In the not so distant past, conducting business on a global scale was the practice and privilege of a relatively small population of large corporations. Those days, doing business in another country, whether it involved sales, production or any other business process, typically required an enormous amount of resources.
But today, entering the global market place has become a rather natural stage of growth for many smaller companies as well.
The change is largely due to the growing prevalence and influence of social media and host of technological advancements that facilitate communication and collaboration across any distance. Not only has the price tag come down on international business transactions, but the process is in many ways more simplified and inherently less risky.
We are also in a generation where it has practically become second nature to interact with people who are thousands of miles away from us- both in terms geographical location and culture. There exists today an unprecedented, multi-cultural comfort zone.
That said, before you rush into the “going global” movement, a word of caution: there are nevertheless many, many variables to consider before doing any kind of business with people from a different country (even if you never have step foot on foreign soil), and the truth may be that it is not the best move for your business.
The following article will offer some considerations for expanding your small business globally, some tips for frugal entrepreneurs who are looking to do it on a shoestring budget, and a list of free resources that you should check out to help you make the transition.
Considerations Before Doing International Business
Here are a few things you need to consider before you expand your operations internationally. Even though you may be tempted to skip this step, don’t. It can potentially save you a lot of money and headaches along the way:
Get to know the market. The first, and most important step in entering any foreign market is conducting adequate market research. Depending on your unique situation, this research may take many forms and may include topics such as the socioeconomic makeup of the host country’s population, local natural resources, the local and national legislative environment, the established competitors in the market, as well as the prevailing cultural differences, attitudes, and behaviors. There are many online resources that can give you this information (see below). Additionally, you may want to consider hiring a cross-cultural business consultant. This person or group can give you a ton of country-specific information in a personalized way. I’ve seen it in action, and I highly recommend it!
Determine how much you can afford to invest in your international expansion. This is another vital point. You don’t want your foreign operations to bankrupt your domestic ones. Some funding options may include: taking a fixed percent of your domestic business profits, finding outside investors, accessing grants, loans, or other special funding designed to help small businesses expand into foreign markets (see your local small business development center).
Plan to initially be unprofitable. Following on the heels of the above consideration, just as a new small business owner needs to budget a few months to a year of unprofitablity into the startup costs, so too, realize that your global endeavors may not be a source of real revenue for the first year or two. Can your business comfortably sustain this loss?
Learn about country-specific and international business legislation… or hire people who know this information. If you plan on doing business internationally, then it is vital that you are aware of the legal environment within each new country that you do business. This is especially true if you will be establishing a physical presence in the country. Here, you may want to consider hiring a lawyer who is an expert in international business law. You don’t want to have your products seized or your operations shut down due to some oversight with the local government.
If you will be shipping products internationally or within the host country, then research your options. Your international shipping costs can quickly eat up any income generated in your foreign market. Make sure you are aware of any international shipping fees, duties, and taxation, and where applicable, the transportation and infrastructural realities of the host country.
How will you overcome the “language barrier”? I put the term “language barrier” in quotation marks because I am referring not just to the actual spoken language your foreign customers may be using, but also to a whole host of cultural behaviors, attitudes, nuances and sensitivities that can easily change the meaning of any message. How will you navigate it all? Here again, a cross-cultural business consultant may be appropriate. Don’t forget that all business communications should be considered. This includes: customer service response, brochures, websites, emails/newsletters, and face-to-face meetings.
Tips on Bringing Your Company into the Global Marketplace
If you’ve done your research and you’ve decided that conducting business across boarders is for you, then here are a few tips to get your international operations up and running while containing costs:
Develop a plan. Just as it is vital to write up a good business plan before starting, it is all the more so for entering international markets. The more you can narrow down your goals and develop clear strategies for measuring the quality and ROI of your endeavors, the better off you’ll be and the greater will be your chances of success.
Make sure everyone is on board. Before you go too far, make sure you’re employees are on the same page regarding any international expansion. Keep in mind that they may be wary that their jobs will change, or maybe that they will loose them outright- especially with the bad rap that international outsourcing has received.
