When a company chooses to expand their business to a new country, they would start making an small analysis: market prospection, barriers, access to local providers, potential customers and so on. If the country seems to be atractive enough, the next step would be to make a small business plan to find out how much will it cost to start the operation. Let’s focus on the expenses. You will usually add the corporate constitution, legal documentation, accounting, legal representation…
From now on you must pay special attention to some issues that increase your costs greatly. It is impossible to anticipate all possible variations and variables that may occur, but, let’s talk about a few that you will have to face with, and, most probable, you don’t know them or they are not in your Excel expenses sheet.
Choose correctly the professional for your subsidiary
Once you decide to open your subsidiary abroad, you will have to choose perfectly who is going to be in charge of the new operation. If you move someone from your company (most probable) you will have a few expenses quite high: an important salary, a car, house renting, fligths for his/her family and so on. Most of this expenses, can be anticipated. No problem, yet. If you work in a corporate giant, then this expenses will not be so important. On the other hand, if it is a medium company with limited resourse you will have to choose well what benefits you have to give to the employer. Once again, this is not problematic, there will be no surprises here. Just a tip: don’t be stingy with your expat. He deserves a lot.
However, moving a person from one place to another have a few other things rather than money: this person will need to adapt, form the teamwork from zero, he will barely know the country and its culture. He (or she) will have to adapt to it, they will have to build a new way of life regarding all new things. He will be stressed, his performance will be lower than usual. But, this adaptation is temporal. It should not take too long.
While your professional mate goes through this process, he or she will also have to adapt to how they work, take some time to build a new multicultural team, where he must mix the culture of his company with the identity of the country or region where he is. This is quite a long process of adaptation which you can not calculate exactly, you can not add it to your expenses sheet. But, now you do know it. There is a time needed to complete this “change”, so please, in your business plan you should add some delay to the real beginning of your operations. Revenues will come later than expected. How long? It depends on how big are the cultural differences, the easiness of adaptation of your professional, his capacity to face and build a multicultural team…
You are going to delegate all responsibilities into a new guy who you just have met and who is miles away from you.
On the other hand, you could hire someone locally. Quite a common strategy in which, usually, apart from naming him as the Country Manager of the company (or similar) you choose to turn him as a share holder of the company or negotiating a great bonus based on some measurable goals. The aim is to motivate and retain him.
Recruiting in another country is difficult. But, it is much more difficult to know whether he is a person in who you may trust. You are going to delegate all responsibilities into a new guy who you just have met and who is miles away from you.
Be careful. Based on my experience as a Regional Business Developer our company has had some local partners, in some cases with awful results. Time to learn what we did wrong. Unfortunately, I can not tell you what happened but, believe, they were not confortable situations. How to avoid this? The only possible way is to increase the financial controls from the headquarters, and the CEO or his direct supervisor, you will have to travel often.