For most entrepreneurs, building and maintaining a local customer base is one of the first steps on the road to success. Once they have achieved this goal, some business owners feel they're ready to take on the next step: expanding internationally.
Becoming a global company is an impressive feat, and not every business that sets out to do it accomplishes the goal. To successfully convert your business from domestic to international, you'll need to consider a new set of factors that might not necessarily affect a local-only company. International business experts shared their insights on what it takes to break down your company's national borders and run a multi-country operation.
Are you ready to go global?
Creating a strong international presence is rarely as simple as telling your customers you ship overseas and then waiting for the sales to roll in. There are numerous things to think about when selling and marketing in another country, and these factors must be considered carefully. Ask yourself the following questions to determine whether your business is really ready to expand.
Have I ensured that a customer base exists in the country or countries I want to enter? A product that sells well in your home country may not necessarily have the same appeal elsewhere, so it's crucial to invest time and energy into researching potential foreign markets.
"First, make sure your customers exist," said Joseph Paris, Jr., chairman of business consulting firm XONITEK and founder of the Operational Excellence Society. "Is there a need for your offering? Are they inclined to purchase? Don't think that they might — know that they will."
Mike Zani, CEO of business consulting firm PI Worldwide, advised traveling to the country or countries you want to expand into to really do your homework and get a first-hand idea of how your business will fare. This will give you the opportunity to not only conduct research and test your product in the foreign marketplace, but also to experience the culture and social norms of the people you'll be marketing to, he said.
Is the foreign market I'm looking at compatible with my own market? Michael Lee, head of international marketing and business development for e-commerce platform Alibaba.com, advised looking for markets that are similar to yours. While the business environment won't be identical to that in your home country, you should make yourself familiar enough with it that you can ensure smooth, seamless business discussions.
"Take into consideration trade barriers, proximity, currency and culture," Lee said. "Seek out homogeneity — the fewer differences between your country and the one you export to, the easier it will be to do business with [that country]."
Do I have the available resources and staff to focus on both expansion and my established business? Trying to juggle an overseas operation while maintaining your current domestic customer base with a small staff is incredibly difficult, and you likely won't be able to sustain your growth. Before you decide to expand, make sure you have the financial and structural stability to add staff members who can handle the new influx of work that comes with such growth.
"An organization should have a strong team solely focused on international growth that is ready to face challenges and fully support the expansion," said Taki Skouras, co-founder and CEO of international wireless accessories retailer Cellairis.
The challenges of international business
While the international market may be a perfect target for your business, expanding beyond your home country isn't without its challenges. Here are a few that you'll need to prepare for.
Language and cultural barriers. Selling to customers or working with vendors who don't speak your native language can be a significant obstacle for any business owner. That's why Skouras recommended hiring bilingual staff members who can easily translate back and forth.
"If you don't have the budget for full-time translators, outsource tasks like overseas customer service and translation of promotional materials to freelancers," Skouras said.
Beyond language, differing cultural norms may also stand in the way of a successful business expansion, if your company doesn't respect them. Lee advised entrepreneurs to research cultural practices in the countries they plan to expand into, especially as these may relate to the company's product or service. Foreign customers' and business partners' needs may not be the same as those of your domestic stakeholders, and this could affect your sales, marketing and overall business strategies, he said.
"You will have to understand the different ways people communicate," Paris added. "For instance, in northern Europe, there is far less 'chit-chat,' and you might feel that the party is being blunt to the point of rudeness — this is not the case. In southern Europe, there is a lot of personal conversation and activity before business issues are addressed, and cutting to the chase is seen as being impatient."
Tax codes and compliance issues. If you think it's difficult to navigate the various tax codes and business regulations from state to state, try selling in another country. Paris reminded entrepreneurs that the United States taxes worldwide income, and the IRS also imposes special reporting requirements on this income. Additionally, foreign banks may be hesitant to deal with a U.S.-based account due to the administrative burden, so you might need to set up a separate, foreign business entity and bank account to make handling transactions worth while for the banks.
Paris also noted that other countries have different labeling and packaging standards that you may need to comply with, depending on what you sell.
