Monthly Archives: September 2016

Tips to Expand Your Business Internationally

For most entrepreneurs, building and maintaining a local customer base is one of the first steps on the road to success. Once they have achieved this goal, some business owners feel they’re ready to take on the next step: expanding internationally.

Becoming a global company is an impressive feat, and not every business that sets out to do it accomplishes the goal. To successfully convert your business from domestic to international, you’ll need to consider a new set of factors that might not necessarily affect a local-only company. International business experts shared their insights on what it takes to break down your company’s national borders and run a multi-country operation.

Are you ready to go global?

Creating a strong international presence is rarely as simple as telling your customers you ship overseas and then waiting for the sales to roll in. There are numerous things to think about when selling and marketing in another country, and these factors must be considered carefully. Ask yourself the following questions to determine whether your business is

Have I ensured that a customer base exists in the country or countries I want to enter? A product that sells well in your home country may not necessarily have the same appeal elsewhere, so it’s crucial to invest time and energy into researching potential foreign markets.

“First, make sure your customers exist,” said Joseph Paris, Jr., chairman of business consulting firm XONITEK and founder of the Operational Excellence Society. “Is there a need for your offering? Are they inclined to purchase? Don’t think that they might — know that they will.”

Mike Zani, CEO of business consulting firm PI Worldwide, advised traveling to the country or countries you want to expand into to really do your homework and get a first-hand idea of how your business will fare. This will give you the opportunity to not only conduct research and test your product in the foreign marketplace, but also to experience the culture and social norms of the people you’ll be marketing to, he said.

Is the foreign market I’m looking at compatible with my own market? Michael Lee, head of international marketing and business development for e-commerce platform, advised looking for markets that are similar to yours. While the business environment won’t be identical to that in your home country, you should make yourself familiar enough with it that you can ensure smooth, seamless business discussions.

“Take into consideration trade barriers, proximity, currency and culture,” Lee said. “Seek out homogeneity — the fewer differences between your country and the one you export to, the easier it will be to do business with [that country].”

Do I have the available resources and staff to focus on both expansion and my established business? Trying to juggle an overseas operation while maintaining your current domestic customer base with a small staff is incredibly difficult, and you likely won’t be able to sustain your growth. Before you decide to expand, make sure you have the financial and structural stability to add staff members who can handle the new influx of work that comes with such growth.

“An organization should have a strong team solely focused on international growth that is ready to face challenges and fully support the expansion,” said Taki Skouras, co-founder and CEO of international wireless accessories retailer Cellairis.

The challenges of international business

While the international market may be a perfect target for your business, expanding beyond your home country isn’t without its challenges. Here are a few that you’ll need to prepare for.

Language and cultural barriers. Selling to customers or working with vendors who don’t speak your native language can be a significant obstacle for any business owner. That’s why Skouras recommended hiring bilingual staff members who can easily translate back and forth.

“If you don’t have the budget for full-time translators, outsource tasks like overseas customer service and translation of promotional materials to freelancers,” Skouras said.

Beyond language, differing cultural norms may also stand in the way of a successful business expansion, if your company doesn’t respect them. Lee advised entrepreneurs to research cultural practices in the countries they plan to expand into, especially as these may relate to the company’s product or service. Foreign customers’ and business partners’ needs may not be the same as those of your domestic stakeholders, and this could affect your sales, marketing and overall business strategies, he said.

“You will have to understand the different ways people communicate,” Paris added. “For instance, in northern Europe, there is far less ‘chit-chat,’ and you might feel that the party is being blunt to the point of rudeness — this is not the case. In southern Europe, there is a lot of personal conversation and activity before business issues are addressed, and cutting to the chase is seen as being impatient.”

Tax codes and compliance issues. If you think it’s difficult to navigate the various tax codes and business regulations from state to state, try selling in another country. Paris reminded entrepreneurs that the United States taxes worldwide income, and the IRS also imposes special reporting requirements on this income. Additionally, foreign banks may be hesitant to deal with a U.S.-based account due to the administrative burden, so you might need to set up a separate, foreign business entity and bank account to make handling transactions worth while for the banks.

Paris also noted that other countries have different labeling and packaging standards that you may need to comply with, depending on what you sell.

