International expansion for start-up companies International expansion for start-up companies

International expansion for start-up companies
04 Dec 2017

Every start-up company is looking for its edge and as our world gets smaller, that edge comes from a business strategy that includes international expansion. Whether it’s looking for additional consumer markets to tap into, finding the best workforce, or outpacing competitors there are many reasons why start-up companies should consider a global strategy.

Is international expansion the best use of our limited resources? This is the big concern that we hear often from our start-up clients. We can’t answer that question in bulk because every company’s international strategy has different implications, costs and potential benefits. What we can do is help guide start-ups in their planning and discovery process to understand more fully the implications of going global.

Be agile in your international expansion

We have been reinforcing the idea of agile global international expansion with all our clients. What this means to us is that you do not necessarily have to dive in head first, buying hard assets, setting up a subsidiary company and renting space in that country (which may not even be a financial option for start-ups).

We have been encouraging companies to focus on getting great and locally compliant employees in-country that can serve as eyes and ears to really drive the understanding of that country forward as a company and get someone there who is actually bought in to your company.

This person will help you identify opportunity and confirm or deny your international strategy.

Define a clear international strategy

Even if you are agile in your efforts you still need to take the time to have a clear strategy as you start. As a company you need to understand fully the major points of operating in a foreign nation.

It’s almost better to consider the international operations as it’s own internal start-up. Too many companies get tempted by an opportunity and find themselves in country without a clear strategy, which ultimately leads to failure.

• How is the strategy internally funded?
• How long is the runway with that funding?
• How is the initiative staffed?
• How will time zone issues affect your staff?

Will you be at risk of losing internal staff due to odd working hours/burnout?
• Do you use contractors, foreign subsidiary as a service (FAaaS) or create a foreign subsidiary?
• What are the tax implications?
• How can you keep the initial footprint as light as possible (to reduce risk)?
• Risks vs rewards?
• Do you have buy in from entire team? (This is the most important factor. Success hinges on how committed the entire executive team is to the strategy.)

Evaluate the local labour and IP law implications of the country

We have heard of many companies, especially those considering using contractors versus full time employees, who have serious issues around protecting their IP in other countries. Using contractors in country can be a huge liability to your IP protection because of local labour law and lack of enforceability.

Evaluate the cost of exiting that country due to failure

Many companies don’t take this into consideration and it is particularly important for start-up companies considering their limited resources.

Depending on the method in which a company decides to establish themselves in that country (contractors, FSaaS or by foreign subsidiary) the teardown cost can vary greatly.

Using contractors and FSaaS is the lowest cost option at close to zero, but tearing down a foreign subsidiary can cost up to three times the dollar and time amount it took to establish it. It is very important to know the cost of a potential failure for a start-up considering it might eat enough resources to kill the company.

Get the right people on the bus in-country and keep them

We mentioned earlier the idea of buy in from everyone on the team, this applies to the people you have in country as well. These people, if they truly buy into the strategy you established in step one, will be your greatest assets. You will not be able to predict everything that will go wrong or right in the country you are expanding into and the people you bring on board need to understand what it is you are trying to accomplish in order to identify opportunities and threats.

When you do find the right people it’s also important to make sure your compensation and benefits ensure that you don’t lose these people. We find that many of our clients who end up using FSaaS or international PEO actually had contractors who were demanding to be full time employees.

What not to do
Don’t be reactionary

Many companies, both established and start-up, fall victim to a singular ‘hot’ opportunity that dictates their aggressive move towards getting established in a foreign country. These types of situations typically lead to poor planning, poor understanding of the risks and disagreement in the executive team, which ultimately leads to failure. Take your time, leverage your resources and come up with a plan all team members agree with.

Don’t leave free money on the table

You would be surprised how many emerging markets have massive pools of grant or minimal interest capital available for development. This type of capital is difficult to find, but is available in almost every enterprise vertical.

Don’t assume your domestic business model will work internationally
You should really treat your international expansion plans like a second far smaller internal start-up. You would be surprised how many companies hit serious speed bumps because they assumed what works here or works there.

Don’t do it alone

Find great partners who can help guide you and show you how not to reinvent the wheel. International expansion is a common practice these days.

 

Ben Wright at Velocity Global, which is a global employment services company that is reinventing the way its clients do business internationally with its Foreign Subsidiary as a Service (FSaaS) solution. With capabilities across over 166 countries, Velocity Global is a leader in agile global expansion.

