For the successful small business owner, taking your idea abroad can seem a natural next step from domestic dominance. But setting up in another country isn’t always as easy as having a good product and a substantial sum of money. Here are five things you should think about before you pack your bags.
Culture
Foreign businesses often face the extra hurdle of consumers wanting to ‘buy local’. Sometimes overcoming this is as simple as having the superior or cheaper product, but in a crowded and competitive market, maintaining that can be difficult. Instead look to emphasise the things that make your business unique. Play on your ‘invader’ status as being more distinguished or exotic.
Take Pabst Blue Ribbon: considered a budget beer brand in America, the company successfully rebranded in China as a high-class import. Don’t be deceptive – people can see through this more easily than you might think – but if your product or service has an attribute that makes it unique, don’t be afraid to emphasise it. And if your business has a certain image you’d rather it didn’t have, moving it abroad can be like changing schools: a chance to reinvent and revitalise.
Likewise, be careful to research what local consumers actually want – and more pertinently what they don’t want. We’ve all heard the stories about poor translation putting curse words or slang into company catchphrases, and common English words having amusing foreign analogues. Run your ideas past a specialist, test the water with an AdWords campaign, or leave it to local staff and seek feedback. You might not get the same immediate impact of a well crafted slogan in English, but it’s probably better to build an audience than become an instant figure of fun.
Competition
Your idea’s brilliant, I’m sure of it. It’s been successful so far! But other countries bring their own unique landscapes and their own competitors to the table. Take car-sharing goliath Uber: having had great success with rapid expansion across America, they decided to jump into China with minimal research. But when they got there, they found similar companies were already offering much the same service. Facing competitors funded by giant domestic interests, and lacking the same endearment or clout with local government, Uber recently announced that they were selling their Chinese arm despite it generating 30% of their global business.
The opposite might even be true: some countries might not be equipped for massive uptake of a digital service, for instance. These appearances can be deceiving: Japan for instance has almost total smartphone penetration, yet businesses still use fax machines, and bank cards only work in certain regions. Your idea of the services people use and the way people use it might be perfectly applicable in your home country, but completely alien to another ‘advanced’ nation. The safest places to expand are often the most familiar – the US, UK, Australia and New Zealand all share obvious links – but in-depth research ahead of time is always advisable.
Money
Not everything's about money, but when it comes to branching out your business, having the cash to lease a building, invest in equipment and pay staff is pretty important. Different countries will have different visas for investors, each with their own requirements. In the US, immigrants can stay for up to two years with a “significant investment” in a business – usually around $100,000 – or invest $500,000 and become a fully-fledged American citizen in five years.
There are also unforeseen costs to take into account. Once you’ve set up, you may realise that a law requires you to comply with specific safety standards; or you might find that the local internet isn’t fast enough, and have to invest in a fiber-to-door connection. Part of securing a visa is proving that your business is viable, well researched and has plans for long term growth, so having the funds to cover a loss or an unexpected cost is a sensible contingency.
You may even want to consider finding a business partner. Having someone from the country invest in your business and giving you advice can make the transition more seamless, gaining valuable advice and opening the door to further investment and cooperation.
The law
Businesses are often the first to complain about red tape, and international IP protection has long been the standard bearer for seemingly needless frustration. Almost every country in the world has its own IP office, and registering your trademark, design, copyright or patent in one country leaves every other territory unprotected. While agreements have been struck to simplify this process for many of the largest trading nations, it can still involve a lot of legwork.
Most global trademarks are covered by the Madrid Protocol, while Europe is also catered to by the European Union Intellectual Property Office (EUIPO). Patents are covered by the European Patent Office (EPO) and Patent Cooperation Treaty (PCT), while copyright is attended to by half a dozen major conventions and treaties, the largest of which is the Berne Convention. Designs are covered by the EUIPO, but more difficult to enforce outside of Europe.
Another thing to consider is how laws might affect the operation of your business. Your workplace will have to conform to certain legal standards, tax laws will differ, and the fundamental operation of your business might even be under threat. When Uber expanded into France and Germany, they never imagined that the countries’ systems of civil law would give competing taxi companies an edge, classifying Uber’s service as physical rather than digital. Questions have also been raised about the legality of Airbnb’s holiday rentals, with various cities demanding extra tax payments, or preventing short stays in private accommodation altogether. Again, it’s worth taking the time to research not just whether your premises and day-to-day operations are above board, but whether you need to change your approach altogether.
Franchising
If you’re already overwhelmed by operating one business, well, maybe you shouldn’t expand at all. But a good compromise can be franchising: leaving all of the day-to-day operation of your foreign business to a local franchisee. In this instance you get all of the benefits of owning an international brand while mitigating the risk of direct investment.
You still have to attend to things like the supply line, securing trademarks and negotiating local franchise disclosure laws, and you’re leaving a lot to the ability of the individual. But for businesses that are still growing domestically and see an opportunity to beat the competition abroad, delegating responsibility – and much of the brunt of funding – can be the only viable way to expand internationally.
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As the founder of Open A European Company, Heather Landau has honed her skills in service advisory from the pragmatic to the practical. With a total of 25 years combined experience in international marketing and business development, Heather is a leading voice on company formation in Europe, and operates similar services across North America and the rest of the world. Prior to SAAC, Heather worked in the IT research industry, selling research solutions to the likes of Hewlett Packard, IBM, Microsoft and Intel, as well as information providers Reuters. On top of her knack for helping SMEs develop into the USA, Australia and Europe, Heather holds a BA (Hons) in Modern Languages (French/Italian), and is conversational in German and Spanish.