Taking your business abroad

A quarter of the C-suite executives surveyed for Forvis Mazars’ C-suite Barometer outlook 2024 highlighted international expansion as one of their strategic priorities and identified China, Germany the US, and France as top growth opportunities.

There are several reasons why international expansion is on the agenda for organisations. Certainly, one is around growing market share – businesses are looking to expand beyond their current borders into new markets. But the motivation for expanding internationally isn’t always necessarily related to the top line and revenue growth.

International expansion can be about exploring efficiencies or looking for ways to improve your global supply chains.

“There’s a host of benefits for businesses trying to expand internationally,” says Gareth Jones, partner at Forvis Mazars. “We’re certainly seeing more businesses venture into the US, into Asia Pacific, looking for better ways of doing business.”

Growing global: uncertainty prevails for many businesses

However, global expansion is a complex issue. The way that companies shape and manage their cross-border infrastructure is critical, with specific global regulations regarding the sharing of data, technology and sustainability.

Arguably the biggest challenge facing any organisation looking to expand globally is the unknown. As the saying goes, you don’t know what you don’t know. As such, there is often a wide range of aspects to international growth that many companies haven’t considered.

“If you’re domestic, medium-sized business that hasn’t worked internationally, it can be pretty scary to think, ‘Where do I start looking?’ Where do I do my market research?,” says Jones.

“Often it’s an opportunity that comes along in a particular country and you think, ‘I’m going to go for that’, but you’re unsure because you don’t have people on the ground or a legal setup in that country – or are just worried about the costs involved. Looking beyond that you need to question the return on investment, as well as s the long term viability and profitability of winning new business in a particular region or country.”

Business leaders will also find themselves asking questions around regulation and local laws that are unique to each country. Common questions include: Do I need to set up a company in the new region? Do I need people on the ground or should I send people there?

You then start thinking around the tax challenges stemming from winning contracts in particular countries; you will have to evaluate if you undertake the work in that country and bill from the UK, or if you need to bill locally, for example.

Bringing in people adds another element to the unknown. Some countries in Asia Pacific require local directors sitting on the Board, and you need to have an established office. So how do you source that person? In the US, meanwhile, every state carries individual sales taxes, so that presents particular tax issues and requirements.

The fact is, there are lots of potential hurdles to getting things right first time. And unless you’re partnering with somebody who’s got core expertise in that particular area, you could make decisions that could prove costly down the line.

Challenges to international expansion

As in the domestic market, there’s a digital aspect to expansion – specifically understanding the cybersecurity and data regulation challenges that exist in different countries – or even within other states.

It is important to consider your supply chain, too. We’ve seen huge challenges in supply chain operations in recent years, relating to extra admin and costs due to Brexit, shortages of goods and long lead times during and directly following the Covid pandemic.

“People don’t often think about that as a way of increasing profitability in your business,” says Jones. “You can add an ESG element to this, incorporating the ethical elements of doing business in particular countries and how those goods and services are made.

“You can also incur significant costs if lead times are poor; you have to load up on stock to make sure you’ve got access to serve the customers you’ve got. It’s an area that is probably not focused on enough, especially by medium privately-owned businesses that are probably only thinking about the top line. They’re not thinking about that supply chain as being a detractor from profitability in their business when it goes wrong.”

Having the right partner to help you navigate those challenges is crucial to help you answer questions around supply chain efficiencies.

Plan and prepare for successful expansion

It’s natural for you as a business decision maker to see an opportunity and want to move quickly. However, jumping into a new market without weighing up the different considerations, and without doing your due diligence can lead to costly mistakes.

So stop and pause while you consider your next steps. Have you told your bank your plans? Who do your shareholders think of them? What about the other stakeholders? What will the impact be of expansion on the core business in the UK?

“International expansion can be a minefield for lots of businesses, so it pays to road test what you want to do with somebody who has been there before,” says Jones. “We’ve helped a lot of clients expand globally. The one thing really helps to mitigate risk and telegraph potential problems and opportunities is having access to someone who understands local regulations, culture and ways of doing business. It is invaluable.”

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