New Year, new market!
Published on 19th Jan 2016
Firstly, happy new year! I hope that 2016 is successful for you and your business.
We often find that with the new year brings new budgets and strategies, which often include expanding into markets overseas. With that in mind, I thought I’d start the year with my 2016 Top 10 issues to use as a checklist when considering expanding into a new market…hopefully to save you time but also to enable you to focus on issues that are often key to businesses extending their product or service across borders:
- Which market? This one is really obvious but it’s amazing how many people fail to adequately consider the market they are planning to enter. Over the last few years, expansion has often been driven by customers asking for local presence or access outside your main place of business. However, before making the decision to add a dot on the map, do your research. Many countries have government supported agencies with information and data which can be very useful to ensure that the destination will be a suitable host and market for you.
- Which people? This is often a challenging one. Do you open your new office with a local hire or relocate one of your trusted co-workers from your home office? Ideally both, but often budgets don’t extend that far. Since most overseas offices open for sales (particularly in Europe), it’s worth checking the overseas market for suitable talent…but do it properly and with appropriate guidance, in the same way that you would recruit carefully at home – don’t just make an offer to the first person you meet that happens to live in your new market! If you do relocate a colleague, ensure you check the immigration policies and put in place appropriate secondment documentation agreeing how long they will be posted overseas and what terms apply to that placement (including the length of term).
- Why? Do you actually need a physical presence? Often this will accelerate your sales and allow you to benefit from an overseas network, but be aware that it is sometimes possible to do business remotely – although remember that compliance with local laws and regulations will usually equally apply whether or not you have a physical presence.
- Do the numbers. Budgeting is key – and it needs to be realistic. How much will it cost, what are the contingencies, how long is the initial trial period? All of these are difficult to know before entering the market, but local advisors can provide some decent guidance on how others have managed the cost. Also bear in mind that building sales pipeline can take longer depending on local culture and market approach, so don’t expect new clients to appear at the same rate as you would in your home market.
- Understand the culture. A different market means a different culture (often even within the same country). That means realizing that your successful sales and marketing approach in the US may not work as well overseas. It might also mean understanding a different approach by your employees or the significance of public or religious holidays.
- Understand the timezone. I hear this complaint a lot! Very often employees in a different part of the world will need to work their full day and then much of your day too! Taking this flexibility for granted will eventually mean they will leave, so appreciate their willingness to join an early morning or late evening call, but take some time to consider whether it is necessary and/or whether you can accommodate their timezone on other occasions.
- Regulations. Much has been discussed about European data protection in the last few months, but there are numerous consumer, tax and employment laws which impact on all businesses irrespective of the location of their headquarters. Getting on the wrong side of a regulator or a consumer activist is not a great way to start a new business in a new market.
- Taxes. Local taxes may be payable and certainly greater scrutiny is being placed on where global businesses are recognizing their revenues and profits. Many countries offer tax incentives for some of their taxes which can be considered when profits are being taxed…often it takes a year or two to get to that point. Bear in mind that sales taxes can vary also and online businesses are far from exempt (and often need to account for local rates in local currencies: very often inclusive within prices quoted).
- IP. Many tech businesses place great value in their intellectual property and we’ve all read about the giant corporations suing each other around patent infringements. Bear in mind that separate protection will be needed outside the US (some which can be registered on a regional basis) but that no all IP that can be registered in your domestic market is registerable overseas. Appropriate advice should be taken early (and often before you even plan to expand overseas).
- Flexibility. Finally and fairly obviously, taking a flexible approach and accept that management time will need to be spent in nurturing the new employees, the new market and the global opportunity. It takes time in some countries to get up and running – patience is definitely a virtue and sometimes a sense of humour is even better!
Best of luck with your plans for the year!