If you’re looking to start a new business or buy an existing one abroad, put in the financial research necessary before taking the plunge.
While taking your business ventures abroad is not impossible, the more time you spend planning and researching before moving abroad, the smoother your transition and the fewer hurdles you’ll encounter. Meeting with lawyers, accountants and tax experts can quickly ring up a huge bill, not to mention the months of market analysis needed to ensure that your business is successful.
We spoke with international finance experts for advice on how to buy, start or sell a business overseas.
Research — and then research some more
A common misconception among those looking to start a business overseas is that the you’re ready to go as soon as your approved visa arrives in the mail.
Not all international visas entitle you to start a business abroad. Instead, many visas come with stipulations that limit the activity of people originating from other countries. For instance, some visas require that you partner with a local business owner to run at least a portion of your endeavor, while others limit the percentage of the business that can be owned by a foreigner; still others ban people from other countries from starting a business altogether.
Because every country’s laws are different, you’ll need to thoroughly review the stipulations of your visa before drawing up that business plan.
Even if your visa allows you to operate a business abroad, don’t immediately assuming that the laws for running that business are the same as in the US. In the US, you may have to pay taxes on your business until it is profitable. But many foreign entrepreneurs have worked this law into their business plans, only to find that tax laws vary wildly by country.
To avoid putting a dent in your business plan — and financial capital — do as much research on the business laws and regulations of the country you’re hoping to work in.
Avoid rushing into anything
Once you’ve gotten that sure-fire idea for a business abroad, it can be tempting to drop everything and take off on your new adventure.
Many would-be entrepreneurs idealize the idea of starting a business abroad. However, “seizing the day” and rushing into a store or service overseas without careful consideration could result in surprising financial penalties.
Say you want to move to France to start a clothing line. If you haven’t yet managed a clothing store in the US, you may find yourself struggling with the basics of fashion merchandising, throwing off your business plan and potentially finding yourself in debt.
Ensure success abroad by building a strong foundation in the basics of your business at home before making your international leap.
Do your due diligence
If you’re considering buying a business overseas, analyze the specifics of that business to ensure that you’re getting exactly what you pay for. It’s the buyer’s responsibility to verify the seller’s claims, which can be difficult across international borders.
First consider examining the financial records of the business you’re interested in. In many cases, these records can be obtained from local financial institutions. Find out if the business is in any debt — if so, you may be responsible for these debts on your purchase of the business.
Next assess the market status of the business. Ask why the business is for sale. While there’s nothing wrong with optimism over the business’s potential, review its current market share and financial standing before committing to a purchase.
Also ensure that you can clearly outline what’s involved in the sale during negotiations. After all, there’s nothing worse than assuming that the beautiful restaurant you’re looking to buy includes the Victorian-era tables, only to find when the deed is in your hand that you’ve purchased an empty shell.
Go with the professionals
When it comes to starting a business abroad, you’ll do yourself a great service by seeking the assistance of a legal professional so that you fully understand the laws, regulations and local economy of the country you’re interested in.
Keep in mind that local currencies can fluctuate rapidly, and an unstable local currency could affect how far you can fund your business. To protect yourself against local currency fluctuations, consider the services of a money transfer specialist when transferring US dollars to your local currency.
Many money transfer services offer tools that can insulate your business from significant drops by locking in more a favorable exchange rate for future transactions. One such tool is a limit order, which allows you specify and lock in your ideal exchange rate when the market reaches it, only then completing your transfer. Another is a forward contract — an agreement between you and a broker that locks in an exchange rate for future transactions up to two years later.
With a specialist, you can also set up recurring weekly, monthly or quarterly payments to get the best exchange rates and fees for your money.
Consider investing in a franchise
If you’ve been bitten by the travel bug and can’t wait to become an entrepreneur abroad, franchising is a sound alternative to starting a new business. Because most franchises offer initial training, marketing assistance and information on a country’s business laws and taxes, franchises can be especially useful if you’re not familiar with the local economy or regulations.
However, even with a franchise, you’ll want to understand which parts of the growth process the franchisor will assist you with, as well as market saturation for that particular business.
A special note on selling your overseas business
While it’s tempting to simply seek the help of a local bank when selling a business, here too is where using a money transfer specialist will a bigger bang for your buck.
Imagine that you’re interested in selling your successful housewares business in Spain. At the time of the sell, it’s worth 300,000 euros — but now you need to repatriate those funds back to the US.
Here’s what you’d get with your local bank and a money transfer specialist when repatriating your money.
|Local US Bank||Money transfer specialist|
|Exchange rate||1 EUR = 1.004 USD||1 USD = 1.087 USD|
|Transfer speed||Up to 7 business days||2 business days|
|Transfer options||In person, online, by phone||Online|
|Total [USD] received||$301,200||$326,100|
This one’s a no-brainer: With a money transfer specialist, you’d save $150 on the transfer fee alone and get nearly $25,000 more on the exchange rate. You’ll also see your money up to five days faster.
Clear-eyed and on your way
Though it requires considerable time and effort, owning your own business overseas is an adventure like no other. With research and planning — and the help of a few professionals — you can get the ball rolling toward success.