"In the states, the instructions you include with your product will be in English — sometimes Spanish or French," Paris told Business News Daily. "But in Europe, your instructions, even for the simplest product, will be in multiple languages, sometimes up to 24 languages. If your product is sold more regionally, you will have to consider the increase in packaging cost associated with labeling. In addition, your product will have to be certified as safe [by those countries' standards]."
Slower pace. In America, the business world moves pretty quickly. Executives and even lower-level employees work day and night, making appointments and closing deals long after they've left the office for the day. David Hellier, partner at Bertram Capital and board member of ACG New York, told entrepreneurs that business doesn't move at the same pace in other countries; building relationships is a long-term commitment.
"Overseas, doing business is as much a personal event as it is professional," added Bill Bardosh, CEO of green materials and chemicals company TerraVerdae BioWorks. "You may be able to broker a deal just through formal business meetings [at home, but] in China and the Far East, it is necessary to spend extensive time getting to know your counterparts outside the boardroom during tea sessions or dinner banquets, for instance. Things will always take longer to be resolved overseas, but that isn't necessarily a sign of a lack of momentum — you have to be patient and prepared for multiple interactions to build trust."
Local competition. It's not always easy to convince a foreign customer to purchase your company's product when there's a comparable product available that's made in the customer's home country. While some big-name U.S. chains like McDonald's and Starbucks have clout overseas, small and midsize companies need to work a little harder to convince the international market that their brands are trustworthy and better than the competition.
"Why would [customers] buy from you over the local champion?" Paris said. "Can you penetrate the market? If you do, can you be profitable under the circumstances? Is the juice worth the squeeze?"
Advice and best practices
If you feel you're ready to tackle the challenges of international business, follow this advice from business leaders who have been there before.
Find the right partner(s).When you're expanding your business, it's critical that you don't try to go it alone. Even if your "partner" is in the form of a mentor, you'll need the help of someone you trust, who can vouch for you in the country or countries you're looking to break into.
"You need someone who has a passion for your brand, understands ... the local market, has experience in the [industry], has capital needed to grow, and ideally has additional businesses where he or she can leverage shared resources," said Jim Rogers, chief marketing officer of Tony Roma's restaurant franchise.
Hellier emphasized the importance of setting expectations when seeking foreign business partnerships, and really sticking to them.
"Know what you want in a business partner or acquisition, and have a clear understanding of expectations," Hellier said. "Sticking with those expectations ... will help avoid aligning with the wrong partner or investing in the wrong business. Oftentimes, businesses will give up too much to a partner just to get into a new market or country. You don't want to be stuck with a bad partner."
Hire a great team. The need for help "on the ground" also extends into your hiring practices. The people you hire to deal with your overseas business partners and customers must be fully immersed in the local environment, but you also need to be sure they'll be looking out for your interests.
"The foreign companies that you may deal with probably have more experience doing business in the U.S. than you have in their country," Bardosh said. "Without a core team on your side with the necessary cultural, language and local business contacts, you'll be competitively disadvantaged."
Consider the impact of any new ideas. Introducing a new product or marketing campaign becomes a whole new ballgame when you operate internationally. Instead of only thinking about how your own country's customers might receive your new ideas, you'll also need to think about and accommodate for the impact these ideas will have on your foreign customers.
"As you 'spitball' new ideas, someone definitely needs to think about scalability to your international territories — usually you," Zani said. "Time zones, language and cultural appropriateness all need to be considered when you branch out internationally. If you don't do this ahead of time, you run the risk of offending your international partners by appearing to be more concerned about yourself [than] them."
Remain consistent in branding, but adapt to the environment. As mentioned above, varying cultural norms and customer needs in foreign countries may require you to adjust your sales approach, or even your whole product. Rogers noted that while you must stay true to your overall brand, it's important to tweak your product (or menu, in the restaurant industry) slightly to account for local tastes.
"[Allow for] appropriate localization and flexibility to adhere to local customs and customer needs," Rogers said. "One of the key areas to adjust is with [material] sourcing. If you can maintain quality, local sourcing has the opportunity to improve cost margins and supply-chain reliability."
Always do your due diligence. Any major business decision requires taking the time to think through all possible scenarios based on your business' strengths and weaknesses, but this is especially important for international expansion.
"Research each aspect of your business strategy," Lee said. "Explore alternatives and safeguards. Do as much as you can to understand the markets you are entering, and take your time to get it right."