What are some factors that influence a businesss decision to relocate abroad?

Each of these can make a difference when entering a new international market. Thus, we should take a closer look at what to consider when choosing the next country for your business.

1. Registering a business

The time it takes to register a business can vary depending on the country. In New Zealand, for example, it can take as little as a single day, whereas the process can take more than a month in places like India, South Africa and Venezuela. These differences may be rooted in various issues, from problems with infrastructure to bureaucracy and regulations.

On top of this, getting your business up and running may depend on other factors, such as the availability of office space, technology, electricity, water, etc. And these can vary between countries, too.

This does not mean that, for example, expanding into India is a bad idea simply because you may have to wait to register your business. If the market is right for your product or service, registration times are a minor inconvenience.

The key is working with an expansion expert to mitigated costs and risks ahead of time, or to use an employer of record (EOR), which can actually serve as the registered entity on your behalf.

By doing this, you can set a realistic timeframe and minimise the delays involved in registering a business – or even forgo setting up a registered entity to begin with, depending on the scope and nature of your expansion.

2. Finding skilled talent

In a global market, your talent pool is international. As a result, expanding into a new market is a chance to find professionals with the specialist skills your company needs. And if you hire from less competitive job markets, it becomes easier to hold on to key talent.

Hiring talent in another country offers a window into a new network of contacts, too, which will make the process smoother – and potentially open up lucrative business opportunities – if you then decide to set up a permanent presence in that country.

A good rule of thumb is to look for countries with a natural abundance of the professionals you need. If you are testing the viability of a new product, for instance, you may need strong salespeople.

Or you may be offering an IT service, in which case you will need employees with the right technical skills. So before choosing a country to expand into, make sure to look at the talent available.

3. Employment and tax regulations

Much like the rules for registering a business, employment and tax regulations vary from country to country. And since this can affect everything from hiring employees to complying with business tax requirements, you cannot afford to ignore regulatory issues.

Businesses operating in China, for example, have to make significant contributions to housing and social care programmes for employees, which is not something employers are accustomed to in most Western countries.

And, if you decide to relocate existing employees to a new country, rather than hire new staff, you will also need to consider how easy it is to secure a visa.

Again, this does not mean that employment and tax regulations should stop companies from setting up in a new country if the market conditions are right. However, you should always consider regulatory issues and work with experts to ensure compliance and minimise risk when planning an expansion.

4. Cultural considerations

Naturally, it’s no good setting up a company overseas if that country isn’t ready for the service or product you’re offering. As such, when planning an international expansion, understanding the consumer and business culture of the host nation can be crucial.

As mentioned, one way to ‘test the water’ in this respect is to work with an EOR rather than setting up a registered entity. They will then act as the legal employer for your company in that country, letting you place staff there for a short period of time. And if this initial test is successful, you will have already laid the groundwork for a permanent expansion.

5. Political and economic stability

Political and economic stability are essential for any business. After all, even if a country that has the infrastructure, talent pool and business culture required for your business to thrive, this could change with a sudden economic or political shift.

Many African markets suffer from this problem – due to the instability of governments, rules around how a business should operate can change frequently. In a similar way, businesses will naturally be cautious about expanding into the UK as the terms of Brexit unfold.

It is often best to be cautious about registering a business in a new country if political or economic instability could arise. Here, again, working with an Employer of Record is worth considering. This will let you test the market (and see how political winds blow) while minimising exposure to risk.

This guide has been written exclusively for ByteStart by Rick Hammell, CEO of Elements Global Services, an Employer of Record (EOR) solutions provider that helps simplify the ability of businesses to expand into 135+ countries worldwide.

SJD Accountancy - Small Business Specialists

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Last updated: 22nd February, 2021