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How small businesses can test the waters in a new market

Dany Rastelli, Head of Communications at international PEO company Elements Global Services

According to a recent survey from Santander, the majority of British companies are confident that they will expand their business over the next three years. For many, that’ll include plans for testing the waters abroad, if they haven’t already. Some external factors must be considered, including geo-political uncertainty, Brexit and the increased competition that comes as a natural part of globalisation. However, if aspiring businesses do their research and follow some tried and tested steps, it’s entirely possible for them to launch into new markets.

Here are a few points of advice.

Clarify your objectives and plan ahead

Initially, it’s important to define your objectives – are you looking to simply test the waters with a new product by deploying a small sales team overseas, or are you looking to establish a permanent presence in a region? It’s particularly important to decide on this because it informs the next set of questions. Are you hiring people abroad, or sending people from your existing team? Depending on who you need there, is it practical to send key decision makers abroad?

Once you determine what your intentions are and who you need on the ground, you can start working on a timeline. You will need to factor in how long it will take the staff that you might be sending to the region to get up and running, or how long it might take to recruit new people, as well as setting up the infrastructure you need to actually run your business abroad.

Once you’ve worked out your needs and your timeline, the next stage is to look at ways of minimising the potential costs and risks.

Understand the potential costs and risks involved

Just as there are myriad unexpected costs when initially setting up a business, there are many hidden costs involved in setting up a business abroad. Once you start the process, you’ll find that a lot of the costs are to do with employee management, payroll and HR.

As an employer, you are obligated to meet certain statutory requirements, and these will inevitably vary from country to country. These include localised and translated employment agreements, pension enrolments, housing allowances, payroll tax requirements, healthcare, benefits, and much more.

For example, when you hire a workforce in Germany, you are required by law to contribute towards health insurance, while in China, the employer is obliged to pay towards housing and social care programmes. Some companies try to dodge these issues by employing foreign workers or contractors whilst paying them from their UK headquarters. This is not the correct legal route – if you fail to register a local business entity or to comply with local legislation, you can be in breach of both employment and tax law.

Getting familiar with these different laws and then making sure that you can abide by them takes up a lot of resources, in terms of your time and money. This is when working with experts on the ground can significantly improve and speed up the process.

Work with experts to navigate the process

Many business expansion plans fail because there are not enough preparations made to deal with these HR challenges. It can be difficult to hire people who specialise in HR and employment issues in specific regions, and smaller businesses don’t tend to have this kind of expertise readily available in-house.

One way to help combat these problems is to utilise an employer of record (EOR), a third-party service provider that deals with all tasks associated with managing employees abroad. The EOR acts as the legal employer for your international workers, ensuring compliance at a fraction of the cost of going it alone. Typically, the EOR will handle employee benefits and compensation, visa processing, payroll, and any other HR needs in accordance with a region’s specific rules and requirements. Meanwhile, the business can retain full autonomy over its strategic direction – all without having to set up a registered entity.

Working with an EOR can greatly reduce the time it takes to set up in a new market, enabling businesses to onboard, manage and pay employees in a timely and cost-effective way.

Measure success and use results to develop a long-term strategy

Too many businesses attempt to expand abroad without undertaking the right preparation and end up failing. This can put them off the idea again for several years, which is a pity, as many businesses are unable to tackle HR processes on their own and equally as many succeed when partnering with experts who help them through the process.

For those that do fail initially, it’s important to review what worked well, and what didn’t. By doing this, you can see if the problems that arose were specific to that region, or whether they are wider issues that need to be addressed if you look to set up elsewhere.

Getting overseas expansion right the first time can be hugely beneficial, giving your business the confidence to replicate the process elsewhere. By working with experts to help you meet complex HR requirements, you can save your business time, money and legal hassle – and explore new parts of the world for your business to succeed in.