My dream business scenario goes something like this: launch a cupcake shop in downtown Chicago and achieve instant success. "Katie, these are the best cupcakes imaginable," my customers would tell me on a daily basis.
Two years later, I would open a shop in Paris, and it would immediately thrive. "Délicieux petits gâteaux," my Parisian clients would yell from their flower-lined balconies. I would then live happily ever after spending six months a year in the U.S., six months a year in Paris and getting fat by eating endless cupcakes and croissants. Heaven.
If this is your dream, too, you are in luck—many small businesses expand to international locations. But before buying your plane ticket, be sure to take note of these considerations.
Gauge market interest
Not every successful U.S. product or service translates well overseas. Before setting up shop in a foreign country, make sure locals want what you’re selling.
“Do research on potential competitors in overseas markets,” advises Kenneth C. Wisnefski, founder and CEO of WebiMax, an SEO marketing firm based in Mount Laurel, NJ, that began expanding internationally in March.
Wisnefski wasn’t worried on this front; over the past several years, potential clients from far-flung locations contacted him asking for representation in their home countries. Now the company has an office in Britain and one in Australia.
Determine your hiring process
There are two rules of thought here: relocate U.S. employees to overseas locations or hire locally. If you choose the latter (which will cost you much less), Wisnefski recommends putting together a hiring plan. How will you find employees? How will you interview them without racking up plane flights?
Wisnefski did a search for job boards in each country and posted positions. From there, he set up interviews via Skype.
“It worked really well—it was easy to find candidates, and using Skype was a tremendous help,” he says.
Understand country-specific rules
This is a biggie. And according to Tom Armour, founder of High Return Selection, an HR consultancy based in Toronto, Canada, this is also where many business owners slip up.
“When business owners think about expanding, they tend to assume that English-speaking countries are just like their home countries and that the rules will be the same—then they are dumbfounded when they learn the truth,” he says.
The "truth" is this: all countries have different tax laws, employment laws, benefits requirements, business registration laws…and the list goes on.
How can you sift though it all?
“I highly recommend calling a big accounting firm [like KPMG, PwC, Deloitte, Ernst & Young] and asking for a contact in the country you’re interested in; that contact will then walk you through the process,” says Armour.
Wisnefski took a different approach. He and two other employees formed a committee and researched everything themselves.
“It took a while and in the end, we did speak with an accountant and attorney to make sure we were doing everything correctly—but we did save a lot of money in the beginning by doing the research ourselves,” he says.
Secure office property
Here, Wisnefski got creative. Before setting down roots in a foreign location, he rented shared office space for the first few months. This helped the business build a client base before getting into a pricey lease.
“Once we got some traction, I put our top employees in charge of locating a permanent space,” he says.
If you’d rather plant roots right away, Armour recommends contacting a U.S.-based real state company with offices in your satellite country.
“They will be able to explain the rules relative to that location,” he says.
Securing office property also includes equipment. Anything used for your business—a phone, fax machine, scanner, etc.,—should be owned by the business, not by the satellite employee.
Armour says, “I’ve heard horror stories about disgruntled employees recording messages on their answering machines about a company that just fired them, but since the company doesn’t own the answering machine they can’t do anything about it. For this reason, the company should always own business equipment.”