What are the four key considerations for international expansion in 2023?

These are challenging times. Yet, uncertainty doesn’t mean a lack of opportunity. Savvy entrepreneurs and companies are factoring these challenges into their strategies and moving ahead with their transatlantic expansion plans.

These players have the financial wherewithal, current market knowledge that informs their strategies, local talent, compliance support, and a lean mindset. Their products or services are projected to perform well despite certain unfavorable conditions in the economy. They likely do business in sectors that are still attracting capital, including clean-tech, renewable energy, artificial intelligence, and the online medical services industries.

Coming out of the pandemic, business leaders have become more resilient and are more adept at dealing with uncertainty. They’re also better at making decisions in compressed time frames and in high-pressure situations.

At the same time, other companies are hunkering down and conserving resources so they can be ready when market conditions improve. In the interim, they’re focused on fundraising and building financial resilience, sourcing local talent, and implementing compliance requirements so they can hit the ground running.

Whether your expansion plans into Europe or the US are imminent or further out, below are some considerations to think through as you consult with your professional advisers.

1. Clarity on expansion strategy and its enablers

It’s important to have clarity on the “why” and the “why now” of your expansion strategy and to test them against market conditions regularly. This approach will enable leaders to effectively respond to customer preferences, market fluidity, changing political and/or business environments, and their competitors’ strategies and actions.

Below are some key points to keep in mind.

Refresh your market studies

You’ve probably already invested time in doing an in-depth market study. It’s a good idea to re-check it to challenge whether your strategy, potential customer base, supply chains, and timing are still relevant.

Also, understanding what the competition is doing – especially in the fast-moving technology industry – and being able to articulate your differentiated value proposition is a critical component of decision-making.

Having breadth and depth of knowledge about your target market is essential. For example, if you’re a European company expanding into the US, it’s important to know that American customers tend to prefer business relationships with local domestic companies.

If your objective is to sell to American companies, it may be more beneficial to establish a US subsidiary or to identify an onshore partner rather than attempting to manage challenges and seize opportunities from a distance.

Reassess your financial profile

Sound financial planning and resilience is foundational. Below are some questions to ask yourself frequently.

• What is your confidence level around your company’s financial health?
• When will it be cash flow positive?
• Can it maintain good financial health during an economic downturn?
• Are you and your investor(s) aligned on objectives?
• Is your investor(s) able to provide additional strategic funding in the future?

Having a strong financial roadmap, or knowing that investors share your long-term vision and are willing to continue to support you is key.

Consult with your business adviser for their feedback and advice on financial planning.

Keep a lean mindset

On average, it takes about three years for companies to become profitable in their new market. Companies that are expanding now are doing so with an eye on efficiency to optimise cash throughout the cycle and conserve resources so they can be deployed for critical costs, such as high-performing talent.

With a lean mindset, there’s an emphasis on sticking to your core competencies and acting with forethought and precision.

For example, if you’re a European med tech or AI-driven tech company with plans to put down roots in Boston’s Route 128 Technology Corridor or you’re a US technology company with plans to expand your footprint into the UK’s M4 Corridor or one of Europe’s many other tech hubs, such as Amsterdam, you may want to consider pursuing contract-driven work, which tends to be more lucrative.

If your company is awarded a contract, you can fulfil it while simultaneously scaling your business to develop the next iteration of your product or solution and win the next contract.

A lean mindset is the art of doing more with less, staying focused on your core strategic priorities, and avoiding distractions.

2. Longer-term strategies

To keep value creation top of mind, focus on your longer-term strategy – whether it’s an IPO, selling your late-stage or FDA-approved technology to a large medical device company or a Big Pharma subsidiary, an acquisition of a company with a complementary product or high-tech solution, or additional funding from an investment fund.

Having a longer-term vision will also help determine which advisors you’ll partner with at the outset based on their expertise and networks.

When speaking with an advisor, it’s wise to discuss an endgame strategy and what that could look like for your Intellectual Property portfolio as well as your key employees. This shouldn’t be considered pessimistic thinking. Rather, it’s part of a holistic, 360-degree conversation about your longer-term strategy and options.

3. Talent strategy

Taking an overall lean approach to your expansion plans by conserving financial resources where possible can provide flexibility by freeing up funds to attract high-performing talent. Currently, unemployment is low, which generally means having to offer a more competitive salary, equity, and benefits package to secure talent.

