International Expansion Event Takeaways
Camino Media and Crowe UK recently held an ‘International Expansion’ event, the third in our ‘Going for Growth’ series. With a number of business leaders as well as industry advisors who have grown agencies across borders, the morning provided advice for those looking to replicate their international growth within their own business.
If you were unable to attend the event, here are our top takeaways!
Start off by asking why. Why are you looking to expand internationally?
There are a number of reasons businesses look to expand internationally, whether it is to follow your clients, a key employee wanting to relocate abroad, or it could even be just wanting to challenge your creativity by breaking into a new market. These reasons vary from business to business and there is no one size fits all reason to expand internationally.
So, what is your motivation?
Start preparing as soon as possible!
It is important to ingrain an international mindset within your business as early as possible. An important element of this is hiring people who are well travelled or multilingual. Little things such as this will make the international expansion down the line much easier.
Create a template for growth
Create a template for your growth and stick to it! A couple of examples of this are following your clients or offering an equity split to an employee looking to create the international brand.
It is highly beneficial to have an in-house Finance Director who can ensure tax and financial issues don’t come back and bite you later down the line, in the present too, it will take a workload off the business owners’ plate.
The first hire is everything!
Throwing a boatload of money at your first hire is not the route to take. You need to have somebody who is invested and passionate about your brand and your vision, they will be the ideal leader as that entity grows. It doesn’t hugely matter whether that first person is somebody who is relocating from your current business or whether that is hiring somebody based abroad, but a passion for the brand is non-negotiable.
Don’t let ego stunt your growth
Don’t be afraid to be flexible in your approach as you will need to adapt to different cultures quickly. Be adaptable and don’t let ego stunt your growth!
Although something has been successful in the UK market, it doesn’t mean it will be abroad.
Because something works in the UK, doesn’t mean a direct translation will lead to success. You can’t let arrogance get in the way of growth. It is important to have a degree of humility and be conscious that you might not be as good as you think you are in a new market.
Financial stability is key
When expanding internationally it is important to have something to fall back on. Expanding internationally is rarely profitable from day one, so it is important your core business is strong and can support the internationalisation until it becomes profitable.
Keep your company culture
As touched upon earlier with making your first hire, keeping the company culture is vital. Naturally, this is easier when expanding into countries with the same language but using tools such as Slack to bring each other together virtually will help to keep the culture and don’t be shy to spend money to get everybody together!
Be wary of foreign exchange (FX) risks
There is always an FX risk, it’s either on your side or the other side. There are two options:
- Spot transaction – Here, you agree to the currency rate on the day, and it is fixed. You know exactly how much you will receive later.
- Forward contracts – Here, you agree to the buy or sell currency at a future date. You will be open to making a profit or loss dependant on the markets.
It is important you have an interest and understanding of FX risk, but beware of the advice you receive. The more somebody purports to be an expert in FX (and the more confident they are) the less you should trust them! If it looks too complicated, it probably is. Be careful, take precautions and use your bank!
Beware of tax issues
As a business grows internationally, it is inevitable that tax issues will arise. There are numerous issues which will affect your liability, whether that is paying in pound sterling or foreign currency, how you’re funding something (ie debt or equity) etc, all of these decisions will have a significant impact on how you could be tax loaded.
You also need to be aware of VAT or local indirect tax systems. Withholding taxes regularly catch business owners out as they vary globally and depending on the circumstances, you may or may not be able to recover money held in withholding taxes. Fortunately, the UK has one of the widest global tax treaty networks and you will often need to make an advanced claim under the treaty to avoid these taxes.
Brexit could have a huge impact here as we currently rely on directives from the EU which mean there are no withholding taxes on intra-EU payments. If we exit the EU, we will no longer be able to rely on these directives and we will be forced to go back to first principles on old tax treaties from the 1960s/70s.
It is important to consider the increase in the commonality of unilateral tax. Typically, overseas branches are taxed in the country they’re based and in the home country, but you can set of foreign tax off the other so you’re not paying two sets of tax. The introduction of a new digital tax raises question marks as to whether that can be offset against UK tax, which puts you at risk of having a 60% tax rate across two jurisdictions.
And don’t forget…
You’re never alone in this journey! You don’t need to be an expert in all things finance and tax, but you should take advantage of the experts.
If you couldn’t make this event but would like to attend future ones, email me on Ciaran@camino-media.co.uk