For many small businesses, expanding internationally is a key part of their growth strategy. Driven by a technology-fuelled global economy, the world is increasingly becoming more connected and with that comes new opportunities to take advantage of global markets. Whilst the opportunities are far and wide, navigating how exactly to do that comes with its own unique set of challenges.
At OFX, we’re passionate about helping small businesses expand overseas and succeed. Starting from humble beginnings, we know going global isn’t without its challenges (and opportunities), as OFX CEO Skander Malcolm explains, “We’ve made our fair share of mistakes and we’ve learnt a lot, but we love being global. We think that’s where the world is moving, particularly for small businesses. You’ve got a great market here in Australia, but if you really want to grow and you have ambition, then overseas is really where most of the markets are in the world”.
Going global not only needs to be pursued thoughtfully, it requires guidance and an appreciation of local markets and local customer expectations. So how do you do it?
Learn from the experts – Here are the panel’s key tips for Australian companies navigating the task.
Have local champions
Each market has its own local and cultural nuances, and understanding the local market is what will make the process of going global easier. As OFX’s CEO Skander Malcolm explains, “every new market has a compounding complexity; from a new supply chain, new regulations, new people and new cultural nuances”.
To be a truly global company and find success overseas, you need to hire leaders who have local context, who you can trust above all else and who are also vested in the company and believe in your story. Going global essentially means learning how to go local.
Speaking from his own experiences of taking OFX into new overseas markets, Skander emphasises the importance of getting the right people in the right places. “Quite early on you want to be looking for who’s going to be your person in Hong Kong, in San Francisco and so on. Having insight into what’s happening on the ground is invaluable to understanding local context.
Develop genuine relationships with your key stakeholders, whether that be your customers, regulators or banks. This may mean growth is slower than anticipated, but in a world where trust is more important than ever, this will help make growth more profitable.
Hiring local leaders not only helps attract qualified local employees to your business, but it also ensures you constantly have people on the ground to understand how the local market reacts to your product, helping to active empowered accountability and build a trusted local business.
Figure out your ‘why?’
Many companies are faced with the obstacle of needing to stand out in a saturated market. Taking insight from Sarah Hamilton, co-founder and CEO of Sand & Sky, having a purposeful and consistent brand proposition from the outset is core to your business, but even more so when you go global.
There are three questions that Sarah suggests businesses constantly ask themselves to ensure they have a unified global brand; “What is your brand story? Why do we care about it? And why should others?”
Cynthia Dearin from Dearin & Associates points out small businesses can also be particularly vulnerable to launching in new markets before they are ready. To avoid this, she stresses the importance of getting clarity on your reason for going overseas; Is it to help decrease production costs? Will it give you a base closer to a key market? Do you want to take advantage of favourable market conditions?
The rise of technology has made the logistics of expanding a small business internationally much more accessible. However, this also means that businesses not only have to consider the local context, but digital contexts as well.
Sand & Sky and the umbrella brand Supernova are the epitome of a modern company; an e-commerce business focusing on real-time results, complemented by a flexible model.
“We were all about how we make e-commerce profitable. For Supernova, we ensured we’re profitable from first purchase and if a market is not doing well, we’d just pull it out. But everything was done online, so we had the flexibility to do that”, explains Sarah.
“We monitor results in real-time and have estimates on where our sales are going to end for that day in real-time. At the end of the day if a market is not profitable, we won’t continue to put advertising in it.”
Take your business global
Looking for inspiration on how to take your business global? Check out the key strategies and tips from our Go Global Workshop 2019
Have the right support structures in place
With the excitement of going global, setting up the appropriate tax and legal structures can sometimes be an afterthought. Regardless of the size of your business though, it’s important you are receiving the necessary advice, whether that be through partners or advisors, and having the proper structures set up early on.
With the many complexities of doing business internationally, consulting with experts to help manage your foreign currency exposure is also important. When operating a global business, creating certainty around cash-flow and profit can help protect your bottom line, particularly when markets are volatile, and exposure is high.
Rob Southwell from Pitcher Partners highlights key questions to ask yourself when it comes to cash flow and FX management; How are you going to fund an expansion? What existing profits are you prepared to put back in your business? Do you have a partner who can support and provide clarity on where your business is in terms of cash-flow?
Skander notes it’s also important to watch currency volatility on your inventory, particularly as you scale and trade in multiple currencies.
Using a distributor vs. going direct to retail
There is no right or wrong way to enter new markets, and your network and business model will ultimately influence how you choose to distribute your product. One option would be to work through a distributor. Skander recommends connecting with the various international Chambers of Commerce, which helps businesses connect with local trusted people, is a great first step to building a network. Once you’ve sourced a distributor, asking them for a list of their recommended distributors may also help you expand your network further.
Cynthia advises it’s also important to exercise some judgment when you’re doing your research and go in with a wish list of what you want from a distributor. For example, if you’re selling bags there might not be as much requirement for specialist knowledge, compared to someone selling a healthcare product.
On the other hand, scaling through the direct-to-retail approach is another popular means to go global. Despite having 34 retail relationships to manage and five warehouses in key markets globally, Sarah credits the success of her business to owning the relationship. In fact, Sarah claims if you have the opportunity and capacity, there is no better alternative than going direct.
“You get to know the market better, you’re not handing over your product to someone else and you can take the distributor margin out of your profit.”
“We won’t say yes to all retailers. It’s always top of mind that we’re owning that customer relationship. Retail to us is a new marketing channel, so if the retailers just rely on our audience then we’ve done a bad job at our relationship. If they expand us to new audiences, then we have a good partnership.”
About the OFX Go Global Workshop
At OFX we’re passionate about helping businesses grow in a global world, and we recently ran our annual Go Global Workshop to support two small business in their expansion journey. A panel of experienced business experts coached Nutrition Innovation Group, a business hoping to solve a larger health issue with their low GI, unrefined sugar; and Prene Bags; a women’s accessories label grown through the power of social media, to help them get their focus right.
Keep an eye out for the next iteration of the Go Global Workshop.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.