“In the states, the instructions you include with your product will be in English — sometimes Spanish or French,” Paris told Business News Daily. “But in Europe, your instructions, even for the simplest product, will be in multiple languages, sometimes up to 24 languages. If your product is sold more regionally, you will have to consider the increase in packaging cost associated with labeling. In addition, your product will have to be certified as safe [by those countries’ standards].”

Slower pace. In America, the business world moves pretty quickly. Executives and even lower-level employees work day and night, making appointments and closing deals long after they’ve left the office for the day. David Hellier, partner at Bertram Capital and board member of ACG New York, told entrepreneurs that business doesn’t move at the same pace in other countries; building relationships is a long-term commitment.

“Overseas, doing business is as much a personal event as it is professional,” added Bill Bardosh, CEO of green materials and chemicals company TerraVerdae BioWorks. “You may be able to broker a deal just through formal business meetings [at home, but] in China and the Far East, it is necessary to spend extensive time getting to know your counterparts outside the boardroom during tea sessions or dinner banquets, for instance. Things will always take longer to be resolved overseas, but that isn’t necessarily a sign of a lack of momentum — you have to be patient and prepared for multiple interactions to build trust.”

Local competition. It’s not always easy to convince a foreign customer to purchase your company’s product when there’s a comparable product available that’s made in the customer’s home country. While some big-name U.S. chains like McDonald’s and Starbucks have clout overseas, small and midsize companies need to work a little harder to convince the international market that their brands are trustworthy and better than the competition.

“Why would [customers] buy from you over the local champion?” Paris said. “Can you penetrate the market? If you do, can you be profitable under the circumstances? Is the juice worth the squeeze?”

Advice and best practices

If you feel you’re ready to tackle the challenges of international business, follow this advice from business leaders who have been there before.

Find the right partner(s).When you’re expanding your business, it’s critical that you don’t try to go it alone. Even if your “partner” is in the form of a mentor, you’ll need the help of someone you trust, who can vouch for you in the country or countries you’re looking to break into.

“You need someone who has a passion for your brand, understands … the local market, has experience in the [industry], has capital needed to grow, and ideally has additional businesses where he or she can leverage shared resources,” said Jim Rogers, chief marketing officer of Tony Roma’s restaurant franchise.

Hellier emphasized the importance of setting expectations when seeking foreign business partnerships, and really sticking to them.

“Know what you want in a business partner or acquisition, and have a clear understanding of expectations,” Hellier said. “Sticking with those expectations … will help avoid aligning with the wrong partner or investing in the wrong business. Oftentimes, businesses will give up too much to a partner just to get into a new market or country. You don’t want to be stuck with a bad partner.”

Hire a great team. The need for help “on the ground” also extends into your hiring practices. The people you hire to deal with your overseas business partners and customers must be fully immersed in the local environment, but you also need to be sure they’ll be looking out for your interests.

“The foreign companies that you may deal with probably have more experience doing business in the U.S. than you have in their country,” Bardosh said. “Without a core team on your side with the necessary cultural, language and local business contacts, you’ll be competitively disadvantaged.”

Consider the impact of any new ideas. Introducing a new product or marketing campaign becomes a whole new ballgame when you operate internationally. Instead of only thinking about how your own country’s customers might receive your new ideas, you’ll also need to think about and accommodate for the impact these ideas will have on your foreign customers.

“As you ‘spitball’ new ideas, someone definitely needs to think about scalability to your international territories — usually you,” Zani said. “Time zones, language and cultural appropriateness all need to be considered when you branch out internationally. If you don’t do this ahead of time, you run the risk of offending your international partners by appearing to be more concerned about yourself [than] them.”

Remain consistent in branding, but adapt to the environment. As mentioned above, varying cultural norms and customer needs in foreign countries may require you to adjust your sales approach, or even your whole product. Rogers noted that while you must stay true to your overall brand, it’s important to tweak your product (or menu, in the restaurant industry) slightly to account for local tastes.

“[Allow for] appropriate localization and flexibility to adhere to local customs and customer needs,” Rogers said. “One of the key areas to adjust is with [material] sourcing. If you can maintain quality, local sourcing has the opportunity to improve cost margins and supply-chain reliability.”

Always do your due diligence. Any major business decision requires taking the time to think through all possible scenarios based on your business’ strengths and weaknesses, but this is especially important for international expansion.

“Research each aspect of your business strategy,” Lee said. “Explore alternatives and safeguards. Do as much as you can to understand the markets you are entering, and take your time to get it right.”

