International business expansion: Getting it right from the ground up

Growth opportunities at home can sometimes seem limited. Part of the issue is that it’s the nature of businesses to need to want to evolve, grow, seek new challenges and flex its wings, so to speak.

The other part is that, for small- and medium-sized companies, growth in foreign markets can be more appealing (and, indeed, more advantageous), especially if their home country doesn’t have the business laws and tax breaks that support corporation-format businesses.

Suddenly, expanding one’s business internationally becomes a matter of survival, finding a safe haven to actually grow.

If you’re the owner or head of a small- or medium-sized enterprise, you’ll be pleased to know that the market skews in your favor — you’ve actually got it better than most large-format enterprises. Small businesses absolutely thrive in smaller markets and they’re already present:

• 98% of nearly 300,000 American companies that export goods are small and medium-sized businesses.
• 95% of the world’s population already lives outside the U.S., and two-thirds of the world’s purchasing power is located overseas.
• Because small- and medium-sized businesses have the mindset (and the lean operations) of a startup, they’re able to product test with less risk, grow more sustainably and be more cost-effective in the long run, especially when compared to large-format enterprises that have more bloat and more employees adverse to change or expansion (yes, personnel need to be as ready as the business to go global!)

A new study by US Forex underscores this reality, showing that the itch to expand comes from a place of confidence for SMEs:

• 58% of small businesses already have international customers.
• 96% of these small businesses are already confident about conducting business internationally.
• 43% of SMEs say that higher quality suppliers or vendors is a major incentive to expand globally, and 42% are benefitting from access to higher quality local talent.

In a climate like this, expansion is not just optional, it’s inevitable. Since the cards seemed to be stacked in favor of SMEs expanding internationally, how can small- and medium-sized enterprises begin that upward climb?

What to look for when expanding

There’s a proper amount of planning, research, and testing you’ll have to do in order to make your international expansion a successful one. Part of the research stage will be to consider the best market to begin in and the best country to set up the new headquarters of your ‘old’ business.

Where are there the capabilities and resources to sustain your growth?

Look for cities and countries that have the benefits you’re looking for to make your particular brand and operation of business faster, better, cheaper, higher quality, more profitable, more competitive, etc.

For some, that means access to a better, more educated and talented workforce. For others, it means access to cheaper suppliers. While one city or country may not ‘have it all,’ look for a place yielding the greatest number of your highest priorities.

Approach your home bank to learn more about cross-border financing options

The Straits Times reports that, in a survey of 300 SMEs, 96% said that they already have a presence in at least one market overseas. 60% reported that 20% of their income is from revenue made overseas.

But what if you need money to make money?

26% of SMEs are looking to alternative financing options for funding their expansion, including peer-to-peer lending platforms.

This is because 70% of SMEs don’t have a proven track record, financially-speaking, in foreign markets. This makes it difficult for them to access funding, which means that SMEs will need to get creative.

One option is, of course, to look at alternative forms of financing and lending.

Another is to directly contact and work with their home banks in their countries of origin to find out more about how their banks can be instrumental in giving them options and establishing relationships. In fact, most banks already have network arrangements and it’s in their interest to help you to capitalize on this.

Take a look at unexploited economies

In your market research, take a look at markets or economies where what you’re selling hasn’t hit yet. You also want to do thorough research into consumers’ spending habits, preferences and current lifestyle within the country of your choice.

It doesn’t matter as much if you have competitors or brands within the space. That shouldn’t automatically deter you. If you can articulate your product’s competitive edge in a creative and experiential way, consumers will flock to you because they haven’t been able to see this product as a ‘need’ yet.

‘Unexploited’ doesn’t mean ‘no presence.’ It could just mean a presence that hasn’t reached the awareness of your consumers.

Yet.

Enter, your business, stage right.

Focus on niche selling

After a certain income threshold, what people spend on starts to homogenize. Understand where your product lies in their needs and wants and how what you offer can slide into a niche market that is underrepresented or simply remains untapped.

