If you are thinking of doing business abroad, you might have already a few countries and places in mind. Whether you are setting up an entity or just testing the market, there are many considerations involved. Here are a few things companies should keep in mind when going into an international market:
Location matters! Every year the World Bank Group issues a report on the ease of doing business in 189 countries. Although the real situation may vary, it should serve as your general business guide for location. The annual report analyzes the state of health of economies and the underlying characteristics. Details can include the regulatory system, the efficacy of the bureaucracy and the nature of business governance in particular.
Singapore is actually ranked the best to do business with and has been one of the top ten countries where international companies choose to set up their AsiaPacific operations. Singapore is strategically located and has excellent financial infrastructure furthermore it has a simple and business-friendly tax system. The strict regulations regarding the protection of intellectual property are also appealing and it is the center of the fastest growing economic region globally.
Location matters for multiple reasons, but there are three that stand out. First, you want to be able to set up your operations quickly. Second you want to have access to a number of markets from one convenient location and finally, you don’t want to deal with time consuming bureaucratic red tape. Choose wisely!
How well do you know your new business location? If you are an American company and opening a new office in Singapore, it may not be so foreign or difficult to adjust. On the other hand, if you are going to a country where English is not widely spoken and the cultural and business environment is completely different, consider seeking the help of local consulting firms. If you are entering a market and have little to no knowledge of the place, consider recruiting local nationals. These local resources understand the market and can help you avoid speed bumps.
With new opportunities come new challenges. These challenges range from small monthly payroll reporting procedures to significant changes in regulations. The more you invest in your new operations, the bigger your stakes are. Some governments are better than others at informing businesses of the new changes. For the most part, do not expect the government to update you on new regulations.
Costs of doing business abroad
It is expensive to do business abroad if you are setting up a foreign subsidiary. The initial costs alone will set you back about $40,000 USD. On top of that, there are yearly costs of maintaining the entity itself and it doesn’t include the cost of employing people for your new entity.
If you are looking for an alternative, using an Employer of Record (also known as International PEO) can help you save the costs of running your new operations. We do this by employing your new employees under the PEO model. If you are just testing the market for the first time, it doesn’t make sense for you to set up an entity. Set up a profitable, lean, efficient operation without having to spend a ton of money on entity setup.