If your SME is very successful, you may have considered expanding internationally. To make that dream a reality, you must conduct thorough research and develop a sound business plan. This can be a difficult task. Here, we describe a number of crucial factors that you must consider as you plan to grow your business globally.
Evaluate the Feasibility of Entering and Succeeding in Different Markets
There are a number of ways to evaluate the market that you plan to enter. First, it is helpful consider the size of the market as a whole. Of course, GDP is an easy measure for the market size of an entire nation. Depending on your product you may want to consider the population density of a given city, or internet accessibility nationwide.
However, there are important nuances that you must consider before entering a new market. For example, you will want to identify if the major players in your industry have market dominance. Is your target market already dominated by a few businesses or crowded by many companies competing for market share? If either is true, you must be able to justify why you will have a competitive edge against the local players.
Do You Have Sufficient Financial Resources for Expansion?
Once you have an idea of the market that you want to enter, it is essential to consider expansion costs. These costs can include office rent, transportation, equipment, office supplies and professional services (legal, marketing, recruiting, etc.). If your business has enough profits and savings to meet its expansion costs, then it can pay for the expansion itself. If not, your business should consider other financing options like taking out a loan or receiving investments.
Operating Cost Can Vary Depending on Local Conditions
Expanding a business to a new country presents new operating costs. First, you must include the corporate income tax into your cost projections. It is also important to understand any national or local sales and VAT taxes as these will affect the ultimate price that your customers pay for your product.
Additionally, you must consider the cost-of-living in a new city. This will affect how much your employees expect to be paid. Real estate prices may also be relevant if you plan to buy or rent real estate for your business’s new location.
Finally, you should have an understanding of borrowing costs. This is especially important if you plan to borrow in the country to which you plan to expand. To get a get an idea of how this will affect your costs, research interest rates for various loan types that might be relevant to your business.
How Will You Staff Your New Operation?
If your expansion will require hiring new employees in a different country, you will want to ensure that you are able to find qualified candidates. There are a number of ways to do this. Most importantly, you have to first find the manager who can help you build and scale the operation in the new country. The best candidates will likely arise internally or through your network, though it could also be helpful to contact a professional recruiter in your prospective market to discuss the availability of talent. Finding someone who is fluent in both language and the culture of the local market is crucial in helping you communicate with clients, suppliers, and government officials in the country.
Conduct a Thorough Due Diligence on the Local Legal Requirements
Before rushing into international expansion, it is prudent to make sure that you understand the laws for businesses in the country of which you plan to expand. It may be helpful to hire a lawyer that can thoroughly examine the tax and registration laws as well as compliance requirements for international businesses. It is imperative to fully understand the legal environment and plan for any associated costs before making plans to to expand. After all, you don’t want to spend hundreds of thousands of dollars over 6 months just to find out you can’t sell any of your products for another 6-12 months.
The article 5 Factors to Consider Before Expanding Your Business Internationally originally appeared on ValuePenguin.
More From ValuePenguin:
- Best SME Loans for Small Businesses 2018
- Best Countries in Asia Pacific for Startups
- How to Get the Best Loan for Your Small Business