The nature of the global economy is such that you don’t have to be a large business to sell your products overseas. Nor do you simply need to rely on online sales pitched to global buyers. Your company can establish a genuine presence in a foreign market if you understand both the market and the strengths of your own financial position and strategy.

There are many attractive foreign markets that lure investors and exporters. Yet the risks put off many small businesses.

China has a booming mass consumer market, but the worries of a shrinking Chinese economy and the risks inherent in the shadow banking industry in China are a concern.

On the other hand, Korea is a top-notch location due to a commitment to R&D and technological production, yet the subtleties of understanding Korean business regulations and culture can be challenging.

Companies keen to start doing business in Australia find challenges in dealing with specific and changing regulations despite a market and industry base that on the surface seems similar to the US and Europe.

The first step to overcoming such challenges is not digging deep into market stats per se, but exploring your own business strategy.

Common overseas strategies that reap rewards.

Here are some common reasons successful small businesses go into foreign markets. Understanding which applies to your business is imperative to know how to shape your strategy and financial entrance into a foreign market.

  1. Your ideal market is overseas because the products you make are more popular there.
  2. You source your supply or outsource workers from an overseas market, so setting up overseas will allow you to directly buy out or control your resources, plus tap into the foreign market.
  3. You have reached critical mass, so you don’t feel you can gain more customers locally.
  4. Your product and vision have always been international, so being a local company does not suit your brand.

Once you know the shape of your strategy, the first question that many small businesses need to answer is one which determines the extent of your foreign investment.

Setting up a foreign company: pros and cons

There are good reasons to not set up a foreign company; instead, just export and sell overseas, utilizing a minimum foreign footprint. This can help maintain access to local export grants such as the EMDG and local government support, and keep overseas costs down. Small businesses with some kind of nascent yet genuine presence overseas (such as a basic office or staff) can simplify matters by minimizing their overseas exposure and just promoting their local products in a foreign market.

Yet in other cases, you are best advised to go the extra mile and invest in setting up of a subsidiary. If you prove successful and you might then need to expand your presence overseas by setting up infrastructure, employees, client contact, offices, and the like, this will usually require a foreign subsidiary. Also, while keeping only your local company opens it up to any risks faced doing business overseas, you might also have a chance to pay less tax overseas.

In the end, start and end your planning with financial reality

Even small businesses that have a clear grasp of their motivations fail to hire experts to go through their books and data with a fine-tooth comb. But this is vital so your understanding of your business’ strengths are not based on assumptions, but hard financial data.

Many business owners face the challenges of knowledge gaps in their business. You may have a strong team that plans well. But these goals and objectives made by you and your management team can be validated, analyzed to a financial measurement, and measured over time, preferably by an external expert who lacks any bias.

It ensures your business is grounded in financial reality. It helps your planning and vision by opening your eyes to your true financial strengths and weaknesses underlying an overseas venture – who knows, it may well reveal new opportunities you did not know you had. Above all, a virtual CFO, external auditor, or international accountant can help you create a plan for success overseas that is not just based on hopes, but one that is supported by data.