3 risks of international expansion (and how to overcome them)

Making the decision to take your business international is a significant one, and it’s not without risks. Will your business find the right partners overseas? Will you choose the right market for your expansion?

Here, we discuss three of the most common risks during international expansion and how your business can overcome them for successful growth.

Corruption in international business

Companies looking to expand internationally must bear in mind the large number of permits, licences and registrations they must acquire to ensure that their company is compliant in their new market. In some places, this is a streamlined process. However, there are countries in which bribes or other illegal measures are commonly employed to get things done more quickly.

Clearly, taking part in corrupt activities is not a good approach when expanding your business abroad. To avoid disappointment, be sure to deal with all red tape far in advance – as long as you are organised and stick to your timeline, you can efficiently and effectively set up your business.

Managing foreign currency risks

When you set up a company in a new country, chances are that you will be getting paid in the local currency instead of your own. The issue that can arise in this situation is that the currency fluctuates and falls before you are paid – although on the flip side, the currency could also rise before you’re paid, leaving you with more money…

However, let’s say the currency does go down. This could be a problem for a newly set up business that relies on a high volume of sales with low profit margins, as it could greatly change your profits. Luckily, there are several solutions to this risk that can be put in place to ensure you do not lose any of your hard-earned cash, especially when you are already taking a risk by expanding into an international market.

The first solution would be to have your clients pay you in your home currency, meaning that your customer will cover your risks. The other solution would be to include a clause in your contracts which accounts for an increase in price, should the currency fall before payment is due.

Staying compliant in international accounting

Expanding into a new market means adopting a new set of policies and rules, which, of course, means taking on different taxation regulations. A risk when expanding internationally is remaining compliant in this new country and ensuring you have all the proper procedures in place – failure to do so could result in costly penalties.

To make sure that your finances are all taken care of properly, it is often wise to outsource your accounting to a local service who knows the market and will guarantee that your company is compliant. Another solution is to seek expert advice from a company that specialises in international business expansion and/or international accounting, so you can receive expert assistance.

It’s true that international business expansion can be daunting, and these are just some of the risks you may encounter. But once you identify the problems you may face, you can implement solutions to prevent them – making your expansion a success in the process.

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