Europe remains a powerhouse in the global economy, boasting a GDP of around €18.3 trillion. As the world’s largest single market, with a population of approximately 450 million, Europe offers unparalleled opportunities for businesses seeking international expansion.
The European Union (EU), with its unified currency and free movement of goods and services, presents a unique landscape for companies to explore new customer bases and revenue streams. This guide delves into strategic tips for successful European expansion, highlights ideal countries for market entry, and explores flexible global expansion solutions.
Why consider expanding into Europe?
European expansion remains a strategic priority for many businesses, from blossoming startups to established enterprises. The continent offers a compelling blend of economic advantages, cultural affinities, and global accessibility, making it an attractive destination for international growth.
Europe’s economic landscape presents a wealth of opportunities for expanding businesses. With a unified market of nearly 500 million consumers, the EU offers unparalleled access to a diverse and affluent customer base.
The region’s economic stability and efforts to streamline regulations and reduce bureaucratic hurdles create a favorable environment for business growth. Using a single currency across much of the EU further simplifies financial operations, making it easier for companies to scale across multiple countries.
For North American businesses, cultural similarities with European countries can significantly ease the transition. Shared values, similar business practices, and often familiar languages can help companies navigate new markets. This cultural affinity can support marketing, customer service, and team integration, allowing for smoother adaptation to local nuances while maintaining core business principles.
A presence in Europe can also be a strategic gateway to other global markets. The continent’s geographical position and well-developed infrastructure make it an ideal hub for accessing emerging markets in Africa, the Middle East, and parts of Asia. This global accessibility is crucial for businesses expanding their international footprint beyond Europe.
Tips for a successful European expansion
The EU is an ideal region for mining new customers and revenue. Below, we’ve pulled together four essential tips for your European expansion.
1. Understand cultural differences
Before expanding into a new market, understanding the local culture is important. Meeting with business leaders in informal settings can provide insights into how they approach the working world in their country.
Seeking out companies that have expanded to these markets can reveal the nuances they encountered. These steps lead to a better understanding of how business works in the new country.
2. Find underserved customers
When Square, a U.S. mobile payments company, began considering expanding to the U.K., it was already one of the most crowded fintech markets in the world. However, unlike many companies, Square’s target customers are not large businesses; they are small to mid-size, especially businesses that do not take credit cards.
About half of the small businesses in the U.K. do not accept credit card payments, making it an excellent target market for Square. When expanding into a new country, identifying a market in which the company has a significant competitive advantage is critical.
3. Carefully consider European headquarters
Despite relative unity in the EU, each country maintains its unique culture, language, and way of doing business. When selecting a European headquarters location, companies should align their choice with their industry focus and business objectives. Cities that have developed into specialized industry hubs naturally attract concentrated talent pools, making it easier to recruit and retain qualified employees.
For example, despite Brexit, London remains one of the most important financial hubs. Additionally, companies should consider how local regulations can enhance or inhibit their business. For example, Denmark’s free-market approach makes it one of the easiest countries in the world to start a business.
4. Utilize EOR to simplify expansion
The benefits of expanding into Europe are tremendous. However, it is also expensive and complex. If a company decides to establish itself locally, critical steps like applying for the appropriate licenses and permits, opening a local bank account, and registering a physical office address are very costly and time-consuming.
Companies seeking a quicker and more cost-effective way to enter the European market can partner with an employer of record (EOR) as a bridge solution while they set up an entity—or to avoid entity establishment altogether.
An EOR allows organizations to forgo entity establishment by serving as the legal employer of their global workforce and handling everything from onboarding to payroll, benefits, and offboarding. An EOR navigates compliance with local legislation and employment regulations so organizations can avoid risk while quickly testing or entering new markets.
Best countries for European expansion
Each European country offers its own unique experience and benefits for businesses. As a result, companies should explore markets of interest in person. Immersing in the culture, getting to know the locals, and learning about their traditions can help identify a country that aligns with a brand and makes the most sense for business expansion.
