First published by the Oregon SBDC Network here.
Global expansion is a great way to grow a small business, but it can also be complex. Are you a small business owner wondering, “How do I expand my small business internationally?” Below are some top-line tips on how to go global with your products or services.
1. Determine the 'Why' Behind Expanding Your Business
Before you dedicate the time, money, and resources needed for your business’ international expansion, identify your specific goals. Yes, you can expand your customer base and extend your sales channel through exporting, but you can gain other benefits by reaching global markets. Selling outside the United States can diversify your company’s revenue and reduce risk. For instance, if sales are down domestically or your business is seasonal, you could see stronger sales in international markets or offset your slow periods in the U.S.
However, going global is a big undertaking, especially for a small business. From evaluating market research to picking your targeted markets, you need to fully understand the intentions behind your company’s international expansion and its potential risks and rewards.
2. Do Your Due Diligence and Understand the Process
Before creating an international market strategy, you’ll need to conduct research and put together calculations. Start by looking at the total addressable market (TAM) and the serviceable addressable market (SAM), and understand the market’s dynamics.
Consider the local language and cultural aspects, too. Remember, customers in different markets have their own purchasing habits. It might be worth looking for reliable partners who know the ins and outs of the market and are familiar with how customers in that market think and behave and their perceived values.
3. Create a Business Plan
Your business plan can include your targeted markets, startup costs, ongoing expenses, capital requirements, staffing plans, short- and long-term projected revenue and profits, and all other details needed for launching a new business.
Your business plan should also define goals, objectives, and the metrics used to measure success. For example, what is the business model? Will you set up a separate company or open a local branch or sales office? Also include a breakdown of the annual budget and an actionable plan with dates for implementation.
4. Determine Your Method of Expansion
There are various methods of international expansion for businesses. Below are the common ways companies can enter a foreign market.
Managing an expansion process in-house
If your global expansion is managed in house, it means you develop your infrastructure in the new market based on your own needs and limitations. Of course, that requires a lot of research and preparation.
Things to consider are having an on-site presence in the market or using an in-country partner (ICP). Will you expatriate current employees to that market, and if so, what would that entail? Who would manage your overseas employees, and what are the financial regulations involved? These are just some of the considerations for managing the expansion process in-house.
Exporting products is one of the easiest and most common ways to enter an international market, and it doesn’t require establishing a subsidiary in that country. Instead, you can work with international marketing agencies, distributors, and retailers to get your goods through local sales channels. While exporting may sound simple, it is still a significant investment when you account for transporting costs and tariffs, which can chip away at profits.
Creating licensing arrangements with established organizations in an international market allows you to leverage their experience in getting your products out in that market. This can include franchising, where someone else operates under your company’s business model and name, like a fast-food chain. Or it can be a private label licensing arrangement where your products are sold under another company’s name or yours.
Cross-border sales often come with legal, tax, and intellectual property concerns, but licensing arrangements can be a quick and cost-effective way to expand your business globally.
Forming a mutually beneficial partnership with a local company can be a cost-effective method of international expansion for small businesses. Your partner would bring their experience and knowledge of the foreign market and its culture. However, a partnership often means you’ll have to compromise and give up some control. So it’s best to weigh the pros and cons before entering into any alliance with a foreign company.
Mergers and acquisitions
Mergers and acquisitions, another method of international expansion, are when two businesses combine or one consolidates another. You can take over an already established business as an automatic entry into that market. But with mergers and acquisitions, and depending on the business type, local laws or restrictions may be placed on foreign ownership.
Working with a global PEO
An international professional employer organization (PEO) specializes in offering HR services to businesses when they are expanding internationally. They can assist with talent acquisition, payroll, compliance with local regulations and immigration laws, taxes, insurance, and more, so you don’t have to navigate these complexities alone.
5. Understand the Legalities of Conducting International Business
Another critical factor to consider when expanding your business internationally is that you’ll need to learn national and local laws and regulations for conducting business in that country. Nations have their own limitations on what you can import or trade and their own laws on employment, trade, taxes, and investments. So you’ll need to ensure compliance with these laws to avoid facing strict penalties. (FCPA and Denied Parties List are examples).
6. Access Training and Guidance Through the Global Trade Center
For Oregon small business owners who want to sell internationally or import products, the Oregon SBDC offers international trade assistance through our Global Trade Center. These no-cost services allow you to:
- Assess your company’s readiness for expanding internationally, create an export plan with the “Export Business Planner” tool, learn the benefits and trade-offs of reaching global customers, and understand how to get paid.
- Receive one-on-one trade-specific business advising at no cost from the OSBDCN Global Trade Center’s team of Certified Global Business Professionals (CGBP).
- Access specialized training programs to develop your export readiness, such as Buying and Selling Outside the United States and CGBP Exam Prep Training.
- Get support from a powerful network of global trade partners, such as the Small Business Administration, U.S. Export Assistance Center, United States Commercial Service, Business Oregon, and the Port of Portland.
Want More Advice?
The PCC Small Business Development Center is here to support you with no-cost business advising and comprehensive business training programs. Get started by requesting your first no-cost business advising session here.