How to Keep Control of a Fast Growing Startup

Rapid startup growth can be both a blessing and a curse. On the one hand, your sales are up and you’re getting recognized for all the hard work you’ve put into building your company. On the other hand, having to scale your business at an accelerated pace — and dealing with the organizational and managerial challenges that come with it — can be overwhelming to a new entrepreneur.

For Greg Skloot, the 23-year-old co-founder of event management software company, the answer to managing his startup’s rapid growth was bringing in a team of senior executives with a wealth of business experience he didn’t yet have.

“Young, creative team members give startups great energy, but they’ve likely never dealt with investors or overseen the hiring process,” Skloot told Business News Daily. “That’s why any new company looking to scale needs to find experienced senior executives to guide the business forward, particularly when product-market is found and the startup is ready for serious growth.”

Having a balance of ages and experience levels on staff will improve your company because it allows people to cater to their strengths, Skloot said. The younger employees can execute and brainstorm new ideas, while executives can use their years of experience to advise on company strategy, planning and growth. As long as every team member is on board with the company vision and culture, hiring a mix of people will help your company grow quickly and effectively.

Once you bring in these new advisers, you’ll need to step back and focus on the bigger picture, which requires some changes to the way you approach your business.

Skloot offered the following tips to help young entrepreneurs adjust.

Hire people who are smarter than you. On a small team, every person is an important part of the business. Early hiring mistakes can cause a lot of trouble in the future as the business scales, so it’s crucial to recruit the absolute best people available. Hire people who are smarter than you to run each department so you can focus more on the overall strategy. You can find great candidates by consistently reaching out to your network, using social media, and leveraging your investors for introductions.

– Keep things organized. During growth mode, lack of organization can be detrimental and slow everything down. Put in the extra effort to make sure everything is clearly organized, documented and available to the team. This might include processes like how to onboard a new customer, or a routine that ensures all signed contracts are scanned and placed in a certain shared folder. Once you have room in your budget, consider hiring an executive assistant to take these types of day-to-day administrative tasks off your plate.

– Prioritize and stay focused. Fast growth brings many opportunities, some of which you may need to turn down. It’s not easy to say no, but you have to do it and do it a lot. Make sure the team is focused on your annual/quarterly goals, metrics, mission and vision. Anything that doesn’t align with that is a distraction that will slow you down.

– Don’t overlook the details. Be sure to pay close attention to the details and don’t let them get lost in the shuffle as you grow. Details can make or break a company, and you must keep them in mind as your workload piles up. As the team grows, you can delegate the details to some of your new employees so the burden doesn’t all fall on you.

– Measure everything. It’seasy to keep track of things when you’re small. Fast growth adds a new challenge, making measurement a necessity. Great entrepreneurs define clear key performance indicators (KPIs) for each department and sometimes each employee at the company so they always have a view on what is working and what needs improvement. This might include metrics like cost to acquire a customer, lifetime customer value, average sales price, revenue per employee, etc.

– Constantly communicate. People are afraid of the unknown. As a leader, you can alleviate that fear by constantly communicating and sharing key information with your team. This ensures that nothing slips through the cracks as you continue to grow.

Some Thing That Have Common In Small Businesses

Small businesses that have seen increased sales, revenue and profitability over the past year credit their success in part to an increased investment in technology, according to a new study from the financial services company Bank of the West.

Overall, 52 percent of businesses experiencing growth have bolstered their technology budget over the past year, compared with only 15 percent of declining businesses.

The research found that growing small businesses are nearly twice as likely as contracting businesses to think investing in technology will be important to their business’s success in the next year. Specifically, these businesses expect technology to play a critical role in attracting new customers, providing a better client experience and making internal processes more efficient.

“While some businesses see technology as a way to improve their customer experience, it may also be an opportunity to propel small business expansion moving forward,” Michelle Di Gangi, executive vice president of small- and medium-size enterprise banking at Bank of the West, said in a statement.

One way in which growing businesses will use technology to improve the customer experience is with an increased investment in point-of-sale technology. The study found that 43 percent of expanding small businesses expect to start using mobile payment systems in the next year, compared with 15 percent of contracting businesses. Additionally, 27 percent of growing businesses are planning to implement tablet payment systems, compared with 12 percent of declining businesses.

