Expansion at any scale, whether local, state or international, presents an array of tasks, risks and opportunities for any business. At the recent Armanino EVOLUTION conference, a panel of experts with broad international experience discussed some internal and external factors that growth-minded companies should consider. Here are their recommendations.
- Start with an organizational checkup. Too many people head into transformational projects with a team that is in chaos beneath the surface. Spend some time upfront to be sure that basics like communication are in order when your project moves forward. Be sure your organizational health is good before you expand.
- Be clear about your capabilities. Take a hard look at your organization’s limitations and consider whether you really have the people to succeed. Don’t assume that your in-house team knows it all, and make sure you get the specific expertise you need. The international consultants you’ve used in the past might know about Japan, for example, but not about Mexico.
- Know whether you’re a global or a multinational organization. This sets the foundation for everything else. A global company uses one set of business practices around the world for selling, fulfillment, etc. A multinational company holds a number of disparate companies and focuses on the integration points between those. You may be surprised to learn that your corporate office thinks you’re global, but your offices in Paris and San Jose sell in entirely different ways. Alignment up and down all levels of your organization is critical.
- Stay involved. Don’t outsource the work you need to do yourself. It’s tempting to think that you can hire someone to transform your business and have it handed back to you, but that’s not possible.
- Set expectations, for everyone. Set your expectations at the appropriate level of detail, so that the people who will be executing the plan understand how to meet them. Management is not the only team that needs to understand the thinking behind expansion.
- Know the labor laws. Be sure you fully understand the nuances of hiring and firing practices in your target location. Some areas in Southern Europe, for instance, may have a lifetime employment clause; that impacts your benefits load in markedly different ways than the at-will employment status common in many U.S. states.
- Study the local talent pool. The talent pool needed for a technology support center is very different than that needed for manufacturing. Look at what the local education system is like and how it will impact the availability of qualified people. Some higher-cost locations may have more of the talent you need.
- Determine your hiring structure. Once you’ve decided where to locate and have identified people to hire, you need to decide if you’ll hire them as independent contractors or use an agency, for example. And is it possible to register in a new jurisdiction without having an entity there, or do you need to establish a formal registered presence, such as an office? Or, should you set up a subsidiary or branch?
- Pay attention to the political climate. The political environment in your potential new location can affect most aspects of your business. Shifting currency rates can mean that a $75,000 employee suddenly becomes a $100,000 employee.
- Let the business drive decisions. Evaluate how you can structure your global intercompany relationships to be most effective. Meticulously assess risk, considering currency risk, labor rates, overhead and taxation. Tax planning is increasingly critical and must be married to business sustainability, but your decisions should flow from the operations point of view; any tax considerations will flow from those.
Expansion is rife with challenges as well as opportunities. These basic strategies can help you avoid expensive missteps and position yourself for success.
March 01, 2017
