Expanding your business overseas – Where do you start?

Your business has enjoyed great success with tremendous growth in its home market.  Now you decide that for strategic, operational and/or financial reasons that you would like to expand internationally.  This is a logical path to take for many businesses, after all, over 95% of the world’s population lives outside the United States and the growth forecast for the World ex-USA is almost 3 times the growth rate of the US alone.  Much of the world outside the US is under developed or categorized as third world so they are undertaking tremendous infrastructure projects.  Incredible amounts of people in the developing world are entering into the world of disposable income and are looking to spend their newly earned disposable income on consumer goods, housing, automobiles and other services.

Strategy

So what is your first step?

Determine what the strategic vision of your business is – Do you want to off shore some processes or procedures to diversify your operations or lower your costs?  Or do you want distribute your goods in a new country or region?  Do you want to use acquisitions as a path to expansion.

Execution

If you are looking to perform manufacturing  or some other support function overseas, you will probably want a location that  offers good security, a pro business government, the rule of law, a plentiful supply of well educated labor and adequate support functions like telecommunications and electricity supply.  There are more than a few locations that would fall into those constraints including most every country in Asia (the region I know best) including Malaysia.    Note: I was posted in Kuala Lumpur, Malaysia for over 8 years as a CFO for the 17 country Asian operations of a NY based communications entity and while posted there was the President of the American Malaysian Chamber of Commerce.

Malaysia , 12 time zones ahead of the US and located smack dab in the heart of South East Asia is a developing country with a population of 27 million persons who are well educated and generally have very good English language skills.  The government is very business friendly and services are excellent.  It is such a sound location that Intel has over 10,000 employees manufacturing semiconductors in Penang (an Island off of Peninsula Malaysia) and Dell manufacturers 95% of the laptops sold in the US in Malaysia.  However, there are several other markets in Asia that could be just as attractive like Vietnam, India and China.

Japan, Korea and Taiwan are also more than suitable but are generally much more expensive places to do business.

Narrow your search down to 3 or 4 countries and contact the local Chamber of Commerce in those markets.  Malaysia has a Chamber of Commerce for most ever nationality including an American Chamber , a British Chamber and an EU chamber among others.  Also, contact target country’s Industrial Development offices – such as MIDA (the Malaysia Industrial Development Authority) who have offices in their home country as well as around the world.

These entities will put you in touch with people who can help educate you about doing business overseas and in that market.  These organizations are usually very cooperative and will host meetings or assist you in organizing junkets so that you can visit potential locations and businesses just like yours.  Most countries will structure a package of financial incentives to attract large, high end manufacturing companies to their market.  You might also receive incentives if you are in the BPO (business process outsourcing) space, logistics industry or some other venture that is likely to employ a significant number of employees.

If you are looking to exploit new markets, you probably already know of regions that are underserved for the product or service that you sell.  Again, you may want to contact the American Chamber of Commerce in that market.  Additionally, you might consider contacting the representative of the US Commerce Department attached to the US Embassy in that country.  They can put you in touch with local of businessmen in that market that might be candidates for partnership in the distribution of your goods.

Tread carefully though – some markets, even incredibly large markets that have huge populations and with fast growing economies can be very challenging places to do business.

You may also want to consider carrying out a strategic acquisition to accomplish you growth related goals.  Valuations, at current levels, may represent a fantastic opportunity.  Use a quality advisor like the Woodbridge Group (www.woodbridgegrp.com), an M&A advisor and a B2B CFO® strategic partner, that has a worldwide footprint.  They can help you clarify your search criteria and execute an efficient search and acquisition transaction.

Either way, make sure that you don’t skimp on the investment required to have skilled advisors such as an accomplished local attorney who is experienced in working with foreign business entities.  Also, consider a B2B CFO®  partner to help you set up the financial reporting, analysis and review procedures to monitor your overseas operation.

The inclusion of a B2B CFO® partner onto your senior team can give you the financial expertise and strategic insight that you need to maximize the performance of your operation.   Our partners who have  over 2500 years of cumulative experience are part of the largest US firm providing services on a part-time basis to closely-held companies with annual revenues of as much as US$75 million.