1 December 2023

How to scale a business internationally

Whether it's a fresh new market in Poland, or cheaper manufacturing costs in Vietnam, there are as many different ways for businesses to expand. This guide will explore how with the right plan, financing, and tools, your business can be the next global success story.
How to Scale a Business Internationally

Today, the world economy is more connected than ever. Cameras manufactured in Japan fly off store shelves in Europe or Australia. German cars drive on American roads, and technology destined for every country ships out from China.

But international business isn't only for large corporations - small to medium-sized enterprises can benefit too.

In this guide, we'll explore what it takes to scale into new markets and discover how your business can be the next global success story.

Why trade internationally?

The world's a big place, with numerous markets of every type imaginable. There's a good chance that, somewhere beyond the borders of your home country, there are people who want to buy your product - they just might not know it yet.

Increased revenue isn't the only opportunity here. Maybe your products have run their course at home - so why not extend their sales life by finding a new market and selling in it?

And while you may not have considered it before, doing business in only a single country is risky. What if taxes become unfavourable, or regulation of your industry hurts your bottom line?

Another scenario: say the value of your local currency and economy declines, and domestic sales fall as people cope with the strain on their purses. Residents of other countries might not be affected in the same way. Your products will be cheaper to them, making this an excellent time to start exporting.

If your products are seasonal, going global increases efficiency. There's no need to slow down production lines during certain months, as you'll have access to profitable markets year-round.

Simply put, trading internationally can help your business grow in ways you hadn't reasonably expected. It may be the next big step for your company.

Are you ready to expand?

Any business looking to go global needs a strong foundation. The first part of that foundation is a profitable, trusted domestic operation. 

The second part is preparedness. Read on to learn five ways to prepare your business for international expansion and, ultimately, how to scale your business fast.

  1. Do market research

  2. Understand the culture

  3. Create an international business plan

  4. Understand laws and incentives

  5. Consider currency fluctuations

Do market research

Start with some simple questions:

Will your product sell well in the target area? Is there any competition? If so, what is their strategy?

If there aren't any competitors, it could mean the type of product you're offering is entirely new to this market, and you'll need to prepare educational materials.

Since you're targeting a new customer group, surveys and focus groups can be beneficial here. Find local suppliers and distributors with knowledge in your industry, to get an idea of what tactics you should apply to this new market.

Look at market reports provided by your home country, too - you'll find a wealth of info on sites like great.gov.uk.

Understand the culture

Learning how to sell in foreign markets involves much more than simply finding the market and tackling pain points. The culture of the country you're looking at may be very different from your own. This can create some unique problems.

Swedish fintech provider Klarna, for instance, discovered that Belgians didn't like the name of their product.

Had they not discovered this and changed the name, their launch in that country could've been completely botched! This highlights another point: different cultures communicate differently.

You'll need to try to learn those differences in dialect and surround yourself with people who understand them well. 

This knowledge will be indispensable for advertising efforts and communication with potential foreign partners. Does the culture value directness, or is directness considered rude? Knowing small details like this could make the difference between closing a deal and building a network of contacts or leaving a poor first impression.

If you're not fluent in the language, bring along an interpreter, even if the other party has one (they'll have that company's best interests at heart, not yours). Practise some basic phrases in the target language and consider hiring an etiquette coach.

Showing prospective partners that you care enough about their country, can go a long way towards them choosing to work with you.

Create an international business plan

What are your goals with expansion? Do you want to set up a brick-and-mortar location in the country or work with a distributor?

Something else to consider is your pricing strategy. If the country has a lower average income, you may want to offer your products at a lower cost. Of course, you’ll need higher sales volumes at lower costs to make up for that.

Understand laws and incentives

People who fit your customer profile are not the only features of your perfect foreign market. You'll also need to ensure that the local laws complement your business and, naturally, that you comply with them. 

India may seem like an ideal market for your product, for instance. They have a huge population and the GDP is growing rapidly year on year. The problem is that it's highly protectionist, meaning you'll likely have to contend with import tariffs.

Other countries are a mixed bag: Singapore is attractive due to its low corporate tax, but it also requires a high up-front capital investment. So, it's not worth it unless you're prepared to spend a truckload of cash up front.