Here are some countries to consider for European expansion:
United Kingdom
The U.K. remains a logical choice for companies seeking European expansion. It’s a European hub for business and provides access to other areas in Europe. The similar culture and language reduce some of the international complexities.
However, since Brexit, there may be additional considerations for businesses expanding into the U.K., particularly regarding trade agreements and regulations.
Sweden
Sweden continues to be an attractive destination for business expansion. The country benefits from deregulation and budget self-restraint. After implementing reforms in welfare benefits, Sweden has encouraged more employment and revitalized its economy.
The country is also a hub for technological advancements and is home to many innovative startups, including Spotify. As a result, a pool of talented individuals is eager for employment.
Denmark
Denmark remains one of the easiest countries to start and operate a business. Ongoing business reforms and deregulation help companies begin operations with less capital and minimal hurdles. The country offers a highly flexible workforce with its “flexicurity” model, providing businesses with adaptable hiring and firing practices, which is uncommon in many foreign markets.
Germany
As Europe’s largest economy, Germany offers a robust market for expansion. The country is known for its strong manufacturing sector, highly skilled workforce, and central location within the EU. Germany’s reputation for quality and innovation makes it an attractive destination for businesses in various industries, particularly technology, automotive, and renewable energy.
Ireland
Ireland has become a popular destination for European expansion, especially for tech companies. The country offers a low corporate tax rate, a highly educated English-speaking workforce, and a pro-business environment. Its strategic location provides easy access to European markets while maintaining close ties with the U.S., making it an ideal gateway for transatlantic business operations.
European expansion: business setup
When establishing a traditional entity or branch in Europe, businesses typically interact with several key organizations:
- Tax & VAT authorities. These bodies oversee the registration and compliance with local tax regulations, including corporate tax and Value Added Tax (VAT).
- Social security authorities. These agencies manage the registration and ongoing compliance with social security contributions for employees.
- European Business Register. This organization facilitates the formal registration of the business entity within the chosen country.
Before committing to a permanent foreign subsidiary, companies often benefit from adopting a lean and agile approach to market entry. By avoiding the initial investment in hard assets and a complete subsidiary structure, businesses can focus resources on growth and maintain flexibility to adapt their global strategy based on market performance.
Staying compliant with European regulations
Ensuring ongoing compliance with European regulations is crucial for successful business operations. This involves several key areas:
- Labor laws. Understanding and adhering to local labor laws is essential. These may include regulations on working hours, employee benefits, termination procedures, and workplace safety standards.
- Taxation requirements. Companies must stay informed about and comply with various tax obligations, including corporate tax, VAT, and industry-specific taxes. This often involves regular reporting and payments to local tax authorities.
- Market-specific regulations. Different European countries may have unique regulations affecting specific industries or business practices. Companies must research and comply with these market-specific rules to avoid legal issues.
- Data protection. With the implementation of GDPR, businesses operating in Europe must ensure strict compliance with data protection regulations, including how customer data is collected, stored, and processed.
By prioritizing compliance across these areas, businesses can establish a strong foundation for their European operations, mitigating legal risks and fostering positive relationships with local authorities and stakeholders.
An agile approach to European expansion
Partnering with an EOR like Velocity Global allows businesses to expand into Europe quickly—without establishing an entity. Through an EOR, businesses can navigate the complexities of entering new markets and ensure compliance with local legislation.
For businesses seeking quick and cost-effective European expansion, an EOR provides the flexibility to test the European market and scale operations efficiently, while minimizing initial investment and risk. Companies can focus on growing their business rather than navigating complex regulations and administrative requirements across payroll and taxes, employee benefits, and workforce classification.
Strategically expand with Velocity Global
Velocity Global’s EOR solution and deep in-country expertise make it easy to scale and grow your business across Europe and around the globe with no need for costly infrastructure or consultants. We open the doors to new markets quickly by hiring, paying, and managing HR tasks compliantly on your behalf.
Contact Velocity Global to learn more about how our EOR solution helps businesses quickly and compliantly expand internationally.
Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. © 2024 Velocity Global, LLC. All rights reserved.