“Technology serves an important role in advancing the customer experience, while boosting profitability by streamlining operations and freeing up resources to pursue growth,” Di Gangi said. “Small businesses that can keep up with the pace of change and pinpoint strategic technology investments will push ahead of the pack.”

After years of just trying to weather the economic storm, many small businesses are now trying to transition into a growth mode. The study discovered that over the past year, 35 percent of all the businesses surveyed invested in new products, while 28 percent increased their marketing budgets. Additionally, one-third of small businesses plan to hire new staff in the coming year.

Not everyone, however, is seeing the type of growth they would like. Nearly 40 percent of the businesses surveyed have made cutbacks in the last year, such as reducing employee hours, discontinuing products or services, or cutting back on marketing budgets.

“Small businesses that have built a strong foundation for expansion through sound business financials and strategic investments appear prepared to seize the growth opportunity ahead,” Di Gangi said.

The study was based on surveys of 499 U.S. residents who own a business with two or more nonowner full-time employees and less than $10 million in annual revenue, and which has been in operation for at least five years.

Let’s Learn About Retirement Plan Options for Small Business Owners

Planning for retirement can be overwhelming and complicated. But because the average American will spend about two decades in retirement, it makes sense for small business owners to learn the basics about the various retirement plan options available to them.

Offering a company-sponsored retirement savings plan has benefits that extend beyond your own well-being. Considering that only 14 percent of small businesses offer any sort of retirement plan for their employees, you can distinguish your business and attract top talent by providing this incentive. Though certain types of plans do not require you to contribute to your employees’ retirement plans, if you choose to, you also will enjoy a range of tax benefits.

Whether you’re managing multiple employees or just work for yourself, there’s an affordable option out there that’s right for you. Here are the most common types of retirement plans available to small business owners and self-employed individuals.

Self-directed or personal IRAs

In a self-directed or personal individual retirement account (IRA), the account owner directs all investment decisions on behalf of the retirement plan, while a qualified trustee or custodian holds the IRA assets on behalf of the IRA owner. Terry Dunne, senior vice president and managing director at financial services company Millennium Trust, said that individuals who have left a job and want to move retirement funds from their former employer’s 401(k) plan typically choose to roll over their assets into an IRA.

When considering a self-directed IRA, there are two types to choose from: traditional and Roth.

1. Traditional IRAs allow annual tax-deductible contributions that depend on the individual’s modified gross adjusted income. Withdrawals are taxed, but earnings on principal and interest accumulate tax-deferred until funds are withdrawn from the account penalty-free after age 59 and a half, and minimum required distributions are mandatory after age 70 and a half. Dunne noted that the traditional IRA is a good choice for individuals whose tax strategy is to defer taxes until after retirement, or for those who anticipate that tax rates during their retirement will be lower than their current rate.

2. Roth IRAs have distinct tax benefits, Dunne said: Earnings from a Roth IRA accumulate tax-free, and unlike a traditional IRA, withdrawals are free of tax and penalties, provided certain conditions are met. Contributions are not tax-deductible but can be made past age 70 and a half.

One recent option that has become available to small businesses and self-employed individuals is myRA. This Roth IRA program is offered through the U.S. Department of the Treasury for people without access to employer-sponsored savings plans. There’s no cost to open a myRA, it has no fees or minimum contribution requirements, and participants can withdraw money at any time without paying taxes or a penalty.

Employers that offer myRA can set up payroll deductions for employees interested in the program but do not need to administer or contribute to the accounts. Contributions are invested in Treasury bonds; the government guarantees the principal, so there is no risk of losing money.

Denise Downey, a certified financial planner and founder of Financial Trex, said that while this makes the investment selection very easy, investors should consider the growth potential.

“U.S. Treasuries are very safe investments, but they struggle to earn enough to keep pace with inflation,” Downey said. “Once a myRA account balance reaches $15,000 or in 30 years (whichever comes first), the account owner must transfer the account into a Roth IRA.”

Employer-sponsored IRAs

Employer-sponsored IRAs are ideal for small business owners who want to offer their employees a retirement plan. There are two options: Simplified Employee Pension IRAs (SEP IRAs) and Savings Incentive Match Plan IRAs (SIMPLE IRAs).

