By Max Firth, Managing Director of Business Information Services at Experian
Growth and expansion for a company of any size can be both an exciting and daunting prospect. In days gone past, you would have typically associated an international footprint with larger enterprises, but with improvements in global trade agreements alongside developments in technology, it’s now possible for SMEs to look beyond British borders to the global marketplace. But whilst opportunity can prevail, there are also significant risks which you should consider prior to embarking on operations abroad to safeguard your company.
Do your homework
It may seem obvious but you really should do the necessary research on any market you consider launching into. From understanding the macro issues such as the political, social and economics of a country to specific details about local bylaws and competition. There’s a wealth of information you can access from your desk, but if you can, go and visit your chosen market to understand first-hand. This could be hugely beneficial when developing your company strategy.
Talk to the experts
There are a whole host of organisations who can provide guidance and advice; It’s worth speaking to trade advisors from organisations such as UK Trade and Investment and local chambers of commerce. More often than not, they will be able to put you in touch directly with organisations who have already expanded so you can learn from their experiences. They can also provide guidance on specific laws and export opportunities as well as provide in-country contacts through their own networks.
Respond rather than replicate
One size fits all is rarely true and a cookie cutter approach to your business model may be fundamentally flawed before you’ve even started. You simply can’t underestimate the cultural nuances that exist between different markets and how customers might react differently to your service or product. Entering at the wrong price point for example could mean you out-price yourself against the competition, or worse, minimise your margin.
Bank on your company abroad
Setting up an international revenue stream can be beneficial in managing your overall profit and loss and combating inflation on home soil. However, banking systems can vary dramatically from country to country, so take the time to understand the ins and outs. International payment fees can quickly add up when converting currency, so consider setting up a specific currency account to protect against fees as well as foreign exchange fluctuations. Also consider foreign exchange contracts which allow you to forward buy currency at a fixed rate so you’re not exposed to the daily ups and downs of the currency market.
Minimise your risk
Just as you would check the credit rating of any supplier, partner or customer at home, the same rules apply overseas. To help reduce your risk exposure, consider accessing an up-to-date international credit report through Experian Business Express which provides access to millions of companies worldwide. Not only will this help you assess a company’s credit history, but it will allow you to set appropriate payment terms and credit limits for customers.
Understanding the small print
Corporation tax, value added tax and local taxes can take their toll on any new company so it’s worth you being aware of the tax guidelines before entering a market. Equally the legal landscape can be hugely diverse from market to market so it’s important to understand contracts, the tax system and how to safeguard your intellectual property. One way is to speak directly to an accountancy firm that has experience in working with companies abroad as they will be able to provide the best advice for any particular market.