“Many companies expand too quickly,” says Jon Fjeld, executive director of the Centre for Entrepreneurship and Innovation at Duke University, US. While selling overseas extends your company’s reach, he says, you don’t want to move into international markets too soon and use resources you need to continue growing on your home turf.
Here are eight key questions to ask before going international.
1. Have I built a solid foundation at home?
Make sure your business is stable on a day-to-day basis before pursuing overseas markets. Can your business function well in your absence? Companies also need to have the distribution running smoothly enough so that they don’t have to focus on it constantly, Fjeld says.
2. Do I have the bench strength for international expansion?
You will need to assign one or two senior employees to your international effort. Can you afford to move people from their current responsibilities, as well as whether they bring – or can quickly develop – the necessary skills for overseas sales and marketing?
3. How will I need to adapt to the local culture?
If you’re in the food industry, will you need to adjust your core offering to suit local taste buds? What cultural and language differences might you expect if you’re offering a service? At the very least, you will need to put your marketing message in the local language and make sure the meaning translates correctly.
4. Do I understand the cultural implications of the sales process?
Closing a deal abroad can be a vastly different experience than you’re probably used to, says James Hunt, adjunct professor of entrepreneurship at McDonough School of Business.
“Some cultures struggle to say, ‘No, we aren’t interested’, which means you can have an extremely long and costly sales process that never leads to a sale.” Sometimes it’s better to cut off talks if they lag for too long.
5. Have I sized up the local competition?
Understanding your competitors abroad can provide insights into how – and whether – to expand. But many companies don’t take time to figure out whether similar products and services are already available and what they would need to offer to compete successfully. Spend time abroad and speak with potential customers to avoid costly mistakes.
6. Do I need an international partner?
For many companies, it’s critical to find a local partner. Partners can help facilitate sales, while keeping costs down for the home office. Forming a partnership takes time and requires plenty of due diligence to find the right fit.
7. Am I financially able to sustain an overseas expansion?
Expanding internationally requires a start-up-like period that’s longer than many entrepreneurs anticipate. “You have to expect to lose money for a while,” Fjeld says.
So, you not only need enough capital to make the initial investment, but you also should have a long-term financial plan in place, he says. You will likely need to update the plan to reflect actual revenue and expenses as you ramp up in the new market.
8. Where’s the potential for red tape?
Expanding beyond the domestic market can mean lots of extra paperwork, especially for medical and technology companies. With such a variety of regulations surrounding exports, it’s important to understand what’s required for your particular industry before attempting to expand abroad.