Starting a business in a foreign country can bring a lot of opportunity, profit… and headaches. You will be dealing with different time zones, cultures, laws and taxes, and bureaucratic processes. You will have to invest a lot of time and money to set up operations. It’s not an easy job, but the rewards can be huge. The big question is: is it worth the investment, and what should you consider and prepare to increase your chances of success? This simple checklist can help clarify that complex business question.
How easy is it to establish the business in that region?
The World Bank actually measures the ease of establish a business in a country. Check out their page to find out their ease of business ranking, and get a general idea of the average number of days it will take to set things up. However, don’t be discouraged by the scores. There are companies like Creation Business Consultants that can make it easier to set up a business in the GCC. They are familiar with local business environment, laws and processes, and can help with paperwork and other important transactions.
What is the political and economic climate?
How stable is the government and the economy? Are the current laws favorable for foreign business and investment? Does it offer tax incentives for new businesses, and how will the tax scheme affect your profit margins? How easy is it to establish joint partnerships or purchase office property? What are the property rights? Do these factors look stable, or does political unrest indicate that there can be a change in government policy?
For business owners, opportunity must come with stability. You are already dealing with an unfamiliar business environment; a volatile economy and government increases your risk and makes it more difficult to make long-term forecasts.
What market data do you have?
You already know your product and your own industry well, but you also need solid facts that pertain to the region you plan to penetrate. Look at market research: the average purchasing power, consumer perceptions about your product or industry, as well as local or foreign competitors. Even demographic data – such as the age, population, average income and unemployment rate per city – can let you know the best target market and location for your business. Local market data can help you hedge your bets and invest where you’re most likely to succeed.
What is the best business structure?
Should you invest in an existing business structure, enter a joint partnership, set up a corporation, or do an S corporation or a limited liability company? These all have their pros, cons, costs, and legal ramifications. Consult with an expert to find out what works best for your business in your target region.
Consider daily operations
Setting up an overseas office isn’t as simple as finding a building with decent rental fees. You have to consider details like internet access, accessibility, and (if you’re hiring staff) reliability and accessibility of public transportation. Since many regions like the Middle East put a great emphasis on personal relationships and face to face meetings, you will also want an office location that will make it easy for you to report for work and then leave for a business lunch or function.
Your type of business also affects what you should look for in a location. If you are a premium product or service, you should also look into the reputation and prestige of the office building. If you only need back-end support, and it’s unlikely for clients to actually visit or care about your physical office, then convenience is more important than image.
What are the language barriers?
Communication is the key to any business success. The wider the language barrier, the more important it is for you to have trusted local partners who can comfortably communicate what you want and need to both your staff and your stakeholders. It is best if you take efforts to learn the local language, both to facilitate communication and to show your sincerity. This is especially important in areas like the Middle East, where trust and “gut feel” play a huge part in business relationships. Foreigners may be seen with distrust, but if you learn a few phrases and eventually gain competence in the language, you will show that you respect the culture and are committed to doing business in the region.
What are the cultural quirks?
You need to invest time in understanding the culture and the business etiquette of the region. For example, in the Middle East, personal relationships and socializing are critical for any negotiation to succeed. In many countries in Asia, saying “No” is impolite, and concerns are often aired indirectly. You need to be able to read between the lines as well as manage conflict without offending or alienating the person you’re talking to.
That’s why interpersonal skills, patience and cultural sensitivity can play a huge role in establishing a successful offshore business. You may have a great product and service, and a brilliant business plan, but if you are unable to manage your people and business partners well, you will not be able to gain ground.
Are you getting professional advice on tax and business operations?
One of the biggest mistakes that people make when establishing a business overseas is that they assume that they make assumptions about tax regulations, intellectual property and other legal protections. You need to invest in an attorney and a firm that has local presence in order to provide the best advice when it comes local taxation laws. Their assistance can help prevent very complicated and expensive legal battles in the future.
What local partners do you need?
While you are an expert on your product and industry, you are not an expert in the local consumer or business environment. You need to partner with people who can provide that specialized, localized information. This is especially true for areas like marketing and sales, which are hinged on a close understanding of customer behavior and values. A local can understand details like what words will resonate with audiences, the latest trends, or what type of events, advertising platforms or business locations can attract your desired market.
What business objective are you trying to achieve?
Are you trying to increase reach a new target market? Hire local talent at a fraction of what it would cost in your country? Introduce a product in a less competitive area? Grow revenue? Clarify what business objective you want to achieve when you establish an overseas office. It will help you set realistic metrics and measure your return of investment, and help you decide if this is really the best way to reach your business goal. While there may be overwhelming pressure to “go global” you have to be clear about why you’re doing it, and not just enter it for the sake of being a “bigger brand.”
How long can you wait for a return of investment?
It may take several months to get the business established, and even more to get it running at 100% efficiency. Getting a local setup partner can help fast-track documents and prevent costly delays, but it’s realistic to expect that you will be in there for the long-haul. Calculate the cost of establishing and running an offshore business, and how long you can wait until your investment bears fruit. There is nothing more futile than going half-heartedly or blindly into an offshore business and then pulling out before you are able to see a real profit.
Get facts but trust your gut
These considerations are all important when you decide whether you should establish a business abroad. They can help you see what data you need to gather, and the criteria and metrics you should set. However, these facts are just tools: at the end of the day, listen to your entrepreneurial instinct and management experience. Great rewards come to those who are willing to take great risks, but are able to intelligently manage the process and resources to influence a better outcome. Whatever obstacles you may encounter, there will always be a solution or a way to simplify the process.
