International markets can be an alluring option for scale-up businesses looking to expand. Here’s how they can assess the risk to access the rewards.
Scale-up entrepreneurs rarely follow the well-trodden path to business growth. While traditional SMEs opt for the path of least resistance, choosing comfortable progression instead of more challenging terrain, scale-up entrepreneurs look towards high-reward routes that can offer the fastest track to growth.
Gradual organic growth can offer a less risky approach to expansion, but in times of turbulence slow and steady doesn’t necessarily win the race. As markets fluctuate, the common trait exhibited by successful businesses is, increasingly, agility. Being able to react and respond to changes as they arise is a key characteristic and advantage of scale-ups.
With the UK’s relationship with the EU uncertain, and our future trading framework with the rest of the world far from concrete, now may not seem like the best time to look towards regional or global markets for growth. Yet appearances can be deceiving. For innovative scale-ups, exploration into international markets could be the perfect opportunity to leverage their agility and facilitate rapid expansion.
Identify the opportunity
How can you tell if an international opportunity is right for you? Once you’ve identified demand for your product or service in the market you’re targeting, it’s time to address the challenges.
Who are your international counterparts? Where can you develop your key strategic relationships? Before you move into any formal arrangements, it’s crucial to take advice from experienced professionals on the ground. Even if you are familiar with the location from personal experience, its business landscape could be very different.
Investing in a thorough research and due diligence process will go a long way to mitigating risks later on. Should this initial investment lead to a dead-end, and you choose not to continue with the venture, it will still prove more cost-effective than the alternative: an international presence that fails to achieve its purpose.
Once you’ve identified the opportunity, there are several ways to extend your reach to your target market, ranging from a simple distribution agreement to a fully-managed presence on the ground. At each incremental stage, there are inevitably greater risks, but for scale-up entrepreneurs with a fast growth, high reward mindset, those risks are often worth the results.
Opportunity: A low-risk and cost effective way to test your product or service in a new market.
Risk: Without careful management and strong communication with your distribution partner, it can be difficult to gauge success: your overseas partner has greater control.
Opportunity: A more collaborative option, this allows you to get a foot on the ground in partnership with someone who knows the market well.
Risk: Due diligence is still essential. Potential problems can include taxation conflicts, legislation and communication issues.
Opportunity: Purchasing a business on the ground is a good option for scale-ups to achieve ‘instant’ market access.
Risk: Cultural, technological and administrative integration can be a challenge, with the added complications of language barriers and legislation variations.
Launching a presence in a brand new international market is much like starting again from scratch. There’s a whole host of variations, from the obvious language and legislation differences, to the less obvious issues of culture and labour laws. Mitigating these risks to make sure the reward is worth it relies on thorough planning and due diligence.
Success Story: Accelerating growth through overseas expansion
When a successful technology company saw an opportunity to scale overseas, we were able to support their strategy with our financial expertise and international network. A facilities resource allocation software business planned to expand into new markets to meet demand from existing international clients.
Smith & Williamson held a strategic workshop – matching finance and tax solutions to their proposed strategy – and introduced the business to valuable advisors on the ground in targeted locations.
With characteristic scale-up agility, the business then extended their service offering to meet further demand in those new locations, allowing the brand to capture more market share at home and overseas.