You opened your own business 10 years ago and it has gone great from the get-go. Your first expansion was local when you opened a few more locations in your city. Next, you spread throughout your county, and then your state. Five years ago, you took the plunge and began to expand your business nationwide, and you’ve been amazed at the demand for your product. While enjoying a glass of wine with your wife one evening, you discuss expanding overseas. She thinks it’s an excellent idea, but how do you do it?
1. Determine its Viability
First things first, and the first here is to make certain global expansion is viable for your company. According to Inc. magazine, “An objective look at your currentbusiness model will give you a new perspective on the viability of expanding your business.” In other words, does your current business model allow for global expansion? It’s important to keep in mind that just because you’re successful in the States doesn’t mean you’ll be successful abroad.
Take a long, hard look at your business model and finances, and then ask yourself whether expansion is the best financial decision for your company at this time. Do you have a viable target market in one or more overseas locations, or in Canada and/or Mexico? One way to determine this is to look at how your existing customer base makes its purchasing decisions and whether individuals in a foreign buying location will make the same purchasing decisions.
Also, take into account your operations. Can an overseas business be run without you physically there? Evaluate the pros and cons of international expansion and what it will take to open a location or work through an agent in a foreign country. What are the local laws and can your business model abide by them? Are your financials clean and ready for inspection or do you have some dings on your balance sheets that might look bad? Take an honest look at everything.
2. How Much is Too Much?
Next, you must determine how much it will cost to expand abroad. This includes export and import fees and taxes among other expenses. You will need to support your new location until it turns a profit, so make certain you can afford to do so for an extended period. You might not open with a splash abroad, as you must appeal to the different tastes of different cultures, so calculate all expenses, i.e. building space and costs, personnel, additional inventory, etc. and analyze your break-even point.
Sjamsul Nursalim is an Indonesian businessman worth an estimated $830 million as of 2017. He built his financial empire investing in coal, real estate, and retail. In Indonesia, Nursalim owns a portion of Mitra Adiperkasa Iperkasa, a retail giant that has opened Steve Madden, Topshop, and Zara store locations among others. Nursalim also has a stake in Gajah Tunggal, a tire manufacturer. What does he have to do with global expansion? He has expanded his holdings to Singapore for property development.
3. Run a Credit Check
If you want to be like Nursalim and introduce your product to the global markets, it’s time to run a credit check on your business and personal finances. Even if everything looks good after your financial analysis and your business financials are rock solid, you still want to ensure everything looks even better on your credit reports. Your personal credit may come into play, especially on loan applications, so run both. You can get your personal report free once a year. You’ll have to pay for your business scores.
4. Get Financed
Provided nothing needs to be worked out on your credit reports, it’s time to finance your overseas expansion. There are numerous ways you can accomplish this, and perhaps one of the best ones is investors. If you’re looking to expand on a large scale, consider venture capital funding. If it’s a smaller expansion, angel investors might be interested in lending a financial hand. You can also open a crowdfunding campaign and encourage your loyal customers to donate.
Of course, traditional debt-based financing also works if you have good enough credit and plenty of collateral to back the borrowed funds. You can take out a business loan or look into establishing a credit line. If you don’t need a ton of money, an SBA microloan might be a good option. There are plenty of alternative options that might work, too. For example, a bridge loan would help you bridge the gap between an overseas real estate transaction and close of escrow.
No matter what, be overly cautious and super smart about your international business expansion. You cannot afford to fail when you open a location abroad. The cost of failure doubles if not triples in this type of investment, so make certain your overseas expansion looks more than good on paper. Talk with colleagues who have done this to ensure you have a handle on the ups, downs, and potential disasters.