Your first foray into international markets is an exciting time. Expanding your presence across time zones, cultures, and client ecosystems presents challenges and opportunities alike, not the least of which lie in the initial market entry. We penned multiple pieces (here’s one about how you can fuel your international growth) about utilizing International PEO to stay agile in your initial approach, but what about when it comes time to scale? Let’s explore phase two of your plan here.
Your first employees across multiple regions performed better than expected and suddenly there is more work than the small headcount can support, furthermore the support they need as a high-performing group is making for early morning/late nights back at home. Coordinating group calls are increasingly difficult over such dispersed time zones. Functional leaders at headquarters are spending more time on planes than they are driving strategy and direction with the rest of the leadership team. You’re fairly certain at this stage that the opportunity in those key markets would flourish if you simply had a bigger, better investment and presence. So it’s time to double down.
Top 10 Reflections to Scale Globally:
1. Where do you envision your regional hub?
Find a culturally and geographically friendly jurisdiction in the region where you can access the best talent and plan to focus hiring plans there. This will require some working knowledge of the history and relationship between the neighboring countries so you don’t set up a reporting/support structure that highlights cultural challenges from the start. The ability to travel freely from the hub to your regional offices will also be necessary.
2. Who will lead the region or country’s operations?
We’ve all seen examples of people who excelled at execution but struggled at leadership, so don’t assume that the first person on the ground can also drive the scale you envision. Success on this front will require a combination of really knowing your team and solid expectation settings.
3. Can you realize a beneficial salary arbitrage?
While it sounds obvious, you should do some research on where you can find the right talent at the right price as you scale. If nothing else do some simple market research on a country-by-country basis. But bear in mind that salaries vary drastically if your employees are based in large cities so further exploration may be warranted. For example, average salaries in Sao Paolo are 25% higher than the national average and that number is close to double for white-collar salaries in the city.
4. Can I reduce my global corporate tax?
Be careful not to let the tail wag the dog with corporate taxes… access to the best talent in an advantageous geography should always be your first priority. However, if two countries within the region are closely ranked, choosing the lower tax jurisdiction inherently leaves more resources for hiring and investment.
5. Should I expect unforeseen costs… like travel budget increases?
While your senior leaders will have the advantage of traveling to your larger offices as opposed to dozens of smaller locations, the smaller locations will often need to travel to the regional hubs for important meetings. But don’t overlook the value of a senior member of the organization traveling to see your remote employees, wherever they may be. I was recently told by an employee of another company that “my company has no idea what we do because they’ve never once come visit”. That employee confidentially shared they may not stay much longer….
6. Wouldn’t it be faster to buy (versus build)?
In most cases, yes, but make sure you’re prepared for a very different kind of integration. I’ve seen many cases where companies purchased a local vendor or partner only to learn that the employees were so concerned about the cultural differences having a foreign parent company that all the local employees resigned. Get to know any real or perceived biases before entering into a transaction – a cultural rift will quickly nullify your speed to scale and execution abilities.
7. Who will support the back-office operations?
Depending on how quickly you scale in a country you may need to support that growing staff remotely until they can stand on their own two feet. You guessed it, this means your HQ team will have to pick up the time zone slack.
8. Will my technology stack transcend borders?
In many cases, the senior members of organizations are able to conduct business in a common language, but at the lower levels this may prove a challenge. Could you imagine being asked to use a software for which you don’t speak the language? Inquire with your software vendors whether they support multiple languages and if so, what is required to turn this functionality on.
9. Should Intellectual Property be a consideration?
Absolutely yes! Some countries are easier to protect IP than others so you must work with a global IP attorney to determine how to structure your contracts accordingly, and where you place your regional hubs will factor into this decision – such as choosing Singapore if you are going into Asia.
10. Is it worth it?
You have to examine your overall goals to answer this question. No question scaling globally adds layers of complexity and bumps along the road. But if global expansion provides competitive advantages, increases shareholder value, and strengthens the company value proposition generally… then what are you waiting for? It’s time to scale!
Ben Wright, Velocity Global CEO