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International Expansion: What to Consider Before Opening Overseas

Expanding internationally can be a great plan for many businesses, but the details can be overwhelming. Several experts explain what you may want to consider before thinking about international expansion.
April 10, 2017

Successful entrepreneurs often have big dreams for their companies—to bring in the 1,000th customer, to win an account against a large competitor, to expand to multiple offices and, often, to launch an overseas location. The first three of these goals are ambitious and exciting, but it is the fourth intention that arguably has the most surprises attached to it.

Many business owners across industries—product and service companies alike—may love the concept of global expansion to create a larger footprint and capture an even more sizable slice of the marketplace. And while international expansion can be a great strategy for many, others may falter in the face of the complexities involved.

Here are a few things to consider before launching an overseas outfit.

Establish the where and why for expansion.

Patti Cazzato is CEO of Timbuk2, a San Francisco-based, high-end messenger bag company with both a  wholesale and e-commerce presence, as well as multiple stand-alone brick-and-mortar retail spaces in nearly a dozen U.S. locations and international cities such as Bangkok, Kyoto and Singapore. The company has aggressive plans to expand its international presence with more stores in Japan and several across Europe.

So how does Timbuk2 decide where to go?

The answer is part hard research and part gut, experience and nuance. The latter has to do with the company's ties to the fashion industry—an industry that stays ahead of trends and makes it its business to know which cities will be hot next. Hard research comes in the form of finding on-the-ground distribution partners that understand the brand and are able to facilitate introductions to interested members of the community.

And then, it comes down to seeing if a location has the right criteria for the brand. “Timbuk2 is based on city plus bike plus tech," says Cazzato. “Is it a city? If so, is it bike-friendly? And all hot cities have an element of tech. Our most successful stores have a strong, bike-centered community or, better yet, a bike lane in front of our store."

Cazzato recommends other business owners ask themselves if a location fits their brand. Beyond that, it can be important to think about why you’re expanding.

“Before you do your market research, be clear on your brand positioning," she suggests. “Know what you want out of your brand and why you'd go to an international market. Answer those questions first because going international isn't easy.

“There are currency issues, import issues, and the list goes on. There are so many complexities of running an international business that unless it is necessary and really makes sense, it may not be the right solution."

Once you can articulate why you want to expand, think hard about where you want to go. Cazzato recommends staying close to what you know; if you live in the U.S. and have a steady U.S.-based customer pool, try going to Canada first and mastering that market. Then move on to Europe, then Japan. “Don't try going to more than one market at once," she says. “Master that one and then go to the next."

Go and meet people, understand the major business influences and the market as a whole.

—Ed Marsh, principal, Consilium Global Business Advisors

Timbuk2's e-commerce business also helps to provide a sort of “heat map," as Cazzato explains, to determine where avid customers live. This helps give the company a head's up on the next ideal location.

Other types of companies can use the same strategy, says Jessica Vollman, founder of The Vollman Group, a New York-based consultancy that helps early stage startups with marketing and business development.

“Tech companies, for example, are smart to look at where their newsletter subscribers are coming from as an early indicator of where to expand," she says.

The same can be go for exports. Ed Marsh, principal at Consilium Global Business Advisors, a B2B manufacturing consultancy in Boston, recommends entrepreneurs look at their export numbers and locations.

Test the location.

Once you've narrowed down a few locations, start spending time in each place, as it can take quite a while (sometimes years) to determine if a city is the right spot for your company. Slowly establish relationships with local officials—distributors, community partners, potential customers, even government officials—to get a feel for what it would be like to do business there.

Then, start testing your theory.

“Try doing a pop-up weekend if you are a product or service-based company," offers Vollman. “It is very low risk and you can see what sticks. Just make sure to have some sort of engagement strategy after the pop-up so you can connect with the customers that resonated with your brand and tell them when you'll be back for good."

Testing can even extend to local talent. Interested in opening up shop in Turkey but aren't sure where to start or how to find the best employees? Marsh recommends working with a professional employer organization (PEO), which is the technical employer of a local worker that manages the various tax, HR and regulatory considerations specific to the market.

“They operate an employee leasing model," he says. “You recruit your ideal candidate, and then the PEO hires them to be their employee. They will lease that employee to you to work for you full time, so there is no overhead for you. When the time is right, you can ease into a new market without as much risk."

The bottom line: Take your time.

“Go and meet people, understand the major business influences and the market as a whole," says Marsh. “It is that kind of research that will allow you to be successful. It is a long-term process. Be patient and deliberate rather than jumping right in."

Photo: iStock
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