. There is a difference between serving US customers through an eBay store and opening a real store in a physical location on American soil.

of course, you could pack your suitcases and go and live there!

Russia

This is something worth bringing up because a business podcast I listen to is hosted by someone who set up a business in Russia in the 1990’s. After the fall of communism there was an open, untapped market desperately in need of solutions to the problems the regime had left behind.

At one time all production and distribution was controlled by the state.

For example, if you visited a supermarket you could only buy a certain size of egg for a set price. A cap on groceries, produce, manufacturing and commodities meant you got what you were given. After the USSR was dissolved in 1991 there was suddenly a demand for pretty much anything with new businesses tripping over themselves to supply those needs.

In these circumstances a savvy businessman could be the first on the scene to provide whatever is needed and possibly grow a small startup into something bigger.

 

What is very clear in the current economic climate is that businesses need to do whatever it takes to survive. Expansion is an option that most will consider, but it is how that expansion can be carried out that is important.

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