There comes a time in the life of many companies where a bit of introspection and balancing of priorities takes place.
Have we fully capitalised on local opportunities? Have we met or exceeded our initial ambitions? Where do we go from here?
In some cases, this line of question leads to the conclusion that, in order to open up new revenue opportunities it’s time to explore new geographies.
Exporting to a new geography, whether it’s a product or service, has other positive impacts beyond revenue.
It can also expose the company to new ideas and management practices, new ways of perceiving and responding to market forces, and ways of staying competitive.
Exporting a business also leads to better growth prospects overall, according to Austrade. In the current economic conditions, finding new ways to augment an organisation’s revenue is more critical than ever.
The looming recession and broad-reaching consequences across a spectrum of industries, exporting products or services diversifies and strengthens a company’s interests and position by providing access to new consumers, partners and B2B customers.
An Australian government report on export behaviour, suggests that continuous exporters perform significantly better in all performance measures than non-exporters. The report suggests that exporting is associated with a higher probability of business survival.
Here are key considerations to launch in a new market
Hire your first team members abroad
Your first hires in a new market are critical to expansion success. You need someone with staying power, local knowledge, and the will to build and coach an entirely new team.
Set them up for success
Once the perfect candidates are chosen for the job, there is need to contract support personnel, human capital management technology, Internet providers, etc for the teams.
You will need to set up financial controls and an expense system. The new hires may need to incur expenses on equipment, networking, travel, local suppliers, and interviewing costs when building teams.
Receive revenue from abroad
Repatriating foreign profits safely and quickly to your local currency is crucial, but you’ll also want to secure the best rates on transfers, so your ROI doesn’t dwindle due to uncompetitive exchange rates and high bank fees.
Setting up a business bank account abroad and having paid-up capital of about US$100,000 (which is a necessity for many banks) often requires executives to make personal visits to the country.
Time and travel restrictions may simply make this an impossibility. A sound option is to open a multi-currency account, which saves companies time, administrative hassles, and cost while offering better exchange rates than any bank.
According to our research, the top five export destinations for Australian companies are (in order) China, Japan, USA, Korea and India. Aside from the USA, these countries represent significantly different business conditions and philosophies.
When expanding internationally a business has traditionally needed to set up a legal entity for each country, each of which has its own unique requirements for tax compliance, payroll and HR.
Setting up as a legal entity can take at least six months or longer and can significantly slow down the company’s expansion plans. It is a significant roadblock to rapid growth, which may hinder organisations looking for new revenue streams in the challenging business conditions which lie ahead.
However, in the modern business world there are better options available. Setting up a legal entity in a new market is no longer a necessity, as new structures exist that negate many of the hurdles traditionally associated with the process.
An Employer of Record (EOR) is a relatively new model, which allows an organisation to set up a legally compliant employee in a matter of a few business days.
The employee, once onboarded, is listed on the payroll of the EOR, with all local tax, legal and insurance compliance taken care of. It is important to note that not all EOR models are equal, and not all EOR platforms allow this speed and compliance.
An aggregator EOR outsources hiring of employees, and relie on third parties, like an umbrella organisation that sub-contracts, rather than taking on full ownership of all the legal and compliance aspects that need to be safely covered in each country.
An EOR that owns their worldwide legal infrastructure takes ultimate responsibility for the contract of each employee.
IP flows either directly to your company, or via your EOR to your company, whichever is most enforceable by law, so it is worth determining the model before moving forward.
With emerging data suggesting that the current pandemic will actually drive MORE globalisation rather than reducing it, companies may well look to new markets as a means of sustaining their competitive viability.
Again, the process will need to evolve and take advantage of smarter technology and business models. It is no longer viable for an executive to board an aeroplane and land in a targeted expansion destination to sign forms, gain approvals and meet people.
Using an EOR model makes all onboarding and set-up processes manageable remotely, so again removes roadblocks and uses smarter technology to aid expansion.