Tax and financial preparation
Proper tax and financial infrastructures must be in place from the outset to ensure that you are receiving timely reporting and that your foreign entity is complying with local corporate policies and procedures.
- Consider outsourcing accounting, payroll, and taxes.
- Establish local banking relationships.
- Develop a risk management plan.
- Develop a transfer pricing study.
- Develop a cash repatriation plan.
- Prepare and report sales and VAT taxes.
Prepare your final budget
The results of the steps above should provide enough data for the foreign company’s stakeholders to put together an aggressive but achievable final budget owned by their local team.
- Develop a 3-year budget and 12-month business plan with detailed key performance indicators and update every 6 months.
- Perform quarterly operational reviews.
- Set a budget in real-time (or at least weekly) for the actual report with an analysis of variance.
Establish close relationships with local businesses
Gain a strong competitive advantage by creating a supporting ecosystem of complementary products and services, which can come through third-party relationships. These relationships can support the scaling of the organization while minimizing financial risk.
- Negotiate alliance/partner/distributor programs.
- Develop an ecosystem strategy and business model.
- Build an internal alliance team to manage and nurture relationships.
Develop a flexible corporate mindset
Unlike traditional standards of corporate practice, your organization needs to be prepared to quickly adapt to changing market conditions and local government regulations, with your legal and finance teams embedding this as part of their corporate DNA.
Try to hire people who are familiar with the culture and language of the target market, while creating reduced bureaucracy within the company and operating as a “flatter” organization to allow the business to adapt faster and more easily. to each international market.
Before you make the leap, take the time to conduct foreign market research with your local competition and identify the most practical international markets where your product or service will truly fill a need.
Visiting the department of commerce of the country you wish to expand to is a useful means of gathering more general knowledge about foreign markets for goods and services from that country.
Initially, try to find markets with easier barriers to entry before exploring more challenging markets.
Confidence in cultural immersion
Aside from fully immersing yourself in your target market’s local news, politics, and influencers, and on-the-ground happenings yourself, explore hiring local business ambassadors who can advise you and your business in every detail to better understand and grow your business.
Businesses change quickly, but you must stay aware of the business pace of winning in other markets.
Having a local presence within your target market will guide you through all the changing dynamics and laws.
Just like any other market, there are different tax codes and compliance issues you need to follow, as well as special income reporting requirements.
Additionally, labeling and packaging standards rank as other hurdles you may need to consider depending on your product or service.
Each country and region has its own set of rules and procedures, so there is no other way to stay on top of these changes than to hire locally.
Rethink your funding source
Financing your international expansion can be a challenge. Do not rely on foreign banks as a source, as they often require a local ‘presence’ , are more expensive and can be fraught with risk.
Instead, try working with your existing bank and taking out loans abroad.
Banks often entertain these types of loans with slightly lower advance rates compared to domestic receivables, as long as you get the foreign receivables in advance.
Another back-end alternative could be available if it is a branded client in that the client’s claims could be factored and converted into immediate cash by local financing companies in the country for relatively nominal (recourse) rates.
Market Research
You’ll want to spend a significant amount of time looking at local spending habits, as well as how much time, energy, and capital will be spent marketing your products or services.
If feasible, try to set up a trial or conduct surveys before investing a lot of capital. Don’t overlook how much you’ll have to pay employees, or what work habits are like those in your own country.
The Incorporation Process
The International Finance Corporation and the World Bank have a great page that compares the costs, amount of time, and a number of procedures involved with forming a business in 183 countries around the world.
The page is specifically for businesses with between 10 and 50 employees but can be a useful tool for those looking for smaller or larger operations.
Some examples:
- In New Zealand, you can form a business in a single day with minimal paperwork (two days in Australia).
- In Panama and Chile, creating a business involves six or seven procedures and can take less than two weeks.
- In Portugal, the process may take as little as five days and involve as few as five procedures, but the overall economic outlook in Portugal is not so promising.
- In Singapore and Hong Kong, setting up a company involves three procedures that can be completed in three days. Opportunities exist, but startup costs could be high, depending on your type of business.
- In China, due to tedious bureaucratic processes, setting up a business is not an easy task; that is why there are consulting firms that help foreign companies to establish themselves; through solutions for the employment of local personnel or the creation of companies in China.
Spending thousands and thousands of euros on a business degree or an MBA is not the only way to prepare for opening and operating a business abroad.
While studying the business can be rewarding, the years you spend in the classroom could be productive, income-producing years, if you select your market and jurisdiction carefully.
Starting your own business abroad will certainly require due diligence and careful consideration of the factors listed above, but with less than €1,000 USD, becoming your own boss may not be as difficult as you might think.
For the years to come, small businesses should be planning to take a leap of faith and reinvent their business models to grow across borders.
Small businesses have as much potential as multinational companies to embark on the adventure of being part of the globalized economy and create a positive impact on the bottom line.
Expanding your business abroad is not for the faint of heart, but for most companies, it will be unavoidable as global markets offer greater opportunities for growth.
By paying attention to the details and outsourcing administrative functions, the hard work of “going global” can yield big results. custom stickers
