Is my company ready to expand overseas? Is it right for me?
Taking your company overseas
Taking your company’s products or services overseas is an exciting prospect, the potential for a larger customer base, the opportunity to enter faster growing markets, maybe less mature markets where you can ride the tide of expansion. There is also a certain cache in being an international business but with opportunity comes challenge. The international journey can be treacherous with unexpected setbacks that need to be overcome.
Even before you embark on the adventure you must assess whether your company is ready to operate overseas. And are you personally suited to doing business abroad?
The first question is whether you have the financial reserves required to support your overseas business during its startup phase. This will cost more than you expect and take longer than you plan. This is based on my own personal experience in entering foreign markets. At this stage in the process, you do not know what you do not know. There will always be surprises.
When assessing whether you have the money to fund your international expansion plans build in plenty of cushion. During the financial review also consider how secure your business is in your home market? How sensitive are you to a downturn in business? You do not want to have to abandon your expansion because there is a slowdown back home.
You need a business plan that details your project’s P&L, balance sheet and cash flow. I cannot emphasize enough the need for a cash flow statement. Payment terms in your target market may be very different than you are used to. In Japan payment terms of 180 days are not unheard of. The good news is that most customers in Japan pay on time. It is a matter of honor. When we acquired a local Chinese company I told the global CFO I needed two new payment terms, before Chinese New Year and before Autumn Festival. This was a bit tongue in cheek, but these are two major holidays in China and it is not uncommon for customers to pay their debts before these holidays.
You are probably beginning to understand that your plans should be prepared with a good understanding of local business practices.
Having assured yourself that you have the financial resources to expand overseas it is time to look at your people. Do you have the right folks on your team with the skills and maybe more importantly the attitude to take your company into new lands? Do they have international experience if yes then you are off to a good start. Do they take foreign holidays, not just to sit on a beach, but to explore new cultures? Are they eager for new experiences?
Hult International business school has identified seven skills needed to be a successful international entrepreneur:
• Cross-cultural communication skills
• Excellent networking abilities
• Interpersonal influence
• Adaptive thinking
• Emotional intelligence
Cross-cultural communication skills
Entering new markets will mean working with people from a different country or background to yours. Whether they’re a colleague, a client, or a customer, understanding how to communicate across cultures is an absolutely indispensable skill.
Excellent networking abilities
The ability to build up a network in your target country is an important skill that will help. It’s likely there will be an association such as AMCHAM or BRITCHAM that can help. Joining this type of group will help build your network.
For success in international business, you need to work well with others. The ability to collaborate and work together for a common purpose is fundamental in the business world. It requires humility, allowing others to take the lead and share credit for success. It also requires confidence to tackle problems, give and receive feedback, and respectfully fight your cause.
In today’s business environment, you must have the confidence to react and adapt quickly, thinking “out of the box” to solve problems. Adaptive thinkers thrive in an ever-changing environment, making them well placed for success in international business.
In today’s HR terms, you’re more likely to hear people valuing EQ over the more traditional measure of “IQ”. Strong emotional intelligence is noted as a critical skill when it comes to how to do international business. That’s because it influences nearly every aspect of business interaction.
To succeed in international business unequivocally demands mental toughness and resilience On a practical level, working across time zones and cultures involves long hours. Failure and setbacks are also a fact of life in the business world, but defeat isn’t.
As well as looking for these skills among your employees you need to look at yourself, do you have these skills? Be honest with yourself, maybe ask your significant other. I have seen many business folks who think they are ready for the international stage when clearly they were not temperamentally suited to work outside their home environment.
Food, are you a picky eater? Building relationships in new markets will require socializing often over a meal. Foods do differ around the world and there will be times when your host offers you something you have never considered eating before. If you refuse it could be considered impolite. Are you up to this challenge?
Drinking can be another difficult topic. Heavy drinking is expected in some cultures. You can avoid this by telling hosts that you do not drink, but then you need to stay consistent. You cannot say you do not drink and then later order a beer at the bar.
Another question to ask yourself, can you let go? You will not be able to manage your home business and develop your overseas business at the same level of involvement as you had in the past. You will either need to trust your home employees to manage the details of your business while you focus on global expansion, or you are going to need to trust someone in your target market to manage your entry. If you are a real hands-on detailed manager then you might be better staying in your home market, for the sake of your own sanity.
If there is a language barrier hire your own interpreter. This avoids biases. If the other party offers to provide an interpreter you do not know what influences maybe at play. Also be cautious if you have a colleague who speaks both languages, again personal agendas can be in play.
And another piece of advice, Never, never assume that the other party does not speak English. They may be using an interpreter because they are unsure of their English. They may be using an interpreter to give them time to think. An aside to a colleague could well be understood by the folks on the other side of the table. During a meeting do not say anything in English that you do not want the other party to know.