Setting up business in another country: 5 considerations

Canadian companies need to make important decisions before setting up their business in another country.

With a steady demand for your exports, what’s the best way to grow your business? Exporting more products or services to existing markets is one option. Going after new markets is another. What about opening an office in a new country? It’s an option worth considering, but there are plenty of decisions to make and that takes time. Too often, aggressive, fast-growing companies hastily open a new office one day and start looking for staff the next. That doesn’t always end well. Planning ahead is key to international expansion.

Think of it more like raising a child than having a baby. It’s not a project you’ll start and finish within a year. Prepare to invest time, money and patience in getting to know your target market. Although it’s impossible to say how long it’ll take—it varies by business and jurisdiction—many businesses underestimate the complexity of setting up shop in another country, as well as the many barriers that can affect  global operations.

Here are five tips you need to consider

1. Be sensitive to local markets and cultural norms

Every country has its own unique identity and culture, so honing your cultural intelligence is critical, as well as understanding how business is conducted in your target market. In Colombia, for example, negotiation is expected when closing a deal and holding face-to-face meetings with prospects can mean the difference between winning and losing a sale. For cultural profiles of more than 100 countries, consult Global Affairs Canada’s Country Insights. You can also use Export Development Canada’s (EDC) Country Risk Quarterly to understand market risks and opportunities.

If you plan to hire employees, researching the local labour market is essential. Employment laws, benefits and entitlements are different from one place to the next. Does the market you’re targeting have skillsets that align with your needs? If you’re a software company setting up an international office, you’ll have access to an abundance of tech talent. Consult the experts. Start by networking with others who have already set up businesses in your target country. 

2. Know your tax responsibilities

All roads lead to taxation, so choose the structure that will allow you to comply with local regulations while minimizing your tax liability. This is a critical area—one with a lot of risk and complexity. Some countries such as the United Arab Emirates (UAE), Singapore and, yes, Canada, make it relatively easy for your business to avoid tax liabilities. But tax regulations in other countries make things far more complex and time-consuming. When planning to do business in countries where complex taxation rules exist, it’s crucial to have a plan for repatriating your profits to Canada. It sounds obvious, but there’s no point in selling your products in other countries, if you can’t bring the money home. An international tax accountant can help your company understand the pros and cons, depending on your target market.

3. Plot out your sales strategy

When it comes to sales, one size rarely fits all. An approach that works extremely well in one country, may be completely ineffective in another. Research your target market and adopt market-specific best practices, whether it’s partnering, franchising or having employees on the ground. Be cautious when using contract employees to sell your products and services. If your business is their only client or they carry your business cards, there’s a risk they’ll be deemed de facto employees, with rights and employment protection, depending on labour laws in the country where they tender those services. This could mean significant expenses associated with legal disputes, benefits payments, or tax liabilities. Learn the country-specific employment regulations to avoid surprises. Too many companies find this out only when they want to terminate the contract arrangement, and by then, it may be too late.

4. Know the laws and regulations

When doing business in another country, you have to understand the rules and regulations that will affect your exports. Each country has its own requirements for filings and submissions. The European Union (EU), for example, has extensive regulations in place to ensure that products being sold protect human and animal health, the environment and consumer rights. Because these types of regulations can be complex, you may want to outsource compliance efforts and other back-office tasks and functions to local experts to ensure compliance. For example, when exporting to the EU, new ESG (environmental. social and governance) reporting will be required starting in 2024.

5. Decide where and how to market

No matter what you export, a good portion of your marketing strategy will revolve around your online presence, including your website and social media channels. While you can execute your inbound marketing strategy from almost anywhere, there are benefits to having feet on the street. With one or more marketers working in the field, you’ll gather better market insights, build stronger relationships with partners and prospects and make it easier to have a presence at industry events. Do you need to send a marketing executive to the country in which you’re opening new facilities? Again, it depends on your business goals and the types of customers you’re trying to engage abroad. As a general rule, if you’ll be selling directly to customers in-country, a marketing presence will help you reach your business goals faster.