Where can you create economies of scale?

Look for a country or city where there is a major demand for your product — or is likely to be. The greater the demand for your product, the lower your per-unit cost. Focusing on achieving economies of scale is a great way to amplify your overall revenue and reduce costs for production that are occurring within your home country.

Use technology to accelerate

The reason that it’s easier than ever to attract foreign buyers is because of the confluence of digital marketing, smartphone/mobile proliferation, digital payments, and social media visibility.

If you’re using technology to accelerate the buying and branding process, why can’t you do the same for your internal processes? Make sure to use video hangouts or online meeting rooms or cloud-based project management tools to accelerate your internal team collaboration as well.

Look for countries with business-friendly laws and taxes

The above are all tips to get started on the right foot. But how does an SME make sure they’re planning for the long-haul? One of the most obvious reasons to expand internationally — besides access to a whole new market — is to find a place where tax and business laws are corporation-friendly and foreign-business friendly.

Top 4 European countries perfect for business expansion

London, United Kingdom

Businesses considering Great Britain should first look to London, even before Birmingham and Manchester. Why? London is one of the major financial hubs of the world for a reason: it offers flexible employment laws and low-cost legal structures. It also offers entrepreneur-specific visas and capital gains tax relief.

London’s labor market is diverse and highly educated, with more than 4 million workers speaking 230 languages and a bevy of tech specialists and creatives.

Paris, France

Why not consider Paris? France is, after all, the eighth largest economy in the world and the third largest recipient of foreign direct investment.

Yet, the culture is laid-back, offering employees a consistent work-life balance: Parisians work 18% fewer hours than the global average.

The world’s biggest companies — Total, BNP Paribas and Havas, to name a few — already have headquarters here so you’ll be in good company.

Berlin, Germany

It’s a historic city, slowly being taken over by youth. Berlin is creative and open-minded, with the largest population, market, and economy in the EU. The government, in particular, recognizing the city’s ability to attract overseas business, has set up laws that allow businesses to employ international workers more easily and gain local visas faster.

The workforce is highly educated as Berlin has the highest concentration of researchers and academics in Germany. Businesses already based here include Microsoft, SAP SE, and Cisco Systems.

Overall, Berlin is a fully developed hub for creativity and entrepreneurship with the talent to boot.

Dublin, Ireland

Known lovingly as ‘Silicon Docks,’ Dublin has already managed to gain a business foothold on the global stage. Companies that choose to expand here, or use Ireland as a base to access other European markets, thrive considerably.

Just ask about a 1,000 multinational companies who have already chosen Ireland as their gateway to the rest of Europe. The country has the world’s lowest nominal corporate tax rates, at just 12.5% for active businesses, and also doles out a 25% R&D tax credit.

The Emerald Isle also actively encourages and invests in its businesses. Not only is Dublin a hotbed for the venture capital community, the country has recently launched a €10m International Start-up Fund.

The IMD World Competitiveness Yearbook chose Ireland as the foremost location for the flexibility and adaptability of its workplace. Dublin, in particular, was ranked as the best city by the Economist Intelligence Unit for global competitiveness.

As much as the country’s or city’s specific advantages matter to getting your business off on the right foot, so, too, does your overall approach.

Strategic planning and consulting with local partners is incredibly important to the long-term success of your future growth. And while these tips will certainly help you gain an insight into precisely the kinds of things you’ll need to consider, it’s worth mentioning that SMEs who take an ‘agile’ approach to rolling out their business globally are the ones who end up being able to respond when the market changes, more adaptively.

The truth is, you never really know when a stable market could crash and throw significant water on your efforts. This is why it’s wise to take an incremental or ‘MVP’ approach to expansion (not just product building and testing), rather than the ‘waterfall’ approach.’

This allows you to test along the way and respond, seeing if your investments in local infrastructure-building are working and whether further development is justified — or if it might be time to course-correct.