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From customers to employees to logistics — a lot changes when a small business expands internationally. When a small business owner plans to tap into a foreign market, it’s important to adjust his or her business plan accordingly.
“Your core business goal may stay the same — to create more revenue,” says Mark Jackson, CEO of Moreson Conferencing, a global conference-calling company based in Birmingham, Ala. “But how you do that in each country will be a little different.”
Here are tips for revising a domestic business plan for an international market.
An international business plan should include details about the target audience, existing competitors and size and scope of the industry. Based on this information, the plan should explain why this specific foreign market was chosen and why it is a good fit for the business, says Todd Colbeck, executive coach and principal for Colbeck Coaching Group in Miami.
This may sound like a daunting task, but much of this information can be gleaned from preexisting market studies, interviews with potential customers and vendors, and data from state and government agencies, trade associations and research companies, he says.
For most small business owners, international expansion is often motivated by an inquiry by a potential customer or someone in their network, says Harry G. Broadman, leader of emerging markets practice and chief economist for PricewaterhouseCoopers in Washington, D.C. “That makes it easier to define the reasons for choosing a specific market,” he says.
“Don’t just say, ‘We will sell our products in China,’ define what that means,” Colbeck says. Such measurable goals could include selling $500,000 worth of product in the first 12 months, securing 20 clients or establishing contracts with five distributors in the market.
Having measurable goals makes it easier to track progress and conduct periodic assessments of the expansion’s success, he says.
Once a business owner knows what he or she wants to accomplish, it’s much easier to figure out all the steps required to get there, Colbeck says. For example, if the business owner’s goal is to establish five distributor contracts, the steps could unfold as follows: identify potential distributors, set up training for those distributors and research the legal implications of foreign contracts. “By beginning at the end,” Colbeck says, “you are less likely to miss a step, which will save you time and money.”
Business owners should include information in their plans about specific clients or contacts who can help secure business in the foreign market. For example, a small business owner in the U.S. should look at his or her professional network. “Existing relationships can help you get your foot in the door,” he says. In addition, Jackson suggests that business owners can also try talking to trade associations, asking U.S. Department of Commerce representatives for introductions and working with their state department of commerce.
To arrive at the true cost of business expansion overseas, a business owner must factor in shipping and distribution costs, taxes and tariffs, travel expenses, currency exchange costs, regulatory requirements, cultural differences and accommodations, and the time it will take for any international payments to be made, says Danny Markstein, managing director at Markstein Consulting, a corporate strategy and communications agency in Birmingham, Ala. “Talk to your accountant and your attorney,” he suggests. “They may not have all the answers, but they should help connect you to people who do.”
Likewise, business owners should rely on the help of a trusted online foreign exchange service that can provide the resources and expertise needed to decrease currency exchange costs and make budgeting more accurate.
The process of gathering this information and putting it into a formal business plan can help business owners think through the issues and obstacles they face as they expand their businesses into a foreign market, Colbeck says. But he warns there are still no guarantees. “Even if you have a great plan, something will happen that you didn’t expect,” he says. “So be prepared to be flexible and adaptable, and know that some things are going to change.”
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