In the past, opening an international business literally meant crossing oceans to reach foreign markets. Fortunately, times have changed, and today venturing into the global market is much easier, safer and more popular than ever before.
In fact, international business is currently experiencing a significant boom. According to a recent study by the World Bank, international trade is growing at a rate of 3.8% per year, surpassing global GDP growth. Now, that’s a whole lot of opportunities waiting to be seized.
However, it’s crucial to acknowledge that starting a business internationally comes with its own set of hurdles. Cultural differences, language barriers, and legal requirements are just a few examples of the challenges businesses need to overcome. Yet, the rewards can be substantial.
That’s why we’ve put together this guide to help you navigate the process of setting up a business internationally. We’ll walk you through the steps, provide valuable insights, and offer practical tips to make your international business venture a success.
Step 1: Choose Your Market
The first step to take when starting a business internationally is to conduct thorough market research. This will help you identify and narrow down potential markets for expansion. You’ll be required to gather and analyse lots of data based on the economic, political and cultural environment of the countries you’re considering and the demand for your offerings in their local markets.
You can consult a variety of sources to gather information for your market research, which could include:
- Government websites: Many governments have websites that provide information about the economy, the regulatory environment, and their country’s culture.
- Trade associations: Trade associations can provide information about your industry, as well as the regulations and standards that apply in different countries.
- Business directories: Business directories can help you identify potential partners and customers in a new market.
- Online forums, focus groups and online surveys: Joining online forums or focus groups can be a great way to connect with people who are already doing business in a new market. You can also conduct online surveys to gather direct feedback and insights from potential customers and industry experts.
- Consulting firms: Consulting firms can provide specialised advice on market research and international expansion.
- Academic resources: Universities and research institutes often publish studies, papers, and research findings on various markets that can help you provide a deeper understanding of the economic, social, and cultural aspects of the target country.
Step 2: Develop Your Business Plan
The next is to come up with a solid business plan. You’ll have to start by defining specific goals and objectives for your international expansion and outlining your strategies to make it happen.
Here’s what your business plan should include:
- Executive Summary: This is a brief overview of the business plan, and it should include the goals and objectives of the international expansion, as well as the strategies that will be used to achieve them.
- Company Description: This section should provide an overview of the company, including its history, products or services, and target market.
- Market Analysis: This section should analyse the target market, including the size and growth potential of the market, the level of competition, and the regulatory environment.
- Marketing Plan: This section should outline the marketing strategies that will be used to reach the target market, including the messaging, distribution channels, and promotional activities.
- Financial Plan: This section should provide an overview of the financial projections for the international expansion, including the costs and revenue.
- Sales Plan: This section should outline the sales strategies that will be used to reach the target market, including pricing, product positioning, and sales channels.
- Operations Plan: This section should outline the operational strategies that will be used to support international expansion, including the supply chain, manufacturing, and customer service.
- Logistics Plan: This section should outline the logistics strategies that will be used to get products or services to the target market, including transportation, warehousing, and customs clearance.
- Management Team: This section should introduce the management team and their experience.
- Appendix: This section should include any supporting documents, such as market research reports or financial statements.
A well-developed business plan will develop the success of your business in international markets. You’ll not stay focused and on track, but you’ll also have a roadmap for your future expansion efforts. Your business plan will serve as an official record proving the viability of your business, which would open numerous avenues to secure funding and attract potential investors.
Step 3: Set Up Your Business Entity
Even setting up your business’s legal entity could be a hassle when it comes to international business. There are two aspects to it:
Choosing The Right Legal Structure
There are many different legal structures available. However, choosing which would be the best for you will depend on a number of factors, including the size and nature of your business, the level of liability you are comfortable with, and the tax implications in the country you are expanding into.
Some of the most common legal structures for international businesses include:
- Sole proprietorship: This is the simplest and most common legal structure for small businesses. In a sole proprietorship, the business owner is personally liable for all debts and liabilities of the business.
- Partnership: A partnership is a business owned by two or more people. The partners are jointly liable for the debts and liabilities of the business.
- Limited liability company (LLC): An LLC is a hybrid business structure that combines the benefits of a corporation and a partnership. The owners of an LLC are not personally liable for the debts and liabilities of the business, but the LLC itself is a separate legal entity. If you need assistance, Incfile can help you file for your own LLC online for free.
- Corporation: A corporation is a legal entity that is separate from its owners. The owners of a corporation are shareholders, and they are not personally liable for the debts and liabilities of the corporation.
Registering With The Appropriate Authorities
Once you have chosen the right legal structure, you must register your business with the appropriate authorities in the country you are expanding into. The registration process will vary from country to country, but it typically involves providing information about your business, such as its name, address, and contact information.
Step 4: Get the Necessary Permits And Licences
The specific permits and licences you will need will vary depending on the country you are expanding into. However, some common permits and licences include
- Business registration: You will need to register your business with the appropriate authorities in the country you are expanding into.
