(Mis)Adventures in Business — the Pros and Cons of Expanding a Business Overseas
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People read business biographies to learn how business moguls built up their business empires. Good business biographies recount both failures and successes, not just paint a rosy picture of how everything went without a hitch.
So something similar should be the case when you’re planning to expand your business overseas. If you’re thinking of expanding your business internationally, you need to go into the venture with your eyes wide open, and not just focusing on the benefits.
On a high
The benefits of international expansion really are benefits, bringing in both money and business prestige. Not only that, you can hedge against risk. If you’re really lucky, you can even keep more of your profits for yourself. Here’s how and why in more detail.
Helping yourself to a bigger market share
Expanding your business creates access to a whole new market, allowing you to increase your market share. If you expand your business but your competitors don’t, you can tap some or all of that market for yourself. Sounds great!
Boosting your brand
All businesses should look the part. Expanding your business proves to others that you really do mean business. Nobody likes clowns. By showing that you’re serious about business you can improve your brand image and, more importantly, pave the way to do business in new markets or find new customers.
Spreading business risk
Don’t place all your eggs in one basket is as true of business as it is anywhere. If you expand your business to another country, you’re spreading business risk, which is much better than hoping your business interests in a single market will go swimmingly. If a market —or even economy — does slide, your business investments elsewhere can still bring in the money.
Beating the Inland Revenue
Businesses love to ‘steal’ money from under the Inland Revenue’s nose. Many countries know that. Some give them the opportunity to do so. Several countries in the Arab world, such as the Gulf Cooperation Council (GOC) countries and Egypt, have free trade zones which offer tax incentives for businesses that set up in them. These include tax-free profits and fewer charges on business payment and cash management operations.
On the lowdown
Of course, if you’re serious about expanding your business abroad, you don’t just expand and hope. You need to weigh up the risks. Anticipate the risks and you can make much better business decisions. But what are the risks?
It’s the word that keeps a businessperson up at night — or nightmares to you and I. By no means is expansion cheap. If the market or the economy turns against you, the ride can get very bumpy — and leave you filing for bankruptcy.
Governments can sometimes make life difficult for businesses setting up there. Not only that, they can become embroiled in conflicts that can harm your business. Are you ready for that?
If you play with taxes, you get burned
Some countries do offer tax incentives to encourage expansion, but you should look very carefully into their tax and commercial laws, and those of your own country. What goes in one country might not go in another. If the Inland Revenue hear of it, you could pay a heavy penalty.
Expansion is a serious business. The benefits really do pay off, but if you’re not aware of the pitfalls you can land both yourself and your business in serious trouble. You can wind up penniless. However, get your research and your business strategy right, and you can enjoy some real business riches. Now to count those profits…
If you’d like to know more about expanding your business overseas, you can visit the UK Chambers of Commerce.