Considerations for successful international expansion
6 min read
30 October 2018
Ian Stone, CEO of Vuealta, discusses the factors SMEs and hypergrowth companies need to consider in order to make international expansion a success.
Technology allows startups to “think big” earlier than ever before and enables global expansion at pace, to rival larger enterprises. As the world becomes more connected and digitised – whether that’s the internet, social media, or big data and the cloud– businesses have access to better intelligence on global events and market opportunities.
When harnessed properly, this information allows organisations to make faster and more informed decisions, such as opening an office or making an acquisition in a new territory. That expansion is a significant undertaking for any SME or hypergrowth company, but when armed with this real-time market and economic data, they can take that leap with speed and confidence.
Many of the established players have been taken by surprise at this speed and the rate that their industries are being disrupted by agile upstarts expanding into them – particularly the likes of financial services, FinTech and IT.
Companies like Monzo, Airbnb, Coinbase, Darktrace and Uber have all flipped traditional thinking about banking, accommodation and travel, and security on their heads. And there’s no reason why others can’t follow suit.
Taking the first step to going global is not a simple undertaking, and businesses need to ensure that they plan properly.
There are a few key factors they need to consider if they want to expand successfully:
Access to capital
To grow quickly into new markets, SMEs and hypergrowth companies need fuel in the form of funding. Thankfully access to that capital is much better now than 10-20 years ago, with more choice than ever before.
While traditional lending avenues with the major high street banks have stalled – £165bn lent in 2017, down from £166bn in 2016 – demand for alternative financing has soared. Many of these funding routes saw significant growth from 2016 to 2017 including equity investment (79%), asset finance (12%), and peer-to-peer lending (51%).
Not all of these will be right for every business so, it’s important for organisations to do their due diligence on which route works best for them when expanding into new territories.
Local market knowledge
Don’t underestimate local nuances. To succeed in a new territory, businesses need to understand the economic, cultural, governmental, and market conditions of that region. A one-size-fits-all model for a global company doesn’t work.
Knowledge of the local language, cultural differences of doing businesses, the regulatory framework, and industry contacts are all invaluable to setting up operations in a new market.
This can range from knowing whether to handshake, bow, or use formal titles at a business meeting, through to country-specific policies on consumer data protection, or rules around data storage and cyber security.
Land or expand?
When expanding into a new territory, SMEs and hypergrowth companies are faced with the decision of whether to acquire a local business or open new owned offices. Both have their merits and drawbacks and depend on a huge range of factors.
What is important though is that, when opening a new office, ensure that you hire local talent with regional knowledge. If acquiring, find a business that aligns to your vision and wants to come on that journey with you.
That means that you can get up and running fast – crucial for ventures into new territories.
Agile connected planning
Despite the huge potential rewards, international expansion is not simple. The market and economic volatility that allows SMEs and hypergrowth companies to thrive is also a danger to new ventures. You have to be able to plan for every scenario, model the potential outcomes and respond quickly.
Monitor your key revenue lines and the plans that track them closely, reforecasting in real time based on these. You must continuously test and challenge these numbers to show that they’re robust and to avoid any nasty surprises.
We are going through our own exciting expansion, having recently announced the opening of a New York office and the acquisition of Executit, to extend our offering into Northern Europe and Asia Pacific. As with all SMEs and hypergrowth companies looking to expand, we had to make these decisions quickly and decisively, but with complete confidence.
By taking a connected planning approach to expansion decisions like this, businesses can have the agility and real-time insight they need.
They can produce plans and projections for every aspect of the newly formed business, across cash-flow and revenue streams, through to modelling headcount, customer or prospect pipelines, while accurately forecasting to mitigate against external risk factors.
That “what-if” analysis shows you how the impact of the expansion could ripple through the wider organisation, now, in a year, in two or five years, and beyond.
There are many factors to consider and hurdles to jump when SMEs and hypergrowth companies look to expand into new markets. Five years ago, we couldn’t have taken these steps, but when you have a better understanding and visibility of the potential outcomes, you can be sure that you have the ability to do it at speed, successfully.
The concept of “going global” is more achievable now than ever before.
Ian Stone is CEO of Vuealta.