Choosing the best target country to do business

Choosing the best target country to do business
24 Nov 2017

Doing business abroad is always challenging. Whether you are setting up an entity or just testing the market, there are many considerations involved. Here are a few things that companies should keep in mind before venturing overseas in order to help them choose the best target country for them. 

Location

Location matters. Every year the World Bank Group issues a report on the ease of doing business in 189 countries. Although the real situation may vary, it should serve as your general business guide for location. The annual report analyses the different economies’ state of health and underlying characteristics, which include their regulatory systems, the efficacy of their bureaucracies and the nature of business governance in particular.

For example, Singapore is ranked the best country to do business with and is one of the top 10 locations that international organisations choose to set up their Asia-Pacific operations. The citystate is strategically located and has excellent financial infrastructure. It also has a simple and business-friendly tax system. Strict regulations regarding the protection of intellectual property also make it appealing and it is at the centre of the fastest-growing economic region in the world.

Location matters for many reasons, but there are three that stand out. Firstly, it is generally desirable to set up operations quickly. Secondly, you want to be able to access a number of markets from one convenient location. Finally, it is preferable to avoid timeconsuming bureaucratic red tape. So choose wisely.

In-house knowledge

Evaluate how well you know your new business location. If you are a US company opening a new office in Singapore, for instance, you may not find it too foreign or difficult to adjust. On the other hand, if your target destination is a country where English is not widely spoken and the cultural and business environment is completely different, it could be useful to obtain the help of a local consulting firm. If you are entering a market of which you have little to no knowledge, also consider recruiting nationals. Local people will understand the market and can help you avoid speed bumps.

Challenges

With new opportunities come new challenges. These challenges range from small changes to monthly payroll reporting procedures to significant shifts in regulation. The more you invest in your new operations, the bigger the stakes. But some governments are better than others at informing businesses of regulatory changes. Therefore, for the most part, do not expect them to take the initiative and be sure to evaluate how accessible such information is likely to be in your target country.

Costs of doing business abroad

It is expensive to do business abroad if you are setting up a foreign subsidiary. Each country varies, but the initial costs alone will set you back an average of about $40,000, plus the executive time it takes to work through the process. On top of that, there are yearly costs involved in maintaining the entity itself and that doesn’t include the cost of employing people either. So be sure to factor this point into your final decision.

 

Ben Wright, CEO at Velocity Global, has over a dozen years of experience in helping companies expand overseas. Building on his experience as a Certified Public Accountant, leader of an interim finance executive firm, and having global partnership responsibilities at an international services firm, Ben has become a recognised thought leader on international back office operations. He frequently speaks on international business panels and travels globally to present on topics such as international employment, permanent establishment, global payroll, and expatriate assignments. He is a graduate of the University of Notre Dame and is passionate about helping companies succeed globally.

Doing business abroad is always challenging. Whether you are setting up an entity or just testing the market, there are many considerations involved. Here are a few things that companies should keep in mind before venturing overseas in order to help them choose the best target country for them. 

Location

Location matters. Every year the World Bank Group issues a report on the ease of doing business in 189 countries. Although the real situation may vary, it should serve as your general business guide for location. The annual report analyses the different economies’ state of health and underlying characteristics, which include their regulatory systems, the efficacy of their bureaucracies and the nature of business governance in particular.

For example, Singapore is ranked the best country to do business with and is one of the top 10 locations that international organisations choose to set up their Asia-Pacific operations. The citystate is strategically located and has excellent financial infrastructure. It also has a simple and business-friendly tax system. Strict regulations regarding the protection of intellectual property also make it appealing and it is at the centre of the fastest-growing economic region in the world.

Location matters for many reasons, but there are three that stand out. Firstly, it is generally desirable to set up operations quickly. Secondly, you want to be able to access a number of markets from one convenient location. Finally, it is preferable to avoid timeconsuming bureaucratic red tape. So choose wisely.

In-house knowledge

Evaluate how well you know your new business location. If you are a US company opening a new office in Singapore, for instance, you may not find it too foreign or difficult to adjust. On the other hand, if your target destination is a country where English is not widely spoken and the cultural and business environment is completely different, it could be useful to obtain the help of a local consulting firm. If you are entering a market of which you have little to no knowledge, also consider recruiting nationals. Local people will understand the market and can help you avoid speed bumps.

Challenges

With new opportunities come new challenges. These challenges range from small changes to monthly payroll reporting procedures to significant shifts in regulation. The more you invest in your new operations, the bigger the stakes. But some governments are better than others at informing businesses of regulatory changes. Therefore, for the most part, do not expect them to take the initiative and be sure to evaluate how accessible such information is likely to be in your target country.

Costs of doing business abroad

It is expensive to do business abroad if you are setting up a foreign subsidiary. Each country varies, but the initial costs alone will set you back an average of about $40,000, plus the executive time it takes to work through the process. On top of that, there are yearly costs involved in maintaining the entity itself and that doesn’t include the cost of employing people either. So be sure to factor this point into your final decision.

 

Ben Wright, CEO at Velocity Global, has over a dozen years of experience in helping companies expand overseas. Building on his experience as a Certified Public Accountant, leader of an interim finance executive firm, and having global partnership responsibilities at an international services firm, Ben has become a recognised thought leader on international back office operations. He frequently speaks on international business panels and travels globally to present on topics such as international employment, permanent establishment, global payroll, and expatriate assignments. He is a graduate of the University of Notre Dame and is passionate about helping companies succeed globally.

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