- Evaluate if you have the funds and customer base you’ll need.
- Find the right partners and team members.
- Structure your infrastructure properly.
- Consider new ideas and rely on the experts.
- Do your due diligence.
- Be willing to change direction and adjust your customer support.
Taking your brand overseas can be appealing, and many entrepreneurs would jump at the chance. However, the international expansion journey can be treacherous.
Between establishing a fresh customer base, learning new laws and regulations, finding trustworthy partners, and becoming familiar with the local customs, the road to becoming a global company is difficult to navigate.
While not every business is fit for such a challenge, some are. Before you decide to make the leap overseas, you need to consider these factors.
Are you ready for international expansion?
One of the first questions you must answer is whether your business is actually suited to succeed in international markets. Just because you think your product or service will thrive in a new country doesn’t mean it actually will.
Diego Caicedo, co-founder and CEO of OmniBnk, which operates in multiple Latin American countries, said scaling across borders is complicated and expensive regardless of a company’s size, and the process can take time and resources away from other opportunities.
“Companies should evaluate whether or not expansion is indeed beneficial, or if it will only take away from their core business,” Caicedo said. “It may be better to serve one country well than several countries poorly.”
Zoe Morris, president of the Frank Recruitment Group, would encourage entrepreneurs to evaluate whether their business is truly ready to grow before developing an international strategy. She said to plan ahead, monitor your market share, and try to figure out if it will support a move into new foreign markets and create more long-term business opportunities.
“Take a look at finances and honestly ask yourself if you have the funds to support the initial investment and sustain the growth you’re forecasting,” Morris said. “If the answer to both is yes, then it may be the right time to grow. Remember, success won’t be immediate, so you’ll need to factor that into your plans.”
One of the biggest considerations has to be whether your business can actually build a strong customer base internationally. A product that sells well in your home country may not have the same appeal in international target markets.
“First, make sure your customers exist,” said Joseph Paris Jr., chairman of business consulting firm Xonitek and founder of the Operational Excellence Society. “Is there a need for your offering? Are they inclined to purchase? Don’t think that they might – know that they will.”
Jethro Lloyd, CEO of iLAB – a software quality assurance company with offices in Indianapolis, London, Johannesburg, Cape Town, Rio de Janeiro and Sydney – says another initial step is to conduct some significant research into the country you want to expand to.
“Don’t discount the importance of education on both sides, in both your new market and your homeland,” Lloyd said. “You must understand the direction your new city is going in and leverage that momentum to support your expansion, whether it’s logistics, banking or a talent base.”
What are the challenges of international business?
No major business decision is without its hurdles, but global expansion comes with its own unique set of obstacles. Here are some challenges you should prepare for before expanding internationally.
Language and cultural differences
Taki Skouras, co-founder and CEO of international wireless accessories retailer Cellairis, suggests hiring bilingual staff members who can translate for your company.
“If you don’t have the budget for full-time translators, outsource tasks like overseas customer service,” he said.
Josh Robinson, vice president of franchising and development for Pearle Vision – an optical franchise that has 500 locations throughout North America, including about 60 in Canada – said it is important to understand that there may be cultural and language differences within a country.
“Just as you expect differences in residents of California, the Midwest and New York, you need to understand the nuances between Vancouver and Calgary [for example],” Robinson said. “You probably expect differences in laws and languages, so you would hire a lawyer and translator from the country you are moving into. But you also might need a local person’s perspective to understand how the culture and even taste could affect the market for some consumer goods and services outside the U.S.”
International compliance and regulatory issues
Learning the different tax codes, business regulations and packaging standards in different countries can be challenging. Trevor Cox, chief financial officer for DataCloud International Inc. – which has offices in the U.S., Canada and Australia – said compliance was the biggest challenge DataCloud faced when expanding overseas.
“In Australia, compliance was a major headache,” he said. “It took months to complete the necessary paperwork for compliance and setting up a corporation.”
Foreign banks may also be hesitant to deal with the administrative burden of a U.S.-based account, so you may have to set up a separate foreign business entity and bank account to make handling transactions worthwhile for the banks.
“It took just as long to set up a local bank account, with many banks declining to work with us because we were too small,” Cox said. “We had to switch to an international bank, which had offices in Australia.”
Stanley Chao, president of All In Consulting and author of Selling to China: A Guide for Small and Medium-Sized Businesses, said products have to be localized. This means different packaging, foreign language instructions, different voltages, etc.
“The issue here is that you need a local person familiar with your product to suggest these changes,” Chao said. “Don’t think you can just resell your U.S.-targeted product in a foreign country.”
Paris said packaging standards are different from country to country. In the U.S., companies only need to include directions in English and maybe Spanish. “But in Europe, your instructions, even for the simplest product, will be in multiple languages, sometimes up to 24 languages. If your product is sold more regionally, you will have to consider the increase in packaging cost associated with labeling.”
In America, the business world moves quickly. That is not necessarily the case in other countries.
