The economy at home has seen better days. Even with record corporate profits, consumers in the United Kingdom, and in other developed economies are currently seeing a decline in disposable income that is holding back business growth. How did this happen? Inflation, wage stagnation and multiple recessions since the 1980s have reduced consumer income and drastically increased living costs in the UK and in many other developed nations.
However there is some hope for British businesses looking for growth opportunities. In many developing nations, the rise of the middle class means that increasingly, opportunities for growth lie abroad, not at home. This doesn’t mean businesses should ignore domestic markets – rather, that the importance of creating a business that is accessing international markets from day one is a much more critical factor to longer term growth.
This doesn’t mean that international expansion is easy, infact there are many common hurdles faced by entrepreneurs and business owners that attempt to go global, in this article we’ll explore the most common hurdles and how you can overcome them.
Moving capital international
When running an international business, the efficient sending/receiving of capital is a must for financial success. However, the complex machinations of global finance make this task a challenging one. Every time you pay a remote team member or a supplier, your capital is forced to pass through the global financial system.
Depending on which bank/finance company you use, currency conversion rates and transaction fees can take an unnecessarily large cut from each transaction. If you operate in a field known for thin profit margins, high transfer fees and big spreads between interbank rates and the one used by your bank can slam the brakes on your plans for overseas growth.
Fortunately, a new generation of money transfer companies is disrupting the market with lower rates and better customer service. Payoneer business solutions is a good example of this new type of money transfer company that offer much lower fees compared to more traditional options (Payoneer currently only charge a 2% markup on the interbank rate plus a flat 3% transaction fee that is capped at approx £7).
All this said, every payment company has their own pros and cons, which vary based your business situation (i.e a platform like Payoneer is a better suited for merchants exceeding £15,000 monthly in transactions). Make sure to do your research and find the right money transfer platform your your business and situation.
Understanding and respecting different cultures
The world is an incomprehensibly diverse place. Whether you are travelling abroad to meet factory owners or to woo prospective clients, it is important to account for your destination’s cultural traditions.
Don’t worry about speaking effortlessly in their mother tongue; they won’t expect you to be fluent, but learning a few basic phrases will go a long way towards earning their respect. ‘Hello’ and ‘thank you’ are great words to learn; however, learning specific phrases that are contextual and appropriate to where you are travelling will have the greatest impact.
To grease the wheels of commerce, we strongly recommend hiring a team member who is fluent in the language where you are travelling. Doing this will facilitate effective communication, and it will prevent embarrassing ‘lost in translation’ moments that could derail your business objectives.
Before your trip, block off sufficient time in your schedule to learn about the customs of the nation you will be visiting. If you are inspecting factories in Thailand, figuring out how to ‘wai’, avoiding situations which could cause your host to ‘lose face’, and not touching anyone on the head are a few things you should research.
Making a faux pas could jeopardise everything you are working on. If you offend, humbly apologise – it would be a shame if the thousands you spent on airfare went to waste.
Complying with foreign laws
In case you weren’t aware, laws vary considerably across the globe. What is kosher under UK business law can be 100% illegal in another jurisdiction. Some nations are a libertarian’s dream come true, while you’ll need to navigate Kafka-esque bureaucracies in others.
What could go wrong? Let’s focus on customs laws: nothing screws up the cash flow of an international business more than supply chain disruptions. Lack of understanding surrounding trading laws can lead to shipments being held up at the border, pending the payment of customs duty.
Avoiding pickles like this is virtually impossible if you try to do it all on your own. Legal counsel is essential, as wading through a thick stack of laws on trading, labour regulations, tax codes, etc will eat up all of your time. Inevitably, you’ll miss something – after all, there are higher value tasks you need to focus on as the head of your company.
A commercial lawyer, solicitor or law firm in the countries where you do business can save you from a massive legal headache later. On top of knowing about existing laws, they can also prevent you from being blindsided by any new laws or changes to existing ones.
Understanding foreign demographics
Products that sell well at home might end up being a dud on the other side of the globe. If you are selling goods abroad, it is crucial to understand the needs of the markets in which you plan to operate.
Let’s re-visit Thailand for a second. Despite being a tropical country, sunscreen does not sell well here compared to Western countries. The reason: having light skin is a status symbol here – the shelves of stores here heave with whitening soaps and skin creams, but precious few bottles of sunscreen lotion.
Getting a suntan takes the average Thai further from their goals, so the demand for sunscreen here is rather low despite what conventional wisdom might dictate.
If you are looking for your new SPF 60 sunscreen, you would be better off targeting consumers in Australia or Argentina. Both nations are subject to higher UV rays thanks to the Southern Hemisphere ozone hole that formed back in the 20th century. People in these nations are aware of how dangerous the sun can be, making it easier to pitch your product.
Reward Vs Risk
Taking your business international is a risk but the growth opportunities are equally enormous. Engaging in international commerce can be enormously challenging at times with regulation, language, cultural, legal and many more issues needing to be considered. However, when you consider that middle-class wealth and disposable income is growing much faster in many places outside of the UK, expanding abroad to international markets, often means the rewards are worth taking the risk (depending on your business situation).