International expansion tips for small and medium sized businesses
Expanding your small or medium sized business overseas? Some tips to help mitigate risk.
Operating in more than one country offers more than just the obvious advantage of expansion and growth, it also:
- reduces dependence on your home market
- mitigates seasonal fluctuations or demand cycles
- hedges against economic instability in any one market
Expanding globally also carries a lot of risk for a small business which is why a considered approach to growth is so important.
How to scale your SME to do business globally
Market Research
Begin by researching potential markets for your product. There are a number of questions your business needs to ask when deciding where to expand to initially:
- what barriers to entry are there in this market?
- is the market familiar with your product or service?
- what is physical infrastructure like?
The combined answers to the above questions should help you identify potential markets for your SME.
Global Business Plan
Key to success in any area of business is having a clear written plan. This is a step some SME’s skip as it is time consuming and challenging when done well. In the end, the effort you put into planning your expansion will pay dividends. It will also pale into insignificance compared to extracting yourself from an unplanned expansion that fails.
Source Finance
Any form of expansion will require financing. As well as the usual sources of finance, consider contacting investment companies and government agencies who may have budgets to help SME’s export or expand overseas.
Build Expertise
As with business in your home country, your people are key to success. There are logistics required to grow your SME overseas. Depending on your industry, this may involve sourcing suppliers, manufacturers or retailers in addition to navigating all the legal requirements of international business. If there is no existing knowledge of this area it is worth hiring expertise so your business avoids costly market entry mistakes.
International Strategy for SMEs
Agile approach
Build agility into your strategy for international expansion. Ensure your business takes stock of progress on a quarterly basis and optimises strategy accordingly. A change of direction may be required if sales in a particular market are not reaching projections.
Small infrastructural footprint
This will depend on your industry but most SME’s expand internationally with the smallest infrastructural footprint possible. Test the market with imports, renting office space or by partnering with a local manufacturer rather than establishing a base there. Once you have established a firm market for your product or service, your business can look at developing a more permanent base.
Full time human presence
Do not underestimate the need for a full-time human presence in market. You may choose to send a senior manager on assignment to establish your office initially, but also hire locally. Local employees may also help the business spot additional opportunities or identify how you may have to adapt products for the local market.
There is no doubt growing internationally comes with risk, but if carefully planned it can also be a great move for your business.
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