“Overseas, doing business is as much a personal event as it is professional,” said Bill Bardosh, CEO of green materials and chemicals company TerraVerdae BioWorks. “Things will always take longer to be resolved overseas, but that isn’t necessarily a sign of a lack of momentum. You have to be patient and prepared for multiple interactions to build trust.”
It’s not easy to persuade a foreign customer to trust your brand when a similar product is made in their home country. While some big-name U.S. chains have clout overseas, small and midsize companies need to work harder to convince the international market that their brands are trustworthy and better than the competition.
“Why would [customers] buy from you over the local champion?” Paris said. “Can you penetrate the market? If you do, can you be profitable under the circumstances?”
International expansion advice and best practices
If you feel you’re ready to tackle the challenges of international business, follow this advice from business leaders who have been in your shoes.
1. Find the right partners and team.
If you plan on expanding globally, you’ll want a great team or partner. Even if your “partner” takes the form of a mentor, you’ll want someone you trust and who can vouch for you.
Caicedo said it’s crucial to establish a local office and team that understand the market and language to comply with local regulations.
“Having a local country manager can go a long way in not only ensuring that the company is compliant in each new market, but that it is handling its expenses efficiently as well,” he said. “Working with a local partner can also help communicate your company’s unique selling point in a way that is meaningful to the local market.”
The people you hire to deal with your overseas business partners and customers must be immersed in the local environment, but they should also be looking out for your interests.
“The foreign companies that you may deal with probably have more experience doing business in the U.S. than you have in their country,” Bardosh said. “Without a core team on your side with the necessary cultural, language and local business contacts, you’ll be competitively disadvantaged.”
Biolife LLC, developer of bio urn and planting system The Living Urn, launched in the U.S. in 2014 and has since expanded to 17 countries worldwide. Biolife President Mark Brewer said those expanding internationally shouldn’t rush the process of finding trusted and reliable strategic alliances.
“While the potential partner may seem like a great choice today, a better option may be available tomorrow,” he said.
When you’re looking specifically for a distributor, Brewer said, don’t assume the largest one is automatically the best.
“Some of our best and most successful distributors are entrepreneurs like us who are focused on the product and driven to make it successful in their market,” he said. “Larger distributors, having many products, may not devote the same amount of time and attention to our product in the market.”
2. Have the right infrastructure.
Morris said it is vital to make sure that when you do expand, you have the right infrastructure in place to ensure a smooth launch.
These are some questions she said you should have answered beforehand:
- Do you have a management team that can deliver your strategy from a satellite office?
- Have you decided which business decisions can be made on a local level and which need to be made centrally?
- Do you have the capabilities to set up IT and telephone systems?
- How will employees share data securely, and does the data you’re capturing follow the law and best practices?
3. Consider the impact of any new ideas.
Instead of only thinking about how your own country’s customers might receive your new ideas, you’ll need to think about how foreign customers will receive your ideas.
“As you spitball new ideas, someone definitely needs to think about scalability to your international territories – usually you,” said Mike Zani, CEO of business consulting firm The Predictive Index. “Time zones, language and cultural appropriateness all need to be considered when you branch out internationally. If you don’t do this ahead of time, you run the risk of offending your international partners by appearing to be more concerned about yourself [than] them.”
4. Always do your due diligence.
Before making major business decisions, you should think through all possible scenarios – especially during global expansion. Chao advises those expanding their business internationally to spend time in the country they want to break into. An information-gathering trip can be a focal point to develop a plan for moving forward.
“Visit potential customers, distributors, OEM partners, and even competitors who are making either complementary or competing products,” Chao said. “After a visit, you’ll find out all the hard facts on whether your product can sell, who the competitors are, what price to sell at, and how to sell (directly, distributor, etc.).”
5. Rely on experts.
It is important for businesses looking for international growth to understand that they will need help. Chao said this can be particularly tough for smaller businesses, because they have likely been doing everything on their own up to this point.
“Realize you can’t do everything, and rely on some experts to at least guide you through the beginning phases,” he said. “You don’t have to reinvent the wheel. Rely on experts.”
6. Be willing to change direction.
Once you do expand, be prepared for some bumps in the road. That may mean changing how you operate in some ways. Adrian Fisher, founder and CEO of PropertySimple – a real estate technology company with locations in the U.S., Argentina and Chile – said you can’t be afraid to pivot.
“With each new country comes new challenges, and businesses must adapt their product,” Fisher said. “It’s OK if the product shifts; it’s more important to meet consumer demand.”
7. Alter your customer support.
Once you launch overseas, you will have a whole new customer base to support. Roger Sholanki, CEO and founder of Book4Time, a provider of next-generation wellness management software that operates in 70 countries, said your current system of customer support will need significant changes when you expand internationally.
“The immediate challenge is servicing customers in different time zones, which could mean a 12-hour time difference,” he said. “Your customers will want immediate support and access.”
Additional reporting by Nicole Fallon and Saige Driver. Some source interviews were conducted for a previous version of this article.