Start out small. If you are going to be doing business in another country, especially if you have never entered a foreign market before and/or you know little about that country, then start your operations on a small scale at first with the intention of expanding further later on. This may mean picking only one or two products to offer your foreign customers or opening up a modest brick-and-mortar location (or even a virtual one as mentioned below). This will allow you to “test the waters” of the market before dedicating too many resources.
Be open to cross-border alliances and partnerships. In some cases it may be best to avoid re-inventing the wheel when you enter a new foreign market. Instead, consider strategically partnering up with another company or a group of individuals of similar size and market presence. Again, this will help you to test the viability of doing business in a given market, while reducing your investment and thus your risk.
Use available technology, tools, and services to save costs. There are many services and tools that small businesses can use to reduce the cost on international business. Among them include:
- Hosted VoIP (Voice over Internet Protocol) that offers low cost international calling.
- Taking it a step further, you could sign up for a virtual phone system. Basic plans often start at an affordable $10 a month, require no hardware purchases, and come with an impressive assortment of features including: professionally recorded greetings (in the language of the host-country), extensions, call forwarding to a land line or mobile number, and a toll free or local number dedicated to the business.
- Web Chat and web conferencing programs, such as Skype and Google Plus Hangouts (and there are many, many others) offer free and low-cost web meeting capabilities often with collaboration tools included, such as real-time document viewing and editing and video streaming.
- You could rent office space at a virtual office or business center. Regus, for example, has an extensive network of business hubs throughout the world.
Use virtual employees. And while we are on the subject of virtual offices, you can also hire a team of virtual employees. These people can be native residents within the foreign country you want to operate, or they can be residing elsewhere. The goal, however, is to offer your foreign customers a culture and language specific experience so that they can relate to your company.
Pay attention to exchange rates. The Forex (or foreign exchange) market can be extremely volatile, and if you are not paying attention, then your revenues can quickly evaporate as money is converted between currencies. One way around this is to offer a fixed currency conversion rate to your customers.
Research your international money transfer options. Unless you are in need of some specialized service, do not rely on your bank to send and receive money across boarders. In most cases, you will be charged exorbitant fees and will have to wait several days for the money to “clear.” Be aware that there are numerous alternatives, such as Paypal, Skrill (Formerly Moneybookers), and Payoneer.
Free Global Business Online Resources
- The SBA’s Global Business Resources- Find out about the SBA’s counseling, training and financing to support small business export opportunities.
- Export.gov – the U.S. Government’s export promotion and finance portal. Export.gov brings together resources from across the U.S. Government to assist American businesses in planning their international sales strategies and succeed in today’s global marketplace.
- The Department of Energy- Country-specific reports on topics involving energy production and consumption.
- Global Edge- This site is maintained by Michigan State University. It is a portal to an extensive collection of free global business resources including online tutorials, research papers, and helpful tools.
- World Economic Forum- an “international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas.”
- Rutgers University Global Business Library Guide- This guide will uncover some useful sources of information for international business. There are many full-text documents (such as country studies) available from the federal government, as well as economic and financial information from international and inter-governmental organizations.
- Global-production.com This site offers comparative information on leading emerging economies as locations for global production and sourcing.
- International Statistical Agencies A listing of all available national statistical agencies and international agencies. Plus a link to InfoNation with which one can view and compare the most up-to-date statistical data for the Member States of the United Nations.
- State Department Business Center Links to all the major sources of international information supplied by the federal government.
- State Exports This site contains export data for a limited number of major U.S. export markets. All data presented are based on the Census Bureau’s Exporter Location (EL) series, which allocates exports to states on the basis of the location of the exporter of record.
- Travelportal Find information about business travel, currency and currency exchange rates, chambers of commerce, political and economical reports and tips for doing business abroad.
- A searchable market research library by the U.S. Commercial Service. Find the Country Commercial guides (and other reports) which provide overviews for doing business in more than 120 countries with information on market conditions, best export prospects, financing, finding distributors, and legal and cultural issues.
- The Global Small Business Blog- A useful and practical blog by global business expert Laurel Delaney
- A collection of Global business artcles and a Global IQ test by Globetrade.com