PRINT
EMAIL
COMMENT
DEL.ICIO.US
DIGG
OUR PREMIUM CONTENT
The Kiplinger Agriculture Letter
The Kiplinger California Letter
Kiplinger's Biofuels Market Alert
Kiplinger's Retirement Report
SUBSCRIBER HELP
CURRENT LETTER
U.S. Agriculture
Feeding the Economy
PREVIOUS ISSUES
Looking to sell abroad? Do your homework first. Having a sustainable plan seems obvious enough, but many small businesses often get caught up in the excitement of new profits overseas and fail to plan for long-term growth.
Small business managers should first ask themselves: Why exactly are we going abroad? Tax reasons? To diversify the revenue base? To be closer to clients? Getting a handle on the objectives will make it easier to develop an effective strategy.
“You’ve got to wrestle with where and why in terms of location,” says Bill Paape, CFO of LifeSize Communications Inc., a video communications firm. “Have a plan of what you need to achieve and where you need to achieve it.” For LifeSize, the decision to expand was driven by how large the market was for the company’s video conferencing software.
Among important considerations, according to Larry Harding, president of High Street Partners, a global advisory firm:
Make sure all company managers buy in to the plan. Expanding overseas is a larger undertaking than many companies realize. Make sure that senior managers 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.
Know the full costs of hiring abroad. Outside the U.S., benefits often make up a far greater percentage of an employee’s salary. Some key questions: Does the new hire expect a company car? Private health insurance in addition to what’s provided by the country? Should you hire a contractor or a full-time worker? Could your contractor really be deemed an employee?
Be prepared to manage overseas employees' expectations. It can be a challenge to keep wage earners on the same page when they’re on different continents or in various time zones. Moreover, workers hired locally in subsidiaries may also have very different notions for what is considered acceptable than might a U.S. employee.
Headed to Europe? Beware the value-added tax (VAT). Harding says 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-European Union businesses must comply by making periodic VAT filings and by keeping VAT records on file and available for inspection by local tax authorities.
There are other considerations as well, says Adolfo Laurenti, a senior economist at Chicago-based Mesirow Financial, a financial services firm. Two key ones:
Know the lay of the land. Does the infrastructure in your intended market work for your business model? Whether it is the transportation system or accessing the telecommunications networks in a foreign country, it’s vital to know exactly how this will affect your output and efficiency. Laurenti adds that the efficiency factor is especially worth watching in emerging markets.
“It seems to be a trivial thing, but it may not be. Especially in developing countries, it may be a major hassle,” Laurenti says. “They may have roads, but only two lanes of traffic, so just to drive 40 miles, it may take two hours. If you are in the business producing goods, a lot of things can go wrong -- delivery of goods, transferring to clients, the retail chain.”
Get acquainted with the law. While no one wants to get into legal battles, it pays to be prepared. You should know where the liabilities lie for your product, service or industry. And then learn how much it costs to insure your firm against these liabilities. The judicial process and how fast cases progress are also worth knowing in case you need to sue.
“I think it’s important everywhere you go,” Laurenti says. “In the European Union, the time to get a decision out of the court system can vary a lot. It takes a long time in Italy, for instance.”
For weekly updates on topics to improve your business decisionmaking, click here.
E-Mail Article
Print Article
Reprint Article
|
|
|
|
|
|
|
|
