Global Expansion: Financial Guide for International Growth

In the post-recent times economy, companies, large and small, are facing new challenges on the American and global markets. Volatility, uncertainty, complexity and ambiguity have become the new norm in many sectors, which makes it essential for companies to prioritize business resilience, especially when it comes to budgeting, cost savings and reducing operating leverage. Global expansion is a way to reduce costs in the richest countries. By relocating support functions to lower-cost regions abroad, business leaders can better position their companies to face any uncertainty that may await them.

I run a financial consulting company in Tbilisi, Georgia, where I have held the position of fractional CFO for companies based in my home country as well as in the United States, the United Kingdom and Europe. From my work with more than 50 foreign entrepreneurs in sectors ranging from IT to manufacturing, I noticed two emerging trends, both focused on global expansion: the internationalization of support operations abroad and the opening of branches abroad.

There are a number of advantages to each solution. Outsourcing support operations, whether to individual entrepreneurs or other companies, can be an agile and commendable option, allowing your company to grow or shrink faster. Opening a branch abroad also allows you to invest in global talent while spending less on operating costs than at your company’s headquarters, which gives your organization the flexibility it needs to overcome the wave of uncertainty.

Whether you simply outsource to foreign talents or whether you are expanding your business abroad is a strategic decision that depends on your company, your industry and your situation, and whose consideration goes beyond the scope of this article. Whichever option you choose, there are several factors to evaluate when considering expanding abroad, and this article focuses on the key points to help you make an informed decision that suits your business.

Ease of Doing Business

When opening an offshore branch or subsidiary, be aware that it is easier and affordable to start and run a business in some countries than in others—choosing wisely can make a big difference to your results. Ease of doing business considerations, as these concerns are collectively known, including the freedom to operate without excessive government restrictions and regulations that may affect normal business operations, property rights, commercial rights and bureaucracy. Many of these attributes have traditionally been measured in the World Bank’s annual Doing Business report, which measures the business and investment climate in 180 economies around the world. (At the time of writing, this report is being updated and revised as a B-READY project.)

Starting a Business

Find out how long it takes to start a business in your target region and what fees and details are involved. The simpler and more streamlined the process, the less administrative, logistical and financial burden it will constitute.

In some countries it can take several months and a significant amount of money to get through the bureaucracy before you can actually start your operations, but places like New Zealand, Singapore and Denmark are known for how easy it is to start a business there. And in Georgia, for example, once you have done your due diligence, it only takes a day to register a company, as all standard documents are available at a national registry office, requiring only a signature and a payment.

There is also the logistics of finding a body location if you need it—maybe even building it yourself—and equipping it. This involves the location or purchase of space, obtaining construction permits, finding and paying contractors, setting up utilities, etc. Regional variations in these costs must also be taken into account.

Build a team

People are the key to the success of the company. Whether you are opening your own office abroad or evaluating entrepreneurs, here are the most important questions you will want to ask about employment rules and standards:

How long does it take to employ people?

When you hire someone who will have to leave their current job before they can start working for you, it helps to know how long you will have to wait. The standards and expectations for notification of resignation vary by country, from two weeks in the United States to two months or more in some European countries. The standards for entrepreneurs may be different—in Georgia, no advance notice is required.

What are the rules regarding licenses?

No company hires workers while waiting for licenses, but it’s a good idea to know the rules before the possibility develops. In some matters, the time required before a person can be released may depend less on the law than on the terms of the employment contract negotiated between the parties. A contract may include a clause obliging the employer to give at least two weeks or one month’s notice before the official dismissal. It is also worth looking into severance obligations, as some countries have laws on minimum severance pay for laid-off employees. However, you can have more flexibility with contractors in many countries.