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Selecting a European Country for Your Business’s Home Base

The European Union (EU) consists of 27 countries and has "one of the most hospitable climates for U.S. investment in the world," according to the U.S. Commercial Service, a division of the U.S. Department of Commerce.[1]

But with such a wide variety of languages, cultures and business customs, how can a business owner decide where to locate when doing business in Europe? Here are several tips to simplify the process of choosing a European country for an international business.

Evaluate Costs and Exchange Rates

The cost of working in the EU is a critical factor when choosing a European country. Consulting firm KPMG releases an annual report called "Competitive Alternatives" that compares "business costs and other competitiveness factors" in 14 countries, including many EU countries. The most recent report found that the U.K. and the Netherlands are two "low-cost leaders."[2]

“If you depend on logistics, some say it’s better to set up in the center of the EU.”

— Sven C. Oehme, president and CEO of the European-American Business Organization Inc.

One key factor that influences business costs is the exchange rate between the domestic and European country. For example, a U.S. business owner could use an online currency converter to see the dollar-to-euro conversion. If he sees that $1 USD will only purchase €0.758 EUR, the business owner would know that an investment of $100,000 USD to help launch the business in the eurozone would only equate to €75,800 EUR.

Business owners can minimize their foreign exchange expenses by using a trusted online foreign exchange provider. Signing up for an online FX market-rate alert makes it easier to know when preferred exchange rates are available, which can help during times of business expansion.

Consider Geography

When deciding where to set up shop in Europe, small business owners should consider geography. "If you depend on logistics, some say it's better to set up in the center of the EU - say in Germany, Belgium or the Netherlands," Sven C. Oehme, president and CEO at the European-American Business Organization Inc., a consulting firm that specializes in transatlantic business development based in New York.

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In fact, Western Europe remains the expansion target for many foreign companies. The so-called "Big Five" - Germany, France, U.K., Spain and Italy - make up the bulk of the population and GDP in the EU. Before expanding into these key business targets, proprietors should evaluate each market in accordance with their business drivers, says Kimberly VanLandingham, president of the Swiss Alps-based European Market Link, a business expansion firm that specializes in helping small industrial/technical businesses expand into Europe. "Although France and Germany often offer the largest markets for products, the labor laws, culture, administration and tax can be difficult for American companies," she says. "Smaller countries, like Switzerland and Belgium offer easy access to the 'Big Five,' while providing multi-language and more flexible workforce options."

Deciding which European country to use as a home base becomes easy once a business owner understands the benefits of each region. Whether geography or minimal costs of doing business are the primary draw, business owners have many options to choose from.

[1] "Doing Business in the European Union: 2011 Country Commercial Guide for U.S. Companies," March 21, 2011, U.S. Commercial Service of the United States Department of Commerce

[2] "Competitive Alternatives: KPMG's Guide to International Business Location Costs, 2012 Edition," 2012, KPMG

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