Today, you’ll learn how to expand your tech business into new international territories and the pitfalls to avoid in the process.
In February of 2022, UNCTAD’s GTU (Global Trade Update) showed that trade in goods and services returned to its pre-COVID-19 levels. “Overall, the value of global trade reached a record level of $28.5 trillion in 2021.”
International trade and global expansion have become a topic of discussion inside every boardroom. From single-person SaaS companies to enterprise-level firms post-pandemic, the world is moving again, and sights are being set across the horizon.
If you’re reading this, chances are you’re one of those companies.
So, you have a growing business. Clients love what you do, investors are brimming with excitement, things are going well. The next logical step is international expansion. Taking what’s working here... and doing it somewhere else. It can be exhilarating and terrifying at the same time.
New revenue streams and brand-new client markets are tempting, but unless you have a solid strategy, it could be a step backward. Luckily, we’ve put together a simple step-by-step guide for you.
According to Dataversity, 85% of CFOs are looking at the entire globe as their talent pool. And 81% are looking at global expansion in the near future.
Speaking of international expansion, here’s some food for thought...
When U.S.-based companies look to trade outside of America, they often look to China or the Far East. Here are the top 10 countries that U.S. businesses trade with, along with annual trade figures.
- United Kingdom: $607 billion
- Canada: $540 billion
- Singapore: $366 billion
- Ireland: $362 billion
- China: $345 billion
- Germany: $341 billion
- Switzerland: $314 billion
- Netherlands: $266 billion
- Mexico: $232 billion
- Japan: $230 billion
Side Note: France has also become the jewel of the European tech scene. Silicon XI in the heart of Paris is home to 600+ tech businesses, Google and Criteo being just two of the big-name businesses in the area. And we can’t mention Paris without talking about Station F, over 1000 startups are currently working from the 34,000 square metre hub. It’s the “tech university” of France, housed in a former railway building known as Halle Freyssinet.
Stick around until the end for some of the common reasons for international expansion failure and how to avoid it.
Grab a coffee, or a donut, this is going to be very useful. You might even find yourself bookmarking this page and coming back to it.
Actually, let’s go ahead and bookmark it right now so we don’t forget.
All done? Let’s break it down.
What Is An International Expansion Strategy?
Putting it simply, it’s a multi-level plan that a business can use to enter a new market. This new market will open revenue streams and growth opportunities not available to that business before expansion.
Some businesses also expand into countries that have vast amounts of talent they want to make use of. For instance, a startup in London is struggling to recruit staff in London. If the talent pool in Seattle is vibrant, they might open a Seattle office simply because they want to recruit that pool of talent.
More often, a lot of businesses decide they want to recruit remote freelancers, especially post-pandemic. One of the drawbacks of remote working is IP theft, but working with an EoR mitigates this since the employee is legally a Full-time employee, not a freelancer. This means we can outline Intellectual Property ownership at the point of hire, it’s baked into the employment contract.
Expanding in a physical, tangible way is usually the better choice.
Summary: An expansion strategy is mainly about creating fresh revenue streams or expanding your talent pool.
Why Go International?
The reasons for going global are usually extremely specific to your business. But we do have a few common reasons to talk about.
- Talent search. Any tech business owner will know that talent is the bottleneck they never expected. Funding? Sure. Legislation? Maybe. But the talent pool simply not having enough people to choose from is something that takes most people by surprise
- Emerald are unique, not only do we find talent, we facilitate bringing that talent onboard with as little fuss as possible. We can bring all the talent you need on a global scale. Mitigating the risk of your IP being stolen and sold to a third party
- Also, when you don’t have a legal entity in the country you want to expand into, it raises a complete set of new problems. You can mitigate a lot of those problems by talking to us first.
Here are a few reasons why you might want or need to go global.