Every start-up company is looking for its edge and as our world gets smaller, that edge comes from a business strategy that includes international expansion. Whether it’s looking for additional consumer markets to tap into, finding the best workforce, or outpacing competitors there are many reasons why start-up companies should consider a global strategy.

Is international expansion the best use of our limited resources? This is the big concern that we hear often from our start-up clients. We can’t answer that question in bulk because every company’s international strategy has different implications, costs and potential benefits. What we can do is help guide start-ups in their planning and discovery process to understand more fully the implications of going global.

Be agile in your international expansion

We have been reinforcing the idea of agile global international expansion with all our clients. What this means to us is that you do not necessarily have to dive in head first, buying hard assets, setting up a subsidiary company and renting space in that country (which may not even be a financial option for start-ups).

We have been encouraging companies to focus on getting great and locally compliant employees in-country that can serve as eyes and ears to really drive the understanding of that country forward as a company and get someone there who is actually bought in to your company.

This person will help you identify opportunity and confirm or deny your international strategy.

Define a clear international strategy

Even if you are agile in your efforts you still need to take the time to have a clear strategy as you start. As a company you need to understand fully the major points of operating in a foreign nation.

It’s almost better to consider the international operations as it’s own internal start-up. Too many companies get tempted by an opportunity and find themselves in country without a clear strategy, which ultimately leads to failure.

• How is the strategy internally funded?
• How long is the runway with that funding?
• How is the initiative staffed?
• How will time zone issues affect your staff?

Will you be at risk of losing internal staff due to odd working hours/burnout?
• Do you use contractors, foreign subsidiary as a service (FAaaS) or create a foreign subsidiary?
• What are the tax implications?
• How can you keep the initial footprint as light as possible (to reduce risk)?
• Risks vs rewards?
• Do you have buy in from entire team? (This is the most important factor. Success hinges on how committed the entire executive team is to the strategy.)

Evaluate the local labour and IP law implications of the country

We have heard of many companies, especially those considering using contractors versus full time employees, who have serious issues around protecting their IP in other countries. Using contractors in country can be a huge liability to your IP protection because of local labour law and lack of enforceability.

Evaluate the cost of exiting that country due to failure

Many companies don’t take this into consideration and it is particularly important for start-up companies considering their limited resources.

Depending on the method in which a company decides to establish themselves in that country (contractors, FSaaS or by foreign subsidiary) the teardown cost can vary greatly.

Using contractors and FSaaS is the lowest cost option at close to zero, but tearing down a foreign subsidiary can cost up to three times the dollar and time amount it took to establish it. It is very important to know the cost of a potential failure for a start-up considering it might eat enough resources to kill the company.

Get the right people on the bus in-country and keep them

We mentioned earlier the idea of buy in from everyone on the team, this applies to the people you have in country as well. These people, if they truly buy into the strategy you established in step one, will be your greatest assets. You will not be able to predict everything that will go wrong or right in the country you are expanding into and the people you bring on board need to understand what it is you are trying to accomplish in order to identify opportunities and threats.

When you do find the right people it’s also important to make sure your compensation and benefits ensure that you don’t lose these people. We find that many of our clients who end up using FSaaS or international PEO actually had contractors who were demanding to be full time employees.

What not to do
Don’t be reactionary

Many companies, both established and start-up, fall victim to a singular ‘hot’ opportunity that dictates their aggressive move towards getting established in a foreign country. These types of situations typically lead to poor planning, poor understanding of the risks and disagreement in the executive team, which ultimately leads to failure. Take your time, leverage your resources and come up with a plan all team members agree with.

Don’t leave free money on the table

You would be surprised how many emerging markets have massive pools of grant or minimal interest capital available for development. This type of capital is difficult to find, but is available in almost every enterprise vertical.

Don’t assume your domestic business model will work internationally
You should really treat your international expansion plans like a second far smaller internal start-up. You would be surprised how many companies hit serious speed bumps because they assumed what works here or works there.

Don’t do it alone

Find great partners who can help guide you and show you how not to reinvent the wheel. International expansion is a common practice these days.

 

Ben Wright at Velocity Global, which is a global employment services company that is reinventing the way its clients do business internationally with its Foreign Subsidiary as a Service (FSaaS) solution. With capabilities across over 166 countries, Velocity Global is a leader in agile global expansion.