Running any business successfully usually means aiming for growth and expansion. You might be content to stay the same size for a while, but ultimately you’re likely to go looking for organic expansion opportunities. Expansion, by definition, means looking further afield, and the wider you cast your net, the more growth you might expect to achieve.
Figuratively speaking, the world is your oyster – and the smallest of businesses can find new opportunities overseas, if you are willing to tap into the potentially very lucrative export market.
Are you Ready?
First you need to be sure that you are ready to expand into another country. Even in a fairly simple sector, the distances and logistics involved can be daunting, so it’s important to do your preparation work.
A sensible route is to look at market demand: do you serve a niche in your domestic market? If so, is anyone filling that same niche overseas? If you have targeted a particularly small gap in the market, looking abroad may well prove to be your only realistic chance for long-term growth – so don’t ignore it.
Remember as well that export is a two-way process. Overseas businesses might equally choose to offer goods and services in the UK, and you might find new partnership opportunities as a consequence of this, with organisations like UK Trade & Investment to help guide you into your chosen markets.
“UKTI works with UK based businesses to ensure their success in international markets through exports. We encourage and support overseas companies to look at the UK as the best place to set up or expand their business.” – ‘What We Do’, UK Trade & Investment
Law and Legislation
Remember that local laws may differ from country to country, so do your research before entering a new market for the first time. Trading within the EU is likely to be much easier, due to the common market legislation that’s already in place, but even so it’s sensible to check before you take on any European clients.
At the very least, remember that overseas clients will need to pay you in their local currency – whether that’s the Euro, dollar or another option. So have a clear understanding of the acceptable payment methods you will be able to offer.
Funds and Finance
Beyond the question of how you will get paid, there is also the question of how you will fund the expansion. Even if you don’t need a physical presence in the countries you target, you may need to pay for foreign-language marketing materials, translated packaging and other interpreter services.
Growing into a foreign market is akin to starting from scratch in that country: yes you have your existing company to serve as a base, but as a small business you will usually have to build your relationships and reputation from the ground up.
You will, of course, need to keep track of your sales, profit and loss in any country whose market you join – so take a look at your current accounting processes and decide how easy it will be to adjust to trading internationally. Sage One Accounting is one way to prepare for international expansion, while simplifying your book keeping in the domestic market too.
Connect with your bank account to automatically track payments and receipts, and collaborate in real time with your accountant to keep everything up to date. In the meantime, you have a platform for international growth – including multi-currency transactions recorded in the correct way for each country, complete with the relevant rate of VAT.
If you haven’t heard of VATMOSS, you should familiarise yourself with it before considering trading internationally within the EU. Under EU law, companies that trade across borders must now charge VAT at the rate applicable in the buyer’s country, not just the rate in the seller’s own jurisdiction.
It’s an issue that has complicated accounts for many small businesses and sole traders, particularly in the digital space, but with a good understanding of the topics involved, it shouldn’t stop you from exporting.
“You can use a commercial agent or a freight forwarder if you don’t want to deal with export procedures yourself … you can hire a professional (e.g. a tax adviser) if you need advice about export duties and VAT.” – ‘Starting to export’, GOV.UK
Know your Risk
As always, you should conduct a thorough risk assessment before making any major change to your business operations. Ask yourself some tough questions, such as have you taken into account all of the potential costs? Unexpected financial burdens can prevent you from achieving the growth you aim for, and a botched launch can have long-lasting reputational effects too.
A thorough risk assessment doesn’t just flag up any likely hurdles; it also gives you a good amount of peace of mind, so you can enter your new venture with a clear head.
Find your Markets
You might already know where you want to expand to – especially having conducted your analysis of the levels of demand in different jurisdiction. But it’s not all about demand, and combined with your risk assessment and other preparatory work you might find certain markets are more appealing than others, even if they are smaller in terms of demand.
Try to be sensible – and keep your business head firmly on your shoulders, as it is not worth targeting a market where it will be difficult to turn a profit simply because of a sentimental attachment to a particular country.
Call the Taxman
You might not relish the thought of an afternoon on the phone to HM Revenue & Customs, but it could be well worth it in the long run. Aside from any necessary change of tax status and other registrations you might need to make with HMRC, calling them simply gives you an opportunity to talk through the tax-specific issues you might face.
There are also certain forms you might need to fill in, such as the C and E series of import and export forms from HMRC – and speaking to the agency directly will help you to understand your obligations.
Organise your Bank Accounts
As mentioned above, your bank accounts are likely to benefit from a little attention even within the domestic market, so take the time to organise them before you enter a new jurisdiction.
You can automatically Sage One Accounting can be link directly with your bank account so everything is automatically incorporated into your record keeping. If you are moving into a new geographical area – especially if you will be running operations from arm’s length initially – this kind of capability can be crucial in ensuring nothing gets missed.
Is it Worth It?
Ultimately, whether it is worth expanding overseas will come down to the unique balance of pros and cons for your particular business.
However, there are certain benefits you can expect to see:
- Duty-free circulation of goods within the EU
- Significant opportunities for growth in foreign markets
- Preferential trade agreements with some overseas countries
- Access to niche markets much larger than in the UK.
The list goes on and on, with many more sector-specific advantages and tax benefits to be found, particularly within the EU.
Deciding to expand overseas is daunting no matter how confident you are of your decision. However, preparing carefully and anticipating any potential problems is the first step on your multinational business adventure.