Global markets are expanding while things here at home spell gloom and doom for many small businesses. High Street Partners’, a firm that helps businesses expand into global markets founder and president, Larry Harding, offers up five things small and medium businesses should do before heading abroad.
- Have a plan – While it may sound obvious, too many small and medium companies aren’t clear why they are heading overseas. Is it for tax reasons? To be near to customers? To diversify their revenue base? The key is to know your strategy and plan for it.
- Get internal buy-in – Expanding overseas is a larger undertaking than many companies realize. Make sure that senior management across the entire organization, and those tasked with implementing and supporting the expansion, know what the goals are and what is expected of them in terms of oversight and management.
- Make sure you understand the full costs of hiring – Outside the U.S., benefits often make up a far greater percentage of an employee’s salary. Does your new hire expect a company car? Private health insurance in addition to what may be provided by the state? Should you hire a contractor or a full-time employee? Could your contractor really be deemed an employee? Knowing the answers to these questions can dramatically affect your financial success.
- If you’re headed to Europe, beware the VAT (value added tax) – Having a proper VAT registration can be key, as the rules require businesses to collect and remit VAT on applicable transactions. If required to charge VAT, Non-E.U. businesses must comply by making periodic VAT filings, keeping VAT records on file and available for inspection by local tax authorities, etc. A failure to comply can result in significant penalties and cash flow problems.
- Think about how you will manage your overseas employees’ expectations – It can be a challenge to keep employees on the same page when they’re on different continents or time zones. Employees hired locally in subsidiaries may also have very different notions for what is considered acceptable then might a U.S. employee. Making sure that expectations and responsibilities are clearly conveyed at the start will go a long way to preventing problems.
What do you think about expanding globally? Leave me a comment.