When your export trade grows to the point where you want an overseas office, there are important considerations before you open the doors.
Once your exports overseas start to grow, how do you grow your business? If you decide to open international operations, there are plenty of decisions to make. Too often, fast-growing companies make the decision to open international offices one day and start looking for staff the next. You need to give yourself time. Expect the process of selling in a new country to take longer than you think. Although it’s impossible to say how long it will take (it varies by business and jurisdiction), SMEs routinely underestimate how long it will take to start doing business abroad.
Prepare to invest more time, money and patience in getting to know your target market before opening there. International expansion is more like raising a child than having a baby. It’s not a project you will start and finish within a year.
Here are the five basics anyone considering opening a foreign outpost must consider:
1. Be sensitive to local markets and cultural norms
Don’t judge other countries by Canada’s yardstick. Each country (and even each state in the U.S.) has its own identity. Employment laws, benefits and entitlements, data-protection regulations—they’re different from one place to another. And employee expectation of what they will get from the job, even their loyalty to you, will vary. In Brazil’s hot employment market, staff will leave for another job even if it pays only 5 per cent more. Consult the experts. Start by networking with others who have set up in the country you’re interested in. The Canadian Trade Commissioners Service offers lots of advice about doing business overseas. And seek out accounting, global payroll and international human resources experts as well.
2. Know your tax responsibilities
All roads lead to taxation, and the key for your business is to choose an entity structure that will allow you to do business in compliance with local regulations while minimizing your tax liability by as much as possible. This is a critical area—one with a lot of risk and complexity. Some countries, such as the United Arab Emirates, Singapore and, yes, Canada, make it relatively easy to acquit yourself of tax liabilities. But tax regulations in others, such as Brazil and China, are far more complex and time-consuming. And consider how you will repatriate your profits to Canada. It sounds obvious, but it’s no good selling the doors off in other countries if you cannot bring the money home.
3. Plot out your sales strategy
One size never really fits all. Take the right approach in each jurisdiction through partnering, franchising or having employees on the ground. Be cautious of using “contractors”—if you are their only client or they carry your business cards, there is a risk that they will be deemed de facto employees, with rights and employment protection. Too many companies find this out only when they wish to terminate the contract arrangement.
4. Know the laws and regulations
When you enter a new country you have to understand what rules will affect your exports. Will you need to outsource any compliance work in your export market? Lessons learned in one country are rarely applicable in another. Each country has its own requirements for filings and submissions. For example, the European Union has extensive rules governing what certification you need to sell in shops there. If you want to focus on growing your business, you probably should consider outsourcing much of the back-office tasks and functions to ensure you stay out of the penalty box. I hear from executives all the time, who complain, “I don’t know what I don’t know.”
5. Decide where to and how to market
Do you need to send an executive, a sales rep or a marketing person to the country in which you’re opening new facilities? Here again, the answer is: it really depends upon your business goals and upon the types of customers you may have abroad. However, as a general rule, if you will be selling directly to customers in-country, you need to establish an entity.
Tom Gardner is the Canadian country manager for High Street Partners, a premier provider of international business software and services. Its solutions help organizations capitalize on their global growth opportunities by simplifying the management and control of international expansion and operations. He can be reached at firstname.lastname@example.org.
See also: Invest in foreign markets