Two Cents - Insights Brought to you by Vectra Bank

It's known that some of America's biggest corporations make most of their money outside of the U.S., but they are not exactly unique in that regard. According to a 2016 survey from American Express, small- and medium-sized businesses based in the U.S. that reported international revenue said those global sales are up 80 percent over last year. The companies surveyed agreed that international business was a remarkable opportunity made easier by a more connected planet. However, expanding beyond U.S. borders is not without some complex risks and challenges.

It makes sense on paper to expand beyond the U.S. if a company's goal is to maximize growth. After all, for as big and vibrant as it is economically, the U.S. represents just a fraction of the potential customers and opportunities available around the world. Entrepreneur Magazine listed several other more specific reasons why firms choose to go global:

• To extend the sales life of existing products or services.
• To reduce the company's dependence on domestic markets.
• As a counteractive measure against domestic market instability due to demand cycles or seasonal patterns.

This represents just a small sample of reasons why companies choose to expand internationally. Before making the decision, owners or executives need to take stock of their situation here and do some corporate soul-searching. Consider asking yourself some basic questions, like:

• Will your product or service remain relevant or useful in another culture?
• Is your target market already familiar with your product or service somehow?
• Do you or your associates have any in-depth knowledge of the culture or language where you might expand? Do you have any business contacts there already?
• Does the country or region have the infrastructure (roads, utilities, resources) to support your business? 

International risks

With a large amount of business now being done through the internet, e-commerce platforms and shipping providers may give American businesses a straightforward entrance into new markets without ever leaving home. But no matter which approach you take, your business will likely face several hurdles along the way.

More U.S. businesses are expanding to other countries.

Getting things up and running abroad may require interfacing with overseas suppliers, distributors and other key linkage points in the supply chain. But if you're not able to meet these stakeholders in person and observe their work personally, this can invite serious risks. Businesses seeking to expand internationally may want to consider not putting all their eggs in one basket, so to speak – when it comes to supply chain providers. It could make more sense to consider several different sources. This will not only spread out risk, but can make it easier to expand more broadly.

Foreign businesses will also want to consider consulting with a professional regarding applicable laws of any foreign country in which they seek to operate. This encompasses a range of ideas and things to cross off the to-do list, such as:

• Applying for the necessary permits and documents.
• Understanding and carrying out the nation's corporate tax code, often significantly different than that of the U.S.
• Staying aware and compliant on all necessary environmental regulations.

Finally, there are some risks or problems that are just too big for any one organization to handle. Some nations may have unstable or corrupt governments that make them unfriendly to outside businesses. This is true even in seemingly peaceful nations, and no matter where you are in the world, war or natural disaster may strike at any time.

There is no sense in rushing the process of expanding your business to a new country. Take the time to plan your entrance - and even your exit - to help ensure smooth sailing on foreign seas.

To learn more about international banking services; please contact your local Vectra Bank or complete the short form below and we'll reach out to you!

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