You’ve conquered Australia, what next? Following the success of a business in the domestic market, many businesses have the ambition and drive to expand into an overseas market. The thought of running an international business can be daunting, yet it is often part of a good growth strategy. There are a number of key areas to consider and carefully plan before going global. Here are seven early steps to take your business global:
1. Factor in affordability
Can you afford the additional cost of compliance, set up, freight and foreign exchange? Think about the additional costs to your business, both fixed and variable that will impact on your gross profit and bottom line.
2. Market readiness and demand
Think carefully about the market you are looking to enter. Is it ready for your product or service? Is there a need for your product/service or is the market saturated? Will your pricing be competitive against local products – either via price, or differentiation?
3. Consider the currency carefully
How volatile is the currency of the market you are considering? Contemplate if you need to hedge against any foreign currency movements to reduce risk in this area.
4. A smart international business structure
How will you structure the business? Consider alternatives such as licencing agreements, franchising, foreign direct investment and import/export requirements. Employment is a big consideration here. Will you employ locally or send experienced staff? Employment laws as well as visa requirements will need to be understood.
5. Global logistics management and insurance
How will you get your product to the overseas market logistically? What will you do yourself and what will you get someone else to assist with? Consider freight options of flying v’s shipping. Will you have enough orders to fill a container – or can you partner with someone to help fill it to make your shipping cheaper? Freight and duty charges can add up quickly. Don’t forget to insure your products for their journey also.
6. Compliance counts
Every country has various laws and regulations that can affect your product/service and business. What are the legal requirements in the country you are entering? In terms of tax, you need to consider if there is a Double Taxation Agreement with that Country and what the tax consequences are in the local jurisdiction as well as the tax implications here in Australia. What financial reporting do you need to undertake to meet Australian and overseas requirements?
7. Don’t forget global barriers
Other considerations include reviewing things like the political situation, language barriers, how you will impact the environment, any economic factors such as interest rates, any technological advances and of course any social impact of your business.
What is the first step for business expansion?
Research and planning is key to any expansion. Mapping it out before you jump in, will help you to ensure you have considered the majority of risks and opportunities that lay ahead. Mapping out the above considerations as well as preparing a business plan and strategy map will help you to succeed.
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To help you with your international business strategy, BDO Australia’s team can help with market expansion issues:
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Contact us for one of our international business experts to help you make the right decisions and help with every step of the way. For more information, contact your local BDO tax advisor or consultant.