- Market presence diversification. With geopolitical tensions running high, it can be a wise move to diversify your business. Moving into other markets has its downside, but it also helps the business stay afloat if one major market goes south due to the economy or other factors
- Your circumstances have changed. Subsidiary acquisition, sales office opening, political upheaval. There’s a lot of reasons why you might need to make a fast entry or exit into or out of a country. This can be a lot to deal with in a short space of time. Partnering with a dedicated talent partner like Emerald can remove most of the headaches overnight
- You need extra revenue streams. This is intricately linked to market presence diversification, but slightly more pressing. The need for market diversification is sometimes because you want to hedge against something going wrong in your home country. Requiring extra revenue streams is the result of a saturated market. You absolutely must find fresh, untapped markets.
Summary: Expand into another country because you need the talent, the market presence diversification, or the extra revenue streams.
Key Elements Of An International Expansion Plan
- Competitive analysis report. How do we stack up against the existing competition in this new market? Brand positioning and what you have to offer can differentiate you enough to make a dent in most markets. However, neglect a competitive analysis report at your peril. Who dominates the market you want to enter? What are they doing that you aren’t doing?
- Market analysis report. Similar to the competitive analysis, but this time we need to look at your potential client base. Is there a demand for your offer? Who's already buying this offer in the target market? What’s the customer base like? Have customer attitudes shifted since you first thought about expanding? What’s the economy like over there?
- Create a timeline. You need solid, doable goals, but you also want some stretch goals too. Do you have the resources and staff to expand? If you take staff and resources from your home territory, do you have wiggle room? You don’t want to spread yourself too thin back at base camp
- You need a budget. You’ll need at least 12-months of launch resources to get things going. Plus, you should probably set aside another 3 years of expansion support with carefully chosen KPIs to monitor along the way. You don’t want to run out of financial runway
- An internal audit. Are your products or services market-ready? New markets often mean a rebrand or at least a top-down audit of the current offerings. Are your offerings aligned with the local culture and/or economy? In-depth GAP analysis, and even market segmentation can be invaluable to a global expansion strategy. Market readiness would also include regional certification for your product for service.
- A localized plan to develop infrastructure. Regional compliance for taxation, hiring employees, sourcing vendors, and purchasing real estate are vastly different from your home territory. This is why a platform-based payroll system often fails once the business expands across multiple territories. Emerald is a client-centric Employer of Record/payroll solution. We source your executive talent in line with your international expansion strategy and keep them compliant throughout their entire tenure. Because we are customer service derived, not platform derived, we can adapt organically to your needs in ways that other solutions can’t
- A marketing plan. I know, you already have one. Again, what worked at home will not always work globally. Positioning your brand to fall in line with local expectations, KPIs to check if your message is translating, and marketing channel choice, they all play a part in your international expansion
- A pricing strategy. Can the market you’re moving into absorb your current prices? It’s worth thinking about a tiered structure for product/service pricing depending on the local economy.
Summary: The buzzword here is analysis. You need to produce reports for marketing, local infrastructure, market analysis, competitive analysis, and a localized pricing structure for every country you wish to enter.
Okay, so if you’ve read this far, chances are you’ve decided to go ahead and start putting a plan together. We know it can seem a little overwhelming, but thankfully we’ve assembled our top tips to help you move forward at this stage.
1: People Always Beat Systems
As we have established above, you need a plan. What market are you trying to penetrate and why? How will your product or service likely be received in that market?
A clear customer avatar in every market you intend to operate in will help you define and redefine your strategy. This is a fluid situation. It’s also why we advise against platform-based solutions to payroll and talent acquisition. Those solutions are too rigid and simply can’t cope with the rapidly changing geopolitical world we live in.
2: Choose Your Partners Wisely
We suggest you choose an international expansion partner with care. International markets are full of potential, but there's also a lot of risks. Your partner should know what’s in store and crucially, have experience in the field. Emerald has already helped hundreds of companies just like yours.
We handle talent acquisition in foreign markets daily. Our entire infrastructure is built to withstand dramatic changes to human resources legislation and tax legislation.
Our portfolio covers every type of business from seed stage to enterprise level.
Whatever issue you have expanding your business internationally, we’ve handled it before.
3: Action Not Reaction
During your international expansion phase, it’s tempting to throw as much spaghetti at the wall and see what sticks.
Don’t do that.
The last thing you want to do is become reactive. Having a plan and partner who can execute that plan will help you avoid the pitfalls associated with global expansion. You don’t want to spend your day running around putting out multiple fires. Lurching from crisis to crisis isn’t a good look.