If you establish a business in another country, you'll need to consider labour laws such as hiring laws and minimum wage. In some countries, tax laws aren't compatible with rewarding stock options.
Further, depending on your industry, you'll almost certainly need a licence and may need certifications.

Consider currency fluctuations

You'll have to deal with currency fluctuations when doing business abroad. Say you're from the UK and you buy products from China. In the weeks before you make payment, if the Yuan rises in value against the pound you'll lose money. 

There are ways to hedge against occurrences like this, including forward contracts or currency options.

For more information on protecting your business against currency fluctuations - and how a 3S International Business Account can help - check out our recent blog post on forex risk management.

How do I distribute my products abroad?

The traditional option for expanding into another country is to create a subsidiary. This is a new company established and owned by a parent company based overseas.

Setting up a subsidiary is an easy way to ensure you're compliant with local labour and tax laws. For example, a subsidiary is the way to go if you want to directly hire foreign employees to manufacture your product.

But establishing a subsidiary can take up a lot of time and money.

Working with a foreign distributor is much easier. You won't have to worry about securing your storage spaces or building infrastructure, and local distributors bring unique knowledge of the culture, language, and market.

They may even offer services like installation or return, and you can pay them quickly in the local currency using an international business account.

It’s very important to choose your distributor carefully. After all, you're placing a large part of your foreign operations into the hands of a contractor. 

How to find a trusted local distributor

Be sure to meet them in person to determine if they have knowledge of your industry, and verify that they have a strong sales record. 

Remember that not everything's down to the distributor - you'll still want to advertise on your own. However, a distributor with knowledge of your industry and the local market can help you here. Together you can develop an advertising strategy that communicates your unique selling point in the language (both literally and figuratively) of that market.

To find foreign distributors, visit trade shows or utilise government resources, like the United States' International Partner Search.

Joint ventures are another possibility. These involve partnering with another company - preferably a local one - and splitting costs and profits. By partnering with a local company, you get similar benefits as those you'd find with a local distributor, while also receiving additional funding.

Financing your international expansion

So you started your international business plan, and have a good idea of how much money you'll need to realise your cross-border vision.

How do you raise it? Let's explore a few options:

Venture Capital

Wondering how to scale a business fast? Especially for startups, venture capital is one possible answer.

No one knows this better than the founders of Pipedrive, a global SaaS company. Pipedrive began with a handful of people in Estonia - it now has more than 900 employees and 100,000 customers in 175 countries.

In its early days, the firm sent representatives to California to mingle with big-money venture capitalists. Once properly funded, they were able to sell their software to companies around the globe.

If you're looking to go this route, co-founder Timo strongly recommends spending some time in the United States. The US is the main hub for the alliance between startups and venture capital.

To enlist the aid of a VC group, you'll want to create a pitch deck. Stress market pain points in the region you're looking to set up shop, and detail how your product offers a solution.

Government grants

Since exporting is good for national economies, many governments offer financial aid to those eager to expand their businesses.

In Britain, UK Export Finance offers direct loans to exporters, as well as non-payment insurance. The US has a similar organisation called Export-Import Bank, better known as "EXIM."

Small business loans

A small business loan may help you cover the costs of expansion. Many banks offer loans specifically for exporting. Keep in mind that it may take several years before your foreign venture becomes profitable, so plan accordingly.

Trade finance

Trade finance is an attractive option for investors looking for new opportunities and businesses seeking flexible funding options.

Many international companies benefit from trade finance as it helps bridge the funding gap between paying your suppliers and receiving customer payments.

3S Capital Partners, recently announced a new trade finance offering backed by trusted professionals with decades of experience.

Expand your reach with an international business account

One thing many businesses don't consider when expanding to other countries is currency exchange.

Thankfully, this is easier than ever. With a 3S Money International Business Account, you can hold and trade more than 65+ currencies and pay to 190+ countries. 

In contrast to your local bank - which may take weeks and require hefty fees to swap currencies - 3S Money is faster, cheaper and more secure. When expanding overseas, you'll see just how convenient it is to have a non-resident business account.

Get started today!

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