Go hard or go home: Five things to consider before expanding internationally
Wednesday, February 6, 2019/
When you start a business, the thought of scaling internationally may seem like a wild dream.
However, knowing how to scale when the time is right is imperative to safeguard and manage cash flow, cultural differences, speed and hiring so the business launches with the highest chance of success and hitting that elusive ‘break-even’ point before time runs out.
Here is my advice for those considering opening offices in international markets themselves.
Be prepared to move
Starting a business overseas can take more time than the business you started back home. This is because the market is different, you may have little to no professional connections or friends to ask for advice, and you will most likely have minimal understanding of the right neighbourhoods for your business industry.
There can also be cultural differences for staff and customers.
So, be prepared to move to the country for an extended period during the launch phase to ensure the office is stable, growing and eventually profitable. Over the last 10 years, I have spent half of it living between London and Vancouver, and it takes a certain life stage to be able to see this through to ensure your business survives.
Understand local laws
It is easy to assume the business laws and regulations in western countries are the same or very similar to your home country, but often some can be very different.
Many industries are regulated differently, consumer rights vary and different licenses are required to operate, which can take longer than expected or can be hard to obtain.
Setting up without doing your due diligence by deeply researching the operating requirements in a new country can easily get you into trouble. My advice would be to seek professional advice from a law firm, accountancy firm and an industry association well in advance and definitely before you start expending money into your new setup.
Manage your cashflow
We were lucky enough to be in a position to use our own funds from our Australian office’s retained earnings to establish and grow our international operations. It would be extremely difficult to open up overseas if you are not profitable in your home country first, unless you have bank, venture or other capital ready to use.
We had models and projections to calculate how long it would take our new office locations to break-even, and even then, it usually takes longer for unforeseen reasons, so ensure your burn rate is watched closely. Our head office did need to send funding abroad to help these offices get off the ground or top-up cashflow when there were shortfalls.
It is important to note if there aren’t strategic financial plans in place, the negative cashflow can put a lot of pressure on your head office. But if you’ve done your research, found the right staff and believe in your product-market fit, you can be confident it will only be a matter of time until you see a return on your investment.
Once you begin to break-even abroad, the next challenge is keeping it in the black and pushing forward just as hard as you were when you were in the launch phase back home.
If complacency creeps in, it can send you back into the red quite quickly when the next unexpected business challenge rears its ugly head.
When you open up abroad, it is crucial to find the right management team to get the new business off the ground under your direction for when you return home.
Having the wrong managers who either aren’t cut out for it, don’t see your vision or aren’t able to replicate your culture can make the initial launch so much tougher, and could even lead to failure.
Remember back home when you started, you were the general manager, and were able to monitor, develop, motivate and train your managers firsthand, and one by one and over time as the business grew. When one left, the others were experienced and able to transfer knowledge.
When you open up abroad, you’re essentially bringing staff in with no prior knowledge of your business and expecting them to be able to run it, just like that.
Be prepared to replace managers a couple of times when you first open overseas, no matter how good your interviewing and recruiting. If the wrong person is leading a team it can severely damage or halt your growth, which means even more money being flushed away.
Be practical about what you are spending your money on. Only spend, hire and commit to what’s actively needed for hitting that break-even point to begin with. The nice office with a view or those trendy but expensive standing desks can come later, once your business is covering its essentials comfortably first.
Don’t try and expand overseas if you aren’t willing or able to burn through a lot of cash in the initial stages. The goal is to get into profit as fast as possible so the business can completely support itself on its own revenue, so you need to go hard and go fast.
It is scary, it keeps you up at night and it makes you often wonder whether you should have even started this expansion in the first place, but the long-term rewards are infinitely worth it.
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