How to Build Your Business Internationally

If you are searching for new markets for your products and services, consider looking outside the borders of the U.S. as well as within.   Doing business in a foreign country is not as daunting or risky as it may seem and there are plenty of experts who can help you get started.  The opportunities are great so give it some thought.

Getting Ready

Before taking the plunge you will first want to make sure that your company has a well-controlled process for managing receivables and customer credit risk.  That’s important because the discipline inherent in an effective receivables management program will play a large part in helping you manage the billing and payment process with global buyers.  It is the foundation you will build on.

Taking the plunge

Once you have verified that your company is “in control” of its customer credit risk, you are ready to dive in.  The U.S. Department of Commerce / U.S. Export Assistance Center (USEAC) can provide expert assistance in helping you find new markets and can put you in touch with the U.S. Embassy in any country.  The Embassy can help you identify specific markets within a country.   There are also business people in town who have first-hand experience living and working in foreign countries and who have business contacts that could help ease your way into a market.  I know many such people and can introduce you to them.

How would I get paid?

A question that typically comes up whenever I speak about opportunities outside the U.S. is: “How can I be sure that I will get paid by someone half way around the world or even just North or South of the border?”   The answer is that there is a wide range of ways in which business can be conducted.  Here are the primary methods listed in increasing order of risk to the seller and decreasing order of risk to the buyer:

  • Cash in Advance: Sellers prefer this method to because it enables them to pay their suppliers & labor with immediately available cash and it limits the need to borrow funds.  The buyer, of course, sees this as most risky.
  • Letter of Credit:  With this method the seller grants credit to the buyer in a process that ensures that the seller’s product is not released to the buyer until the obligation is settled by the buyer.  The transaction utilizes banks at both ends to effect the transaction.
  • Documentary Collections / Bills of exchange:  These are essentially promises to pay that are drawn on a bank.
  • Open Account: This is the riskiest form of payment to the seller but the most preferred by the buyer because it gives the buyer time to receive, store & distribute goods, and to collect his receivables before meeting the obligation on his debt.

 A Few Notes of Caution

Expanding to markets outside the United States can be a great strategy for growing your business.  But, it requires caution and common sense.  You might want to find someone who has “been there /done that” and who can help you get started.  Become familiar with the sovereign risks of your target market.  The Department of Commerce can provide a wealth of information.  Here are some things to beware of:

  • Political and economic instability
  • Military and civil unrest
  • Boycotts that could affect you
  • Tariffs
  • A history of expropriations of property by the government
  • Lack of foreign exchange for the country’s currency
  • Governmental subsidies to your buyer(s) that could end

As with any transaction, it is critical that there is a clear and unambiguous understanding by both parties of what is being sold and bought.  Here are some items that should be included in a sales contract:

  • Specific description of the merchandise
  • Packing and marking requirements
  • Delivery instructions
  • Itemized price list of all goods and services
  • Shipping terms
  • Transfer of ownership
  • Insurance
  • Inspection – by whom and at what cost
  • Warranties
  • Applicable law
  • Dispute resolution procedures
  • Method of payment

About the Author

Mr. Casebere is a partner with the firm B2B CFO®, a national association of highly skilled Chief Financial Officers who help business owners and leaders of nonprofit organizations achieve higher levels of success.  Mr. Casebere has over 30 years of experience in corporate finance helping organizations increase profit margins, improve cash flow, and maximize corporate valuation. He has held senior finance positions for regional, national, and global enterprises.  He also has expertise in exit strategy planning and nonprofit governance and reporting.  He holds an MBA and is a Certified International Credit Professional, Project Management Professional (PMP), and Six Sigma Black Belt. Contact him at:  dcasebere@b2bcfo.com .

photo credit: Mr. Smith had a real head for maps and locations. via photopin (license)

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