1.SEP IRAs allow employers to make contributions of up to 25 percent of the employee’s compensation, or a maximum of $53,000 in 2016 (whichever is less), according to the IRS. They are also funded 100 percent by the employer; employees do not contribute. The employer is not required to make a contribution every year but must contribute the same percentage for employees that they may contribute for themselves in a given year.

Peter Calfee, president of Calfee Financial Advisors, said that SEPs are the easiest plans to set up, and offer business owners the greatest flexibility in when and how much they contribute.

2. SIMPLE IRAs enable employers with fewer than 100 employees to establish an IRA for each participating employee. The SIMPLE IRA has requirements similar to those of a traditional IRA, but with this plan, employees can make salary deferral contributions of up to 100 percent of their compensation, not to exceed $12,500 in 2016. Employers must also contribute to the accounts by either matching employees’ contributions dollar for dollar for up to 3 percent of their compensation, or contributing 2 percent of each eligible employee’s compensation.

401(k) plans

Perhaps the most well-known type of retirement plan, a traditional 401(k) allows employees to contribute a portion of their wages to individual accounts. Employers have the option to make and/or match contributions on behalf of plan participants, and have the right to reclaim those contributions if an employee leaves the company before a set time. Additionally, employers who sponsor traditional 401(k) plans are subject to an annual qualifying test by the IRS.

Unless employees contribute to a Roth 401(k) account, money is taken out of an employee’s wages pretax and therefore reduces the amount of income tax he or she has to pay. Because of this, the IRS places a cap on how much an employee can put into a 401(k) account each year: $18,000 for 2016.

In addition to the traditional 401(k) plan described above, there are several other types of 401(k) plans available, and it’s important to understand the features of each one before choosing a plan for your business.

1.Solo 401(k) plans are similar to self-directed IRAs. However, these plans are suitable only for single-employee businesses, because only the business owner and his or her spouse may participate and make contributions to the plan. The plans also offer more generous annual contribution limits than any of the other options, and tax-deferred contributions can be up to three times that offered by other plans, Dunne said.

2. Safe harbor 401(k) plans mandate that employer contributions be vested as soon as they are made. Therefore, employees can take the money with them when they leave the company, regardless of how long they have been there. Safe harbor 401(k) plan sponsors are not subject to the annual IRS test.

3. SIMPLE 401(k) plans are ideal for smaller ventures, as they can be offered only by businesses with fewer than 100 employees. As with the safe harbor 401(k) plan, the SIMPLE 401(k) plan requires employer contributions to be vested as soon as they are made, and does not mandate annual testing.

Andrew Meadows, vice president of brand and culture at Ubiquity Retirement + Savings, cautioned business owners to read the fine print when setting up a 401(k) plan, because many providers will tack on hidden fees.

“A lot of employees think a 401(k) plan is free, but their savings are being eroded by a fee off the back end,” Meadows told Business News Daily. “Take a look at the funds, and see how much you’re actually paying. Administrative costs might be low, but you may find that [there are] low balances in the 401(k) accounts [due to] hidden fees.”

For more detailed information on the types of 401(k) plans available, visit Business News Daily’s reference article on the subject.

Profit-sharing plans

Any employer with employees who have worked at least 1,000 hours in a previous year can offer a profit-sharing retirement savings plan. The U.S. Department of Labor states that the maximum annual contribution for this plan for 2016 is $53,000, or up to 100 percent of an employee’s compensation if it’s below $53,000.

Choosing a plan

Before deciding on a plan provider, it is important for individuals and small business owners to determine what kinds of investment options they would prefer to have. Dunne advised employers to ask themselves these questions before they decide on a retirement plan:

– Do you prefer simple administration?
– Do you expect to have employees?
– Is it critical that your employees be able to contribute to the plan?
– Will it be important to attract and keep good employees?
– Do you want to maximize your contributions?
– Will you want to contribute every year?
– Do you want plan contributions to be deductible as a business expense?

Your answers to these questions can help you better evaluate which plan will work best for your business. It’s also important to speak with a professional — such as an accountant, lawyer or financial planner — to determine what your business needs versus how much it can afford.

“Start by interviewing folks who are knowledgeable,” said Marilyn Capelli Dimitroff, principal and director of wealth management at Planning Alternatives wealth advisory firm. “It’s something that most small business owners don’t deal with on a day-to-day basis. The skills that make you a good entrepreneur may not equip you to manage investments on an ongoing basis.”