Going for growth: exploring international markets

Entrepreneurs rarely follow the well-trodden path to business growth. While traditional SMEs often opt for the path of least resistance, choosing comfortable progression instead of more challenging terrain, scale-up entrepreneurs consider high-reward options 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 entrepreneur-led businesses.

With the UK’s relationship with the EU uncertain, and our future trading framework with the rest of the world far from settled, now may not seem like the best time to look towards regional or global markets for growth. Yet appearances can be deceiving. For ambitious entrepreneurs, accessing international markets can offer 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 will be 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: a time consuming and potentially expensive international presence that fails to achieve its purpose.

With the basic due diligence completed, 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 outweighed by results.

Distribution agreement

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.

Joint venture

Opportunity: A more collaborative option, this allows you to get your feet on the ground in partnership with someone who knows the market well.
Risk: Due diligence is essential. Potential problems can include legislative, financial, relationship and communication issues.

Acquisition

Opportunity: Purchasing a business on the ground can be 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 legislative variations.

Managing risk

Launching a presence in a brand new international market can be much like starting again from scratch. There are a whole host of differences, from the obvious language and cultural challenges through to regulation and compliance in areas including operations, labour and taxation. Mitigating these risks to maximise rewards requires thorough planning and due diligence.

Read K2’s commentary on effective global mobility here

DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.