The right time to think about expanding to international business for small business owners comes when they are both confident in their business model and in the viability of global opportunities. This is not an easy decision and you’ll need to consider all pros and cons very carefully. You will also need to research the foreign markets extremely well to determine if you’ll be welcome there. Most importantly, you’ll have to weigh the potential benefits of expansion against the risks and cost of it. This post will help you assess those factors so you can make a wise decision in the end.
Going to International Business for Small Business: Will It Pay?
Yes, going global will definitely pay if your enterprise succeeds with establishing itself on a new market. This change basically opens new pools of prospective customers for you. Many of them might be more interested in your product by default, for example if you sell some local specialties. This increase in prospects is the main reason why small businesses should consider going global.
A big USForex survey of 2016 concluded that 58% of small businesses already had foreign clients. The estimation for the next year was for this number to increase by 14%. This is a definitive proof of the benefits of this action.
I’d also like to remind you that ‘going global’ for a small business means not only ‘selling your products/services abroad’. This also entails purchasing your supplies and materials from international companies. These usually have lower rates than local producers, so even without selling your goods abroad your business can make money from opening to the international markets.
5 Steps to Becoming an International Business: For Small Business Owners Focused on Success
1. Research, research, research, and then research some more
The most important thing you have to do before attempting to make your small business go international is researching the market you plan to expand to. This is not merely a matter of finding out if there will be demand for your products/services. You need to understand the dynamics of the market, major and minor players on it, legal regulations in regards to imported goods and international trade, etc.
The most basic list of analyses you need to carry out includes:
- Market segmentation (to see if your product/service will even fit the local market)
- SWOT analysis in regards potential competitors (SWOT stands for strengths, weaknesses, opportunities, threats)
- Product gap analysis (to assess competing local products)
- Market opportunity analysis (measure the scope of the market and assess its growth potential)
One of the greatest challenges of setting up an international business for small business is the fact that this kind of in-depth research must be carried out for every single market you want to target. So, you might have to curb your initial ambition to target ‘the world’ and take it one step at a time. Rushing these things might be the cause of your failure.
Personally, I also advise researching cultural aspects of the country, not only its economic side. This will help you better understand the consumer and see if you can make your product/service appealing for them.
2. Develop a business plan based on your research
You might have a stellar business plan that helped your business succeed at home and even go nationwide. However, you’ll have to develop a brand new one for going global. It must be based on the information you collect during the aforementioned research.
This plan will also have to include provisions for international shipping, delivery times, currency exchange rates, additional taxes, possible additional licensing. Bear in mind you might also need to hire more staff for the expansion.
I suggest reading through this Inc. article on how to write a business plan and a few others to refresh your knowledge of the subject.
3. Develop a budget
One of the hardest parts in creating an international business for small business owners is money. Take one look at your business plan and you’ll see that your initial costs will be high. You also need to add the costs of a marketing campaign, packaging, etc.
Here’s a personal tip from me, do not forget to translate your labels and product papers professionally. While English might be the language of international trade, you can’t count on all your prospective foreign customers being proficient enough in it to understand product instructions. This might not be a big issue for some products, like stuffed toys. But if you deal in something like food supplements or tech, not giving your clients comprehensible instructions literally puts them in danger. So, remember to include the costs of both translation and creation of a new line of product packaging suitable for your new market.
You should have a budget for at least three years outlined. This will help you decide if it’s the right time for creating an international business from small business you have now. The budget along with your plan will also be necessary when you search for financing.
4. Reevaluate your product/service
Is your product ready to try conquering the hearts of foreigners? Analyze it with a fresh look fueled by the knowledge you gained through market research. This is where you need to account for cultural differences and changes that will be made by localization.
Consider local logistics and legal requirements. Will you need to have your product evaluated and certified by some foreign organizations? Will your guarantees hold up under foreign laws? Will you need to add more disclaimers or warnings to make your product compliant with foreign regulations?
Aside from answering these questions, I advise researching all competitor products personally. Note that this means not only the products that are similar to yours but also other options that local people use as substitutes. Scoping up the competition is one of the most important steps to take when preparing an advancement to international business for small business.
5. Partner up with the locals
This isn’t a mandatory step. Many small businesses can skip it as modern shipping and payment systems allow you to forego hiring a dealer. However, you should consider finding partners in a new country anyway.
This might provide you with financing or help you integrate a market more easily if the brand you are partnering with is already popular. This might help smooth out various legalization and taxation issues. Having partners will also take a lot of pressure off you and cut the transition costs.
If you aren’t looking for a dealer for your products/services or a variation of the sort, you should still search for connections. You’ll need to create some contacts in various legal offices and local marketing agencies at the least.
Is Building International Business for Small Business the Right Choice for You?
You are the only one who can answer this question. Be sure to go over all these points carefully and do a more in-depth research of the markets you plan to expand to. Be realistic in your assessments and take your time to consider the matter from every angle. This is the right way to make a decision that you won’t regret.