TIP: Even if you really do want to set up an office in another country, it’s important to un-couple the visa process for you or your team members looking to expatriate from taking your business to another country because the likelihood of having issues with visas and there being a delay in getting your visas set up is high in most countries. Don’t let the visa process get in the way of your international expansion. At some point, you will likely send team members into other countries – either as visitors or to relocate.
And regardless of your business relationship (either as partners or employees), it’s often very important to have local people either on your team or paving the way. As a foreigner, you and your corporate team may not be the best people to bring your company into a new market and you may actually limit your company in building the relationships you need to be successful. Using local partners to help you develop personal ties is often a successful approach to entering a new international market.
Every country has different options for allowing companies do business with their citizens. The approaches that are most appropriate for your company will vary by country, so this article will focus on the general options without giving country-specific details. You can learn more about individual countries on Globig.co and also in The Definitive Guide To Global Expansion e-book.
The most common methods for engaging in commerce without setting up your own office and business entity in another country fall into the following buckets, in order of simplest to most complex:
Web or Mobile Direct Sales
Sales Representative and Agents
A great way to start developing an international presence is to work with an established business with expertise in your industry. A sales representative or sales agency can help open doors for you as an unknown brand. Sales representatives can set up research to test your product and get feedback about your product or service before you invest heavily into the market. Their reputation and prior relationships can get you introductions you’d not have access to, and they can help you market appropriately for the customer segment you’re trying to reach. Sales reps and agents are a low cost and high reward first step as long as you find the right one to develop a trusting relationship with.
Sales reps and agents typically get paid a percentage of what they sell and may ask for a marketing stipend to offset some of the costs of developing your business. You can often find great sales reps by looking at who sells complimentary products in the market and talking to companies you’d like to do business with about sales representatives they like working with. Trade shows are great places to interview new sales reps and agents.
PEO Firms
Another option is for you to outsource hiring an employee through a Professional Employment Organization (PEO) firm. A professional employer organization (PEO) is a firm that hires your employees for you and provides a service under which an employer can outsource employee management tasks, such as localized employee benefits, payroll and workers’ compensation, recruiting, risk/safety management, training and development, compliance monitoring, and legal support. This can work for expats as well as foreign hires. If you hire through a PEO, you don’t have to create a business entity in that country, saving you a lot of time, money, and tax related issues. PEO’s are really ideal for companies with a very small footprint in each country.
If you plan on having more than 4 employees in a single country, however, a PEO is probably not the most affordable way to go in the long run because you’ll pay $15,000-$18,000 +/- for each employee to the PEO firm per year. Keep in mind that when you are ready to hire your own employees and can manage HR and payroll in-house, you’ll most likely trigger termination regulations since you’ll be moving your employee from being employed by the PEO firm to being employed by your company. There are some exceptions to this with companies that are PEO’s and also provide regular payroll and hiring/HR services.
Distributor
The relationship with distributors is deeper than with a sales representative. Distributors will typically purchase your products, warehouse and ship them, and then market and sell your products in a country. They take on more risk, will ask for a larger share of revenue and also some sort of risk mitigation for returns and marketing costs. You can negotiate to have control over your brand and market positioning as well as other things important to your company. Great distributors need to be well capitalized, trustworthy, and have a sales and marketing network set up in order to be a good partner. These relationships will take time to build and it may take time to find the right partner, but they can be incredibly powerful.
TIP: Make sure you own your trademark in each country you wish to do business in so you have options as you grow.
Licensing
When you license your product, your name, program, IP, design or other aspects of your technology, you typically have much less control about how the other company ultimately does business with it. Licensing is a great way to do business in countries or markets you don’t have a plan to physically expand into and licensing relationships can be very lucrative in the long run.
Franchising
Franchising allows a company to buy into an existing and successful business model, brand name, operations, marketing, and recipes for success developed by that brand and take it into a new country or region. The original brand often maintains a lot of control over the business. Franchising internationally typically requires a business to purchase an entire region or country, guarantee a set number of locations, and the financial relationship includes a franchising fee, the cost of setting up locations, marketing, and a percentage of revenue. Be sure to take into account the importance of localized branding, cultural adaptation, and legal compliance.
Setting up a company and physical office in a new country is only one way to do business abroad. The options featured here can provide a much easier initial setup, be lower cost, lower risk, and very lucrative, especially early on as you test the waters.
To get an overview of all of the options within a specific country, Globig.co has a free Resource Hub that provides the market intelligence and step by step guides to more effectively expand international. Register to become a member today!
