Expanding Into Foreign Markets

Business expansion requires careful consideration. As a business owner, you have to think about many issues - timing of expansion, economic climate, culture of foreign country, and most importantly, cash flow of the business. Even very experienced businessmen make the mistake of expanding into different markets at the wrong time. Such decisions eventually lead to losses. Here are some issues to consider when considering your expansion plans.

1) Cost of expansion.

This factor should be at the top of your list. Many people underestimate the cost of expanding a business into a totally different market. For example, they failed to take into account the fact that more time is needed to build up contacts in a foreign country. So the revenues comes in later than expected. This can affect the cash flow of the business adversely.

Make sure that you have adequate resources to see that your business can sustain until it breaks even and achieves profitability. In your planning, always make room for mistakes and cater additional resources for unforeseen circumstances. Only when you are well prepared should you venture into foreign soil.

2) Don't neglect your existing customers.

Many businessmen think that their businesses are not making as much money as they should because of the size of the market. Usually, this is only partly true. When eying another market, don't neglect your existing customers. Take a closer look at your local market and assess the opportunities. When you take the time to sit down and assess the market, you may find untapped opportunities that are already there. In this case, it makes more business sense to focus resources on the local market than to go after foreign markets. It's much easier to increase profits in your own country.

However, if you assessment reveals that you are already the leading player in the market, and that the opportunities available are negligible, then you may consider allocating resources to target another market. In other words, you are confident that targeting a foreign market will bring in more profits.

3) Tread with caution.

Always tread with caution when you are going into a new market. Do your research online first before making any decisions. Go to a trade directory and start establishing contact with suppliers and customers in that country. Find out all the regulations and costs that are associated with importing and exporting goods and services from that country. Such activities will provide you with a better feel of how business is conducted in your target market.

4) Risk management.

One benefit of treading with caution is that you are already managing the risk. For a business to succeed, every little decision counts. A wrong decision, especially in the early stages, can cost the business a lot of money. Be patient and don't be in too much of a hurry to succeed. Remember, you are sailing in uncharted waters here, so it's always better to play it safe.

5) Relationship building.

Finally, make sure that you spend a huge chunk of your time building relationships with your overseas contacts. In the beginning, you may need to travel there to meet up with your contacts. But over time, your efforts will be rewarded with handsome profits.