How Do You Expand Your Business Internationally?

Welcome to my first newsletter on LinkedIn. It's been on my to do list for quite some time and I'm finally taking action. My intention is to share some of the things I'm working on and learning about for the benefit of the finance leader community.

This week has been a busy week. I took some annual leave a couple of weeks ago and I'm still playing catch up on a few things. Getting back to recording podcasts has been the over-arching theme of the week. The stash of recorded but unreleased episodes had dropped to quite a low level because of my vacation so I've been doing something about that. I recorded a really interesting #growcfoshow with William J. Fink, MBA, CPA, CGMA , Senior VP at TD bank about rising interest rates, the state of the economy, and the effect on things like M&A deals. Watch out for it when it's released in a couple of weeks' time.

Opening an Oveseas Office

Another big priority this week has been preparing for the August GrowCFO member quest. The challenge this month is planning for opening an overseas office. If you are interested you can still register for the quest right up to the briefing Workshop on Monday 7th August.

At first sight opening an office in a different country sounds straightforward. But as a finance leader there are lots of things you need to consider. Generally when you have a presence in a new country you also need to have people there. Once you employ people you need to comply with legislation and have a legal entity to act as employer.

Setting up a legal entity is different in every country. There will be choices about type of company and where to register it. Once registered you will need to comply with all the legislation that surrounds it, and again this will be country specific. You may need auditors and other CPA services, and you will be liable to pay tax. If the foreign entity transacts with the original business then you may need to comply with rules about transfer pricing.

Employing people brings with it legal requirements. You will need to comply with employment law, hold the appropriate insurances and administer payroll taxes.

Then there are all the other operational considerations that dont fall to any particular member of the C-Suite so they end up being swept up by the CFO. These might include among other things IT, Facilities Management and logistics.

You may be lucky enough to have separate IT, HR and Legal teams that can take some of the load, but it remains a complex project where everyone's activity needs to be coordinated.

So, how do you approach the whole exercise and make sure you don't get things wrong? I beleive it all starts with good research and planning. The first step is to understand as much about the new country as you possibly can. The world of business strategy gives you a great tool that you can adapt for this purpose. The PESTLE analysis.

When opening an office in a new country, conducting a PESTLE analysis can be very beneficial to assess the external factors that may impact your business. PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors.

Here are some key considerations for each category:

1. Political Factors:

- Government stability: Analyze the political stability and potential risks of political upheaval or changes in government that could affect your business operations.

- Legal and regulatory environment: Understand the laws, regulations, and policies related to businesses, taxation, labor, and any other relevant areas.

- Trade and investment policies: Evaluate the country's approach to international trade, foreign investment, and potential barriers you may encounter.

- Corruption and bribery: Be aware of the level of corruption in the country and its potential impact on your business operations.

2. Economic Factors:

- Market size and potential: Assess the size of the market and its growth potential for your products or services.

- Economic growth and stability: Consider the country's overall economic performance, GDP growth, inflation rates, and currency stability.

- Exchange rates: Fluctuations in exchange rates could impact your costs and revenues if you deal with multiple currencies.

- Income levels and distribution: Understand the purchasing power and income distribution of the local population.

3. Social Factors:

- Culture and customs: Familiarize yourself with the local culture, customs, and social norms, as they can influence your marketing strategies and employee interactions.

- Demographics: Analyze the age distribution, population growth, and other demographic factors that may affect your target audience or workforce.

- Education and skill levels: Assess the availability of skilled labor and the education level of the workforce in the country.

4. Technological Factors:

- Infrastructure: Consider the state of the country's infrastructure, including transportation, communication, and internet connectivity, which can impact your business operations.

- Technological readiness: Evaluate the country's level of technological advancement and how it aligns with your business needs.

- Intellectual property protection: Understand the level of intellectual property rights enforcement in the country to protect your company's innovations and assets.

5. Legal Factors:

- Employment laws: Familiarize yourself with labor laws, hiring practices, employee rights, and other relevant regulations related to human resources.

- Business registration and permits: Understand the process and requirements for registering your business and obtaining necessary licenses and permits.

- Contracts and dispute resolution: Be aware of contract enforcement and dispute resolution mechanisms within the country's legal system.

6. Environmental Factors:

- Environmental regulations: Comply with environmental laws and regulations to ensure sustainable and responsible business practices.

- Climate and natural disasters: Consider the climate patterns and the risk of natural disasters that could impact your office and operations.

Remember that the importance of each factor can vary depending on your industry, business model, and specific circumstances. A thorough PESTLE analysis will help you make informed decisions and develop a comprehensive strategy for opening an office in a new country.

If you want to find out more about GrowCFO member quests, there's a different one every month, just click the link below.

On The Podcast This Week.

I had a great conversation with Francesco Zappalà about dealing with big infrastructure projects that become distressed. Francesco was part of the 6 person team that established an operational base in Chile for Impresa Pizzarotti, and now looks after the portfolio of major construction projects that are going on in that country.

Here's the YouTube video version, but you can subscribe to the audio version of the GrowCFO show on your favourite podcast player.

Whatever you are up to have a great weekend and I'll chat again next week.

Kevin