- Employment permits: If you plan to hire employees in the country you are expanding into, you will need to obtain employment permits for them.
- Tax registration: You will need to register your business for tax purposes in the country you are expanding into.
- Intellectual property registration: If you have intellectual property, such as trademarks or patents, you must register them in the country you are expanding into.
- Import and export licences: If you plan to import or export goods, you will need to obtain import and export licences.
If you’re struggling to figure out which permits or licences your business needs, BetterLegal can research for you so you can focus on getting your business off the ground.
Step 5: Open a Bank Account
Opening a bank in your target market will greatly help you develop a local financial presence. Plus, you’ll easily facilitate transactions, all while complying with local regulations. Here are a few things to consider before you open your bank account:
- Research local banking options: Start by researching the local banks in your target market. Look for reputable local banks that offer suitable business services, such as international transactions, account types, foreign exchange services and international banking facilities. If you are a non-resident, you will need to find a bank that is willing to open a LLC bank account for non residents for you.
- Check the requirements: Different countries have different rules when it comes to opening a bank account. Make sure to check requirements for documentation, business licences, minimum deposit requirements, and identification. In case you need any help, consult the local authorities, business associations, or legal advisors for guidance. Gather the necessary documentation: Once you have chosen a bank, prepare the necessary documentation to open an account. This typically includes identification documents (such as passports or national ID cards) for the account signatories, proof of address (utility bills or lease agreements), business registration or incorporation documents, and tax identification numbers. Some countries may ask you for additional documents, so ensure you have a comprehensive list based on local regulations.
- Open the account online or in person: Some banks allow you to open an account online, while others require you to open an account in person. If you are opening an account in person, be sure to schedule an appointment in advance.
- Transfer your funds: Once your account is successfully opened, transfer funds to it by wire transfer, bank transfer or check. Make sure to familiarise thoroughly with the processes, fees, and any currency conversion requirements. You may also explore options such as foreign exchange services or international payment platforms to streamline your cross-border transactions.
Step 6: Hire Employees
Expanding on the sixth step of opening a business internationally, which is hiring employees, make sure to find qualified professionals in your target market and make them a part of your team. But before you hunt for potential candidates, familiarise yourself with the local labour laws and regulations. If you need any help, you can also consult local legal counsel or HR experts.
Step 7: Market Your Business
When marketing your business internationally, the first thing you need to do is to create a solid marketing plan. This plan should include your goals, target audience, marketing channels, and budget. Once you have created your marketing plan, you can start promoting your business. This can be done in two ways: online and offline.
Online marketing can include:
- Search engine optimisation (SEO): Create a user-friendly, visually-appealing website that showcases your offerings. Use SEO techniques to improve your website’s organic rankings on search engine results pages. This means optimising your website’s content, using relevant keywords, and obtaining high-quality backlinks.
- Invest in online advertising: Consider running online advertisements through platforms like Google Ads, social media ads, and display advertising networks. Target your ads based on demographic and geographic factors to reach your desired audience effectively.
- Social media marketing: Establish a popular presence on social media platforms within your target market. Engage with your audience, build a connection and use it to promote your business.
- Email marketing: Build an email list and send targeted email campaigns to nurture relationships with potential customers. To keep them engaged, provide relevant information, exclusive offers, and updates about your business.
Offline marketing can include:
- Participate in trade shows and industry events: Attending relevant trade shows and industry events is a great way to showcase your products, network with potential customers, and gain industry exposure in your target market.
- Localise your marketing materials: Translate and adapt your marketing materials, including brochures, flyers, and promotional videos, to the local language and culture of your target market. This shows that you value their customs and increases your credibility.
- Collaborate with local influencers or partners: Be on the lookout for influential individuals or businesses in your target market who can help promote your brand. Partner with them for joint marketing campaigns or sponsorships to reach a wider audience.
- Engage in public relations (PR): Build solid relationships with local media outlets, journalists, and bloggers to generate positive coverage for your business. Issue press releases, arrange interviews, or participate in relevant PR opportunities to increase your brand’s visibility.
- Utilise traditional advertising: Consider placing advertisements in local newspapers, magazines, radio stations, or television networks to reach a wider audience. Adapt your messaging to align with the cultural preferences of the local market.
Marketing your business internationally requires an in-depth understanding of the target market and the cultural differences. So, make sure to adapt your marketing strategies accordingly, monitor their effectiveness, and leave enough room to make changes or incorporate new ideas as you go.
Step 8: Manage Your Finances
Managing your finances is a crucial part of running an international business. A healthy financial record ensures stability, legal compliance, risk mitigation, and efficient operations. Here are some important steps that’ll help you keep your finances in order:
- Keep track of your money: Set up a system to track your income and expenses. This could be using accounting software or getting help from an accountant. It’s important to have a clear picture of your finances.
- Pay your taxes on time: Make sure you understand the tax requirements in the countries where you operate. Stay updated on tax laws and regulations. If need be, seek advice from a tax expert who can optimise your tax planning and avoid penalties.
