Among the 480 small and medium-sized companies in 12 countries surveyed by The Economist Intelligence Unit in February, the majority consider international expansion of their businesses to be the future. However, business owners can make several common mistakes at this time that should be avoided at all costs:
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1. Skimp on talent.
Many new companies are tempted to hire young but inexperienced workers simply because it is possible to hire someone for less. But don’t make this mistake.
From February to April of this year, Wells Fargo surveyed 254 U.S. executives doing business abroad and found that 50 percent felt the cost of labor could negatively impact their international success.
Although the budget may be tight, hiring qualified workers is not the place to take shortcuts.
Having the right equipment is one of the most important factors for success. Don’t let an imaginary number dictate a critical hire. Remember that talent is an investment and be willing to pay accordingly. Hire the best person possible to lead new markets to success.
Hiring local talent to manage the team, rather than promoting employees without relevant experience, can also lead to company success. Among executives surveyed by Wells Fargo, 55 percent said they rely on feedback from customers and suppliers for valuable insights to guide operations. Local professionals will have a better idea of what customers want and will be better positioned to listen to and understand their needs.
2. Failure to designate a remote decision maker.
Organizations must give local market teams the authority to execute decisions in the best way possible, while remaining actively involved. Micromanagement will do more harm than good.
For a local team to thrive, the office needs strong leadership to make decisions. Hire a point person to make tough decisions and set clear expectations about when that person has full authority and when they should consult senior management overseas.
Also, don’t let internal bureaucracy slow the speed of bringing a product to market. The new team should focus on creating, running and growing the business rather than filling out endless Excel spreadsheets to please people across the ocean.
3. Not visiting enough or simply criticizing.
Show the right kind of leadership, especially in the early stages of a new operation in a new market. Although the local team must have authority, the company’s veteran leadership must also show its presence.
Communication is key. Set specific times to check in with a remote team via phone or video each week. During these calls, don’t just check in on how things are going, and don’t waste team members’ time by asking them to list the status of each project.
These smaller tasks could be handled via email or text messages. Instead, listen to their concerns and ideas and offer them advice and ideas. Take this time to build relationships and establish rapport.
When personally visiting a new operation, leaders should strive to learn, not criticize. It’s important to keep your eyes and ears open to what local team members have to say. Get to know them and their experience, and use it to benefit the company.
Be a resource to the team, not a figurehead of the company. Spend the visit actually working on that location rather than simply checking on what the new team is working on. Visits are not the time to tell everyone how to run the show. It’s time to support and learn.
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4. Traveling abroad for the wrong reasons.
Companies frustrated by the lack of growth in the domestic market can set their sights on the global market.
A survey conducted by Chase in January and February of nearly 1,100 midsize business executives and 2,387 small business leaders nationwide found that 73 percent planned to expand to reach new markets and customers.
While the promise of emerging markets is tempting, understand that global expansion is a long-term investment, not a get-rich-quick scheme.
Among 480 small and medium-sized businesses in 12 countries, 40 percent did not earn revenue from international operations according to a survey by the Economist Intelligence Unit in February. But 72 percent of companies surveyed expected to earn between 11 and 50 percent of their revenue internationally within five years.
Companies looking to make a quick buck shouldn’t expand. But those who are patient, plan for gradual growth overseas and are willing to take their time can reap long-term benefits.
5. Preparing too late.
Expansion shouldn’t be an afterthought. Companies that do not prepare for globalization from the beginning will have a more difficult time transitioning to other markets.
Only a third of small and medium-sized businesses around the world surveyed by Oxford Economics in April 2013 do business solely in the country in which they are based. By 2016, the number of small businesses operating in six or more countries will double, according to the report.
As global expansion becomes increasingly important, businesses must prepare as soon as possible. An early expectation of expansion will guide strategies, internal operations and decisions to build a global company. Without this early mindset, companies may have to spend more time rebuilding business infrastructure when they decide to expand.
What are other mistakes entrepreneurs make when expanding their operations?
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