After you've built a loyal national customer base, expanding internationally might be the next step to keep your business growing. Becoming a global company is an impressive accomplishment, but not every business is cut out for the challenge.
There are many things to think about before you sell and market your products or services in another country. For instance, do you have a potential customer base in the foreign markets you want to enter? A product that sells well in your home country may not necessarily have the same appeal elsewhere.
"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."
For this reason, Michael Lee, head of international marketing and business development for ecommerce platform Alibaba.com, recommended looking for markets that are similar to yours. While the business environment won't be identical to your home country, you should be familiar enough with the market for smooth 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]."
The challenges of international business
No major business decision is without its hurdles, but expanding internationally comes with its own unique set of obstacles. Here are some challenges you should prepare for before going global.
Language and cultural barriers
Taki Skouras, co-founder and CEO of international wireless accessories retailer Cellairis, suggested hiring bilingual staff members who can translate for your company. “If you don’t have the budget for full-time translators, outsource tasks like overseas customer service,” Skouras said.
Differing cultural norms is another obstacle. Lee suggests researching cultural practices in the countries you plan to expand into. Foreign customers' and business partners' needs are probably different than those of domestic stakeholders, he said.
"You will have to understand the different ways people communicate," said Paris. "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
Learning the different tax codes, business regulations and packaging standards in different countries can be challenging. Paris reminded entrepreneurs that the United States taxes worldwide income, and the IRS imposes special reporting requirements on this income.
Foreign banks may also be hesitant to deal with a U.S.-based account due to the administrative burden, so you may have to set up a separate foreign business entity and back account to make handling transactions worthwhile for the banks.
Further, packaging standards are different from country to country. In the states, companies only need to include directions that are in English and maybe Spanish, said Paris. "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]," he wrote.
In America, the business world moves quickly. David Hellier, partner at Bertram Capital and board member of ACG New York, noted 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. "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."
It’s not easy to persuade a foreign customer to trust your brand when a similar product is made in their home country. While some big-name U.S. chains have clout overseas, small and midsize companies need to work 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?”
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 in your shoes.
Find the right partner(s) and team.
If you plan on expanding globally, you'll want a great team and partner. Even if your "partner" is in the form of a mentor, you'll want someone you trust and who can vouch for you.
"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.
The people you hire to deal with your overseas business partners and customers must be fully immersed in the local environment but should also 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.
Instead of only thinking about how your own country's customers might receive your new ideas, you'll need to think about how foreign customers will receive your ideas.
"As you 'spitball' new ideas, someone definitely needs to think about scalability to your international territories – usually you," said Mike Zani, CEO of business consulting firm PI Worldwide. "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.
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 should stay true to your overall brand, it's important to tweak your product offerings 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.
Before making major business decisions, you should think through all possible scenarios – especially during international expansion. Zani advised traveling to the country or countries you want to expand into and get a first-hand idea of how your business will fare. This will give you the opportunity to conduct research and test your product in the foreign marketplace, he said.
"Research each aspect of your business strategy," Lee added. "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."
Additional reporting by Nicole Fallon. Some source interviews were conducted for a previous version of this article.