How to ensure your client is prepared before entering a new international market
Guiding a client through an international expansion is one of the more complex tasks a CFO encounters. And as a fractional CFO working with multiple clients on a contract basis, you must balance the diverse needs of each client along with the complexity of your rapidly expanding role.
Asking your clients the right questions when they’re first exploring new global markets saves time and reduces costs and risk. It also ensures you are best positioned to help them reach their new markets efficiently and at the right moment to maximize their success.
Before you take those first steps into a new market, ensure your client has answers to these five questions.
Is your budget realistic for local requirements?
Surprises happen, and they’re rarely welcome. A client might prepare an annual payroll budget for new workers in Brazil but be unaware that local custom demands an extra month’s pay each December. An LLC in France not only pays a 33.3% corporate income tax, it also pays a withholding tax on profits and a value-added tax, or VAT. Being prepared for the nuances for each region, country and locality makes the difference between a solid financial plan and last-minute expensive changes.
How will your benefits package be received in your new market?
A common error is to apply the same package across the board, assuming that benefits welcome in one market are appropriate for another. However, benefits must match what your desired candidates expect to see. Though it may seem advantageous to take the most generous benefits and apply them in every market, it can quickly become prohibitively expensive without a gain in productivity or worker satisfaction.
How will your personnel policies be perceived in your new market?
Worker expectations for employment policies can deviate significantly from one culture to another. What is considered standard in the United States, such as rules limiting personal relationships, can be viewed as inappropriately invasive in other markets. Ignorance of these variations can drive away promising candidates.
Are you prepared for changes in statutory reporting?
Different requirements for statutory compliance will increase your clients’ administrative workload. As an example, in Spain, a company must register its notary after closing its financials, an unusual requirement that foreign businesses may not be prepared for.
What is your exit plan?
Perhaps your client isn’t considering an endgame for its presence in a new market, but planning for any outcome is sound, especially when withdrawing from a market can be as time- and budget-consuming as the initial setup. In China, for example, liquidating a wholly foreign-owned enterprise can take up to 12 months. You’ll find similar lengthy withdrawal requirements in other markets.
Expected and unexpected differences in a new market can quickly create a significant cost and time burden for a growing company. As you’re preparing your client for these next steps, consider what it would take to achieve a low-risk, low-cost global expansion.
Talk with a global solutions advisor today to discover how it’s possible.