How to start a successful business abroad

Research your market

The first step you'll want to take before you start assessing expat business ideas is to gather research on the market. What is the tax rate? What kind of licenses and permits will you need? Does the country have a tax treaty in place with the US or will you be facing double taxation? What are the restrictions on foreign ownership of businesses and what are the visa requirements? These are all important questions that may affect your choice of where to establish your business. However, in many cases, you've already laid down roots in a country, and it's more a matter of knowing what to expect to ensure you're fully prepared.

Go on a fact-finding mission

Before you commit to a business, it's helpful to get the lay of the land. If you're not already located in the country you have in mind, take a trip there, assess the competitive landscape, and talk to other expat business owners. You'll be surprised how helpful they'll be, especially if they don't feel that your business would be in direct competition. Years ago, I was considering opening a shop in St. Vincent and the Grenadines, but after speaking with several expat business owners, I changed my mind. Each and every one of them complained about the local government officials who were constantly demanding bribes and threatening to shut down their businesses. As a result, the owners were barely able to stay afloat.

Planning your business

The single biggest mistake I see expats make is to open a business simply because their wife, husband, or significant other has been putting a bug in their ear. The expat in question buys an existing bar or restaurant in his or her partner's hometown without doing any research on the market or carrying out any due diligence. The outcome is sadly predictable. The business fails in short order and the owner takes the loss and is left licking his or her wounds.

As carefree and laid-back as things may be in your host country, you shouldn't neglect proper planning. Even though it's not a must since you're unlikely to be able to utilize bank financing, you should still prepare a 5-year plan. This should address the overall size of the market, existing competition, permits, regulations, labor laws, etc. The plan should clearly describe your business's value proposition and its competitive advantages. You should also include a SWOT analysis, which describes your business's strengths and weaknesses and identifies opportunities and threats in the marketplace. Last but not least, your plan should include detailed profit and loss and cash-flow forecasts and establish a break-even point.

There is an ancient Congolese saying that you should "prepare yourself for when the water comes up to your knees." You need to have a contingency plan in place to ensure your business can survive any unplanned emergencies. When COVID-19 disrupted international travel, many local businesses catering to foreign tourists were forced to adapt in a hurry or perish. The businesses that survived the ordeal adjusted on the fly. Restaurants redesigned their menus to cater to local tastes while several souvenir shops exited their bread-and-butter business entirely and focused on serving the needs of the local population. These companies survived while others that failed to adapt are no longer among the living. If you want your business to avoid the same fate, you should have a contingency plan with several fall-back options in case the poop hits the fan and things don't go exactly as planned. Check back here regularly, and you'll find a number of expat business ideas that might be just the ticket!

 

Location, location, location

One of the first questions you should be asking yourself is whether your proposed business is an impulse business or a destination business. Are your products or services unique enough that customers would be willing to go out of their way or are they making a spur-of-the-moment decision? Don't make the same mistake I made when I opened my first business and fall for a location that's off the beaten path simply because of the irrestibly cheap rent. This might work if you're opening, for example, a dive shop or a specialty business with marginal competition, but it's not a good strategy if your customers don't plan their purchases ahead of time.

Once you've identified a good location, you'll want to talk to other business owners and find out how much wiggle room there is when negotiating with landlords. In many developing countries, it's common practice to list rentals at a prohibitively high price to leave room for haggling. If you can find more than one location that suits your needs, it will only help strengthen your bargaining power. Make sure to check out other listings, even if they're not attractive for your business, so that you have an idea what the going market rent is. This is an area where it may be helpful to engage your spouse or significant other or a local friend or relative to negotiate on your behalf so that you don't get gouged and end up paying "the gringo price". Finally, once you come to an agreement on a property, you'll want to make sure to hire a good lawyer (should be local so he's familiar with any relevant laws and regulations in the area) to review the agreement and propose any changes before you sign it.

Hiring your first employees

Once you've signed the lease, it's time to start interviewing potential employees. While you might ideally prefer initially to run the business yourself, most countries unfortunately have strict laws that require foreign business owners to hire a specific number of locals. Before you schedule the interviews, make sure you're acquainted with local labor laws and have carefully estimated your man-hour requirements.

When it comes to hiring decisions, if there's one thing I discovered during the five years in which I ran a business, it's that you can train anybody how to sell your products, but you can't train someone to have the right work ethic or attitude. This is why I often chose to hire people who didn't have experience with our products but who had excellent sales skills, a winning personality, and stable job history over "lifers" who knew our products inside out. More often than not, it turned out to be the right choice. The second big mistake I made was to hire people who were overqualified. My advice here is: when you interview someone for an entry-level job who has supervisory experience and they tell you they have no interest in ever working as a supervisor again, don't believe the hype. They'll be out the door as soon a supervisor position opens up with a competitor!

Preparing for the grand opening

Now that you've completed the planning, identified a suitable location, and signed a lease, your ready to prepare for your grand opening. Your 5-year plan should have included a marketing plan that clearly articulates how you plan to spread the word to customers. Depending on the nature of the market and your specific business, there are a number of different ways to spread the word about your business, including social media, billboards, radio or television advertising, POP advertising, flyers and coupons, word-of-mouth, etc. Whatever you do, since you only get one grand opening, you'll want to make it count.

Tracking performance

Once your business has opened, you'll still need to make adjustments on an ongoing basis. Between your point-of-sale (POS) program and your accounting software (e.g. QuickBooks), you can generate a detailed monthly report that breaks down your sales and profits by line item. This can help you flag deadbeat products or services that aren't pulling their weight and identify growing trends that can present new opportunities. Surveys and questionnaires can also be used to help track your performance in specific areas and identify unmet needs in the marketplace. These should be brief and can be tied to an incentive as needed (e.g. 10% off your purchase) to encourage a higher response rate.