It’s also very common to lurch from crisis to crisis when a business decides to wing it.
4: Small Steps – Big Rewards
The ultimate goal should be to go into the new market nice and lean. With help from an established consultancy, you can see what works and shift perspective rapidly. Expanding on a micro level to get macro long-term gains. With Emerald, you can dip your toes before diving right in. With our advanced systems and practices, we can secure talent, arrange VISAs, organize payroll and manage your entire expansion into a new market. Without you ever having to set up a legal entity in that country.
5: Cashflow Is King
If you’ve made all the right moves, you should see big rewards from expanding your business into a new market. Now is not the time to hedge. By reinvesting that money back into your expansion plans you can quickly gain a foothold and potentially squeeze out competitors.
This has an effect called “expansion multiplication”, expansion into new markets is now being funded by the rapid growth of older markets. This cash flow allows you to acquire the best talent, faster. You’re still competing with Facebook, Oracle, Google, and Amazon, but you’re able to snatch the best talent from 99% of other businesses.
Summary: Keeping a positive cash flow in a new market will put you in the first place when it comes to hiring A+ talent. When you’re putting money on the line, agility is the key to success. Organic problems require organic solutions.
Finally, after you’ve assembled your plan and ticked all your boxes, there’s still going to be elements you can’t see because you simply haven’t experienced them. Luckily, we have, and we can let you in on a few secrets.
Here are the biggest reasons why a large amount of international expansion goes wrong. These aren’t in order of importance so make sure you read them all the way through.
1: Failed Infrastructure
Since it varies from country to country, this is one of the big stumbling blocks. The functional back-end infrastructure you’ll need is vital to growing your presence abroad. Remember, we aren’t trying to maintain here, growth is the only option because the expansion has to pay for itself.
If you don’t want to have a legal entity in the country of choice then Emerald is a great option. But, if you do want to go it alone you’ll most likely need the entire back-end infrastructure for:
- Legal representation
- Human resources
- M&A (marketing and advertising)
- C&D (coffee and donuts).
Just kidding about the coffee and donuts, but the other items on that list can get you in ridiculously hot water if you don’t get it right. Your organization can easily fall foul of local tax or HR compliance laws and end up in court.
Getting council with a trusted advisor like Emerald is a smart choice that could save you hundreds of thousands of dollars in legal fees.
2: Quality Control
You’ve already completed the internal audits and decided you can go ahead with international expansion. Brand perception is great. Now you have to think about delivering that product in a new marketplace. Can you guarantee the same quality as you provide back home?
Moving into new markets can be a fantastic way to test the waters and see how your product is perceived in other countries, but you still must deliver the same quality.
It’s another reason why we encourage companies to avoid remote contractors. Employing in-house talent, especially local, can often mitigate quality issues because they intrinsically understand the local client base.
Product localizing or “rewrapping” is common among businesses trying to penetrate a new market. The offer is good, it’s the package that needs work.
3: Compliance, Compliance, And More Compliance
As you’ve most likely seen in the news lately, international business expansion and compliance are hot topics. Tax laws are changing for big-tech companies and it’s a scramble to figure out some sort of path through this red tape. Archaic governmental structures aren't built for fast-moving business expansion.
You’ll need to watch out for:
- Compliance with local laws for payroll, onboarding, employee benefits, and compensation
- Subsidiary or regional presence laws
- Local banking regulations and regional bank accounts
- Commercial certification
- Record and file maintenance
Those are just a few reasons why a local government could take you to court and slap you with a hefty fine if you get it wrong. Partnering with Emerald shifts most of that pressure to us.
Summary: Google, Facebook, and Amazon are all currently in court over legal issues due to international business expansion. While most of that is centered around taxation, you’re still better off talking to a trusted advisor before going ahead with any plan you have to expand into new markets. No matter how big or small you are.
Helping you expand your business internationally as an employer of record is in our source code. We do all the heavy lifting so you can concentrate on building your business.
Talk to us today and let us take care of your international business expansion needs.
Our team are ready to build your team.