Going Global – The First Steps
Many businesses are attracted by the benefits of expanding internationally but what should you consider before taking this big step? In this article, experts from Russell Bedford member firms give their insight into key areas of focus for any business thinking of going global.
Developing your strategy
As business becomes ever more globalised, many businesses will consider whether expanding internationally makes perfect sense. Before taking this step and investing heavily in an overseas presence you should first:
• evaluate your business to test readiness
• clearly define a strategy that supports your reasons for expansion
• understand your market.
Evaluating your business
Going global is a big commitment that can take your business into an unfamiliar political and cultural environment. Before doing so, you need to be sure that your business at home is working well and can provide the funding you need to expand overseas. You can explore other sources of funding, but you will need to demonstrate that the impact on business cash flow is manageable, supported by detailed analysis and forecasts.
Defining a strategy that supports your objectives
Aside from improved profitability and competitiveness, businesses will have different motivations for expanding overseas. Some may look to diversify their income streams by expanding their customer base and better serving customers in their chosen region. Others may look to take advantage of lower labour costs and a diverse talent pool. Whatever your reasons, identify your target market and formulate a strategy to exploit that market in a way that doesn’t jeopardise your business at home. Your international strategy must always align with your overall business strategy.
Understanding your market
Market research is vital, not just from a business and competition view but also from a legal, compliance, and political standpoint. Language barriers can also affect how you formulate your strategy – don’t assume everyone is willing to deal in English and be prepared to tailor your marketing material to local needs.
To succeed in your chosen market you need to support your strategy with measurable key performance indicators (KPIs). Design your KPIs to deal with both short-term and long-term requirements and be prepared to adjust your plans to adapt to a changing business environment.
Tax planning and legal considerations
Most business owners will view international expansion as risky because it takes them outside their business comfort zone. Ensure you develop an international toolkit that covers:• risk and legal framework• customs implications• international taxation implications.Your business will need the knowledge and skills necessary to overcome the obstacles it will encounter. The more active you become in overseas markets, the more important managing risks becomes. This will test your business’s resilience and its ability to minimise the impact of any disruption. Familiarise yourself with the support available from local and international institutions in case you need them.Ensure you are familiar with the laws applying in your chosen region. Don’t fall into the trap of assuming that what works at home will work everywhere. Instead, examine the general rules of international law, together with local laws, even if you think your requirements aren’t that complex.Any cross-border trade requires an appreciation of customs duty and VAT rules and processes. Keep all evidence of exports; local tax authorities will oversee VAT-free exports to ensure compliance.International tax strategies that exploit the gaps arising from overlapping non-coordinated national tax systems require specialist knowledge of local taxation systems. This will be even more relevant when dealing with transfer pricing issues between, for example, the headquarter and foreign subsidiaries. In any case, it makes sense to seek advice from local professionals.In summary, going global can have a transformative effect on a business but only if you’re well-prepared and informed. At the same time, you must not lose sight of your home business and any potential impact that may arise from your international expansion objectives. To succeed globally you need to be sure of your strategy and have a good understanding of the local market trading conditions as well as legal and taxation requirements. When in doubt, seek advice from local experts.