There is no doubt that expansion is one of the primary goals of all business owners. However, there are many obstacles that need to be overcome before plans come to fruition.
The looming recession threatens to disrupt business expansion plans further, causing doubt as to if funding will materialise and if the market is stable enough for further growth.
Preparation is key to ensuring your business not only survives a recession but thrives throughout it. Business leaders must adjust both their strategies and expectations, ensuring to consider all elements of their expansion meticulously.
They discuss how the recession can affect business expansion plans, as well as how industry leaders can foolproof their strategies to ensure they can continue growing their businesses.
How can a recession affect international expansion plans?
It doesn’t take a financial expert to realise that business leaders must be vigilant with their money this year. The threat of a recession has long been looming, but the economic downturn seems to be more of a reality in 2023.
Expanding into new territories is expensive for any industry, but Mike believes that the recession will affect technology vendors’ international expansion plans in particular. This is because VC funding is increasingly difficult to attain in difficult market conditions. Many post-IPO vendors have seen much of their share value wiped, with a significant reduction in VC funding, more so for late-stage Pre-IPO vendors.
Because of this, vendors are increasingly concerned about cash flow and preservation, taking the focus away from their business expansion plans. However, Mike believes that this isn’t necessarily the right call. So long as sensible financial decisions are taken, and the product/market fit is right, businesses can successfully grow even throughout an economic downturn.
This is partly due to the fact that there are fewer companies hiring through an economic downturn, and so is a great opportunity for an expanding business to acquire talent. There has been fierce competition for such talent post-COVID, with resources becoming increasingly limited, but it’s certain to be the opposite should the predicted economic downturn come to fruition.
Reducing the risk
Business leaders have, understandably, become increasingly more cautious about proceeding with international expansion plans due to the unsteadiness of the market. No matter how carefully thought out their plans were, most did not take a recession into account. This has led to more companies slowing transitioning or testing new markets rather than diving headfirst into expansion.
The state of the market has left more and more business owners looking for proof of concept before proceeding with any type of territorial expansion. This could be via existing customer success, channel partners signing up and revenue pipelines.
Mike says that this plays perfectly into both the Emerald’s Employer of Record (EOR) model and the Operatix outsourcing sales model because they can seed the market and start seeing traction without committing to setting up entities in new territories.
Emerald’s EOR solution is designed to significantly reduce risk when expanding into new territories in a number of ways. This includes:
- Ensuring all employees are legally compliant in their country of work, thus meaning that your clients avoid any issues surrounding employment law and tax compliance
- Clients avoid setting up costly, time-consuming, and legally complicated entities in countries they typically don’t have any experience within
- If a new territory doesn’t go to plan, clients avoid exit fees and ongoing liabilities when closing down their business operations.
- The solution provides ongoing support on the operational side with fillings, VAT returns, HR issues etc.
- Remote employees can swiftly and compliantly be switched from an entity to an EOR solution whilst maintaining all relevant compliance if handled correctly.
Investing in such solutions can ensure businesses are more readily able to tackle the potential problems that can arise when expanding abroad, helping to avoid financial trouble down the line.
Preparation is key
Preparation is key to ensuring your business not only survives a recession but thrives throughout it. While admittedly easier said than done, industry leaders must attempt to foolproof their strategies to ensure they can continue growing their businesses throughout this unsteady time.
They mustn’t miss out on an international market opportunity by being overly concerned with cash burn if expansion has the potential to create multiple revenue streams. Expansion can help increase profitability and reduce reliance on fundraising – a tricky thing to acquire during an economic downturn.
Mike advises clients to examine what has been successful in their home market and track the path of their growth to help replicate this success when expanding. In line with the notion that preparation is key to success, he stresses the importance of solidifying a sales plan and strategy that can be tweaked for new markets.
When it comes to planning the ‘where and how’ part of business expansion, Mike speaks about:
- Considering the fact that international labour laws change from country to country, which should play a role in the decision for any HQ location or international hiring strategy.
- Previously, business leaders felt that they needed to set up entities in each jurisdiction they wanted to trade in order to access local markets however, this is no longer the case. It has been proven that a remote workforce can be very successful for tech businesses.
- Thanks to the popularity of EOR solutions, business leaders should focus on the countries that have the best international opportunity or those that have the highest concentration of customers.
Mike believes that choosing a regional HQ is an important factor and one that should not be rushed. The decision should be based on labour and tax laws, as well as the talent pool.
However, once a desirable HQ has been found, it’s a wise decision to hire the remainder of the remote regional resources via an EOR solution. Mike states that this saves an average of around 60% of the set and ongoing costs of expanding a business internationally, all while ensuring HR, tax, payroll and employee compliance requirements are met. Not only does this save money in costs, but it also ensures that the legalities are covered – saving the business from possible financial trouble in the future.
Saving money during the recession is essential, and while you may think that this means cutting out expansion plans altogether, you simply have to be smart about your financial decisions. Investing in solutions, such as outsourcing sales with Operatix or an EOR solution with Emerald, can help ensure your business expansion gets off on the right foot.
Want to hear more tips on successfully expanding a business during the recession? Listen to the B2B Revenue Acceleration podcast now. To hear this interview and many more like it, subscribe to B2B Revenue Acceleration on Apple Podcasts, Spotify, our website, or anywhere you get podcasts.