Recruiting the right talent is an essential part of your expansion strategy. On the ground, local professionals can help navigate the business environment, culture, and regulations. They’ll also open doors to their networks, which is invaluable. You should have that expectation of them.

According to our US Global Expansion Managing Director Alexandra Suhas, “the US is renowned for its professional networking. Hiring the right local people who are connected in the target market is essential. Those are the professionals who will be able to open doors for your business and make impactful connections”.

The same holds true for local talent in Europe.

“To win work or sell products, US companies will need to rely on local professionals on the ground in Europe. Their expertise and networks will help your company gain credibility with key European stakeholders,” said Adam Dunnett, Tax Director and Global Expansion expert in London.

Keep in mind there are differences in employment law in Europe versus the US. For example, US companies are used to “at will” employment, a simple, flexible, and employer-friendly status, while  Europe has generally more stringent employee protection laws. This differentiation also extends to how you hire, the way contracts are prepared, and employees’ rights.

“These differences are quite pronounced and often US companies find this to be surprising,” said Dunnett.

At ZEDRA, we focus on attracting, on-boarding and retaining talent with a strong bicultural basis. On top of having the right skills and experience, employees who can navigate cross-cultural environments and adapt to transatlantic business diversity, will actively contribute to your overseas expansion success.

Additionally, we have robust benchmarking data on the types of salary ranges, incentive compensation, and benefits that are needed to attract talented professionals in today’s competitive market.

We also assist our clients with their US recruitment needs through our Talent Search practice.

Recently, one of our private equity clients engaged us to recruit an Executive Assistant for their newly created Boston office. ZEDRA’s Talent Search expert quickly identified that the candidate needed to be a worldly person, experienced in dealing with European and global executives, while also being at ease working in a chaotic startup environment with a team new to the US. ZEDRA sourced an extremely talented and open-minded American individual, whose cross-cultural experience working in Europe and adaptability to diverse environments was a significant asset for our client.

Overall, whichever side of the pond you’re expanding into, staying curious and open to cultural differences will benefit your company. As a founder or leader, the most practical strategy is to embrace the differences instead of allowing misunderstandings to impede your progress.

4. Compliance

Compliance can be difficult to navigate due to the complexity of regulatory frameworks. However, it can be managed effectively if you’re guided by the right advisers and understand the local regulations.

Below are some questions to ask your advisors as you consider expanding overseas.

From Europe into the US

• With 50 different state regulatory bodies, how do we comply with state and local taxes?
• How should we think about the impact taxes will have on our bottom line?
• What specifics should we be aware of regarding “at will” employment and other employment-specific matters?

From the US into Europe

• What are the ins and outs of VAT?
• How should we be thinking about data compliance given that Europe has more stringent data privacy regulations than the US? What is the General Data Protection Regulation or GDPR and how should we address it?
• How might Brexit affect our operations?
• How might more stringent employee protection law up the ante on choosing the right talent?
• What type of company should we incorporate depending on the nature of our business?

Keep in mind, whether you’re in Europe or the US, obtaining work visas can take time. And banking system wait times are also another area to factor into your company’s planning.

ZEDRA work with a number of US-based and Europe-based clients expanding their businesses overseas. For example, for a US-based high tech company that recently expanded into the UK, one of our directors serves as a single point of contact and is coordinating all of the necessary steps for our client to operate in the UK. We are also managing the set up of back office operations, including accounting, tax compliance, payroll, and hiring employees. This enables our clients to stay focused on market activity and growth.

The client is also considering setting up additional legal entities in other European cities, and we have been asked to coordinate these efforts on their behalf.

Some of the most enduring global brands were launched during uncertain times. A challenging environment can be a boon if your market study is on point and you can meet customer needs at the right time.

Expanding your business into Europe or the US can help you access high-performing talent, enhance your brand, tap new revenue streams, and innovate products or services.

How ZEDRA can help

At ZEDRA, we have extensive experience supporting clients with their global expansion strategies and we have market expertise in several countries. We are skilled at advising businesses on what they need to do based on what they’re trying to achieve. Contact Jan Hendrik Siemssen, Alexandra Suhas or Adam Dunnett to find out how we can help you.