- Watch out for currency exchange risks: Dealing with different currencies can be tricky. Make it a point to stay informed about exchange rates. Also, consider working with a foreign exchange provider who could manage currency conversions and minimise risks for you.
- Build good banking relationships: Choose a reliable international bank that suits your business needs. This will help you handle transactions across borders and access global financial services.
- Implement strong financial controls: Establish clear policies and procedures for financial transactions within your business. This includes authorisations, invoice approvals, and segregation of duties. Regularly review and update these controls to minimise the risk of fraud or errors.
- Stay compliant with regulations: Make sure you understand and comply with financial regulations, such as anti-money laundering and Know Your Customer requirements. Stay informed and keep your operations aligned with these regulations.
Remember, good financial health creates a solid foundation for long-term success in the global marketplace.
Tips to Keep in Mind While Starting a Business Internationally
Stepping foot in the global marketplace can be exciting. However, growing your business overseas also comes with its own sets of challenges. To make sure you’re set up for success, here are a few important tips you need before you ahead and take the plunge:
- Establish physical presence: You can do so by partnering with a local company, forming a joint venture or setting up your own local offices in the target market.
- Adapt your pricing strategy: Make sure to adjust the price of your offerings as per the local market conditions, the competitive landscape and the purchasing power of the target customers. If need be, introduce discounts or promotions to attract more customers.
- Invest in cross-cultural training: This will help your employees to develop cultural intelligence. They’ll better understand the cultural norms and expectations of the target market, which would help them build solid relationships with international partners and customers.
- Develop a comprehensive risk management plan: While coming up with a risk management plan, make sure to address the political, economic, and legal risks associated with operating in different countries. Also, include contingency plans just to be prepared for unexpected events or scenarios.
- Use digital tools: Incorporate digital tools and platforms to facilitate remote collaboration, virtual meetings, and seamless communication with international stakeholders.
- Build a strong brand reputation: Prioritise your customers’ satisfaction above anything else, make sure your offerings are simply top-notch and maintain ethical business practices.
- Stay up-to-date on trade agreements. Tariff changes and geopolitical events can significantly impact your business operations or supply chain. It is important to stay up-to-date on these changes so that you can make informed decisions about your business.
- Seek feedback and testimonials: This will help you understand what your customers actually want and need, and it will also help you improve your offerings. Positive feedback from customers can also help you build credibility and generate word-of-mouth within the target market.
While there are many challenges one may encounter while operating a business internationally, here are some of the most common ones:
Cultural differences: Each country has its own unique cultural nuances and practices that can vary significantly across countries, affecting communication styles, business etiquette and customer preferences. Adapting to and respecting these differences is crucial to ensure successful operations.
Language barriers: Not being able to speak the local language can make conducting business a lot more difficult, especially when you need to constantly communicate with your customers, suppliers, partners, and employees. This can be a challenge, especially if you are operating in a country with a language that is very different from your own.
Regulatory hurdles: Each country has its own set of regulations, and it is important to understand these regulations in order to comply with the law. This can be a challenge, especially if you are operating in a country with a complex regulatory environment.
Financial risks: Operating a business in a new market can be risky, as you may not be familiar with the local market conditions. For example, you may be exposed to currency fluctuations or political instability.
Logistics challenges: Shipping products or services to a new market can be challenging, especially if the country is located far away. You will need to factor in the cost of shipping, as well as the time it takes to get your products or services to your customers.
Competition: The level of competition in a new market can vary greatly. There may be very little competition in some markets, while in others, the competition can be quite high. You will have to assess the level of competition in the market before you enter and develop a strategy accordingly to compete effectively.
There are a number of countries that are relatively inexpensive and easy to start a business in. Here are a few of them, as per the World Bank’s “Doing Business” report:
New Zealand: New Zealand is ranked as the easiest country in the world to start a business. The cost of registering a business in New Zealand is just NZ$43, and the process can be completed in less than a day with minimum paperwork.
Rwanda: Rwanda is another relatively inexpensive country to start a business in. The cost of registering a business in Rwanda is just RWF10,000 (around US$10). Similar to New Zealand, the process can be completed in less than a day.
Slovenia: Slovenia is a country in Central Europe known for its business-friendly environment. The cost of registering a business in Slovenia is just EUR750, and the process takes about a week to complete.
United Kingdom: We all know the United Kingdom is a developed country with a strong economy. The cost of registering a business in the UK is just GBP12, and the process can be completed in about a week.
Denmark: Denmark is a Nordic country with a high standard of living. The cost of registering a business in Denmark is just DKK3,000, and the process takes about a week or so to complete.
You can hire bilingual or multilingual staff, utilise professional translation services, and invest in cross-cultural communication training to overcome language and communication barriers.
An ardent reader, full-time writer and a lover of all things purple. Riya is an entrepreneurial spirit, making her way in the start-up industry through her expressive writing. When not working, you can find her jamming to music, watching period films, eating sushi, or petting cats.