Taking your business overseas opens up a sea of opportunities
The challenges of taking your business into new international territories are complex, but very exciting and getting this right can lead to sustained and robust growth. Get the inside track from Kevin Smith, Partner at KPMG.
KPMG Enterprise’s Moments That Make You report can guide you through critical growth decisions, including taking your business global.
Of all the business growth routes, going global can be the most powerful and game-changing. However, with massive rewards come some more complex challenges.
It’s vital to truly understand the size of the opportunity, and the factors that could get in the way: fudged or inaccurate answers here will build in future failure and can seriously distract the wider business. Then there’s the ‘how’ of making it happen, with the three different approaches (acquiring a business in the new territory, building your own presence or allying with a local partner) all carrying different risks, opportunities and potential rewards. Finally, securing investment for such a move, and meeting new regulatory and operational challenges, will always reveal a number of questions and issues that you should be prepared for.
So in this blog post, I’m going to take you through four things that I’ve learned in my time advising private businesses on their journey to a global profile. For a more detailed picture on global business expansion, simply download our expert guide to growing a private business.
1. Plan, plan, plan – and then launch
Scan the opportunity and obstacles that stand in the way. Remember that you can ‘build’, ‘buy’ or ‘ally’ when it comes to moving across borders – or use a combination of all three. Think across the long term about what you want from a global move and use the option that is right for your business at a certain point in time. For example, you may pilot a business model in-house, but then partner with another business to scale it up, and then acquire a business when you are confident the market will become a mainstay.
"You can ‘build’, ‘buy’ or ‘ally’ when it comes to moving across borders – or use a combination of all three."
Kevin Smith, Partner, KPMG
2. Navigate the (new) rules
New rules, new currencies, new tax authorities – they’re all inevitable in global growth journeys.
The “tail shouldn’t wag the dog”, but tax rules in some countries could be a major deciding factor on how you decide to structure operations in new territories – it’s easy to fall foul of complex rules and demands which can wipe out profitability or impose demands making doing business difficult. For example there are over 90 different taxes, duties and contributions in Brazil – that doesn’t mean that you can’t do business there but it illustrates the knowledge gap that you need to fill.
It’s critical to understand whether you’re ‘trading in’ or ‘trading with’ a particular country: if you have a fixed place of business or conclude contracts in the territory, it’s the former of these, and the local tax authority will designate you as having a taxable presence known as a ‘Permanent Establishment’ (PE). This leads to direct tax filing requirements and the need to attribute profits to the local PE, which would be subject to local direct taxes.
Finally, if your business is headquartered in the UK, make sure the repatriation of cash to the UK will not be problematic – there is no point making profits if you can’t get to them.
''When thinking about international supply chains, start by assessing what the customer wants, not what is convenient.''
Kevin Smith, Partner, KPMG
3. Get optimised
Going global often means also transforming your business from the inside-out. So think in detail about your supply chain whether you sell goods or services. Meeting the mantra ‘right product, right place, right time, first time’ is harder than ever when you’re working across borders. Start by assessing what the customer wants, not what is convenient.
The same thinking is needed for systems and technology. It’s a common mistake to allow current infrastructure, systems and technology to lead decision-making. Make sure it’s your international strategy that’s in the driving seat, not old systems. Multi-location and multi-currency demands may be too much for your current set-up so maybe it’s time to upgrade.
Finally, consider the people you have in place. You will need clear thinking in relation to senior management, middle management and the operational level. You’ll need some experienced staff to spend a lot of time in the new market, so identify who is willing and make sure you have a good spread of capabilities: some to set strategy, some to focus on implementation and others to manage the day-to-day operations.
4. Funding the Voyage
Many businesses need to call on additional investment to go global. Bear in mind that the more complex the nature of overseas expansion is, the more challenging it may be to secure investment, but an overseas expansion may open up new funding avenues.
Raising funds in the new geographical market can work well: you’ll get better local insight and enhanced networks but you may need to then handle complications around foreign exchange and cross border movements of capital.
Don’t forget, the UK Government supports the expansion of domestic businesses overseas with its UK Export Finance credit agency, and many overseas governments have trade departments that will support inward investment with guarantees, direct lending and grant funding.
- You can ‘build’, ‘buy’ or ‘ally’ to go global. Let your initial analysis of the opportunity guide your choices, and remember you can use a combination of different approaches at different times, based on what is most effective
- Avoid using existing systems and procedures for convenience. Instead, put the new strategy and local customer needs at the heart of your thinking
- Weigh up investment opportunities: lenders local to the new territory can offer greater strategic value, but will lack the familiarity of domestic lenders
- Tax should be an integral part of your international strategy, preserving and enhancing value.
For more on taking your enterprise global, and many other aspects of growing a private business, download our Moments That Make You guide.