Times could be better for businesses. Still reeling from the after-effects of a global pandemic, and with a raft of geopolitical issues, many countries are now facing the prospect of a possible recession. The instinct for business owners at this point is to batten down the hatches, and limit the economic damage. Logic and experience suggest that this is the time for conservatism, and playing things as safe as possible.
But what if you did the opposite? What if, instead of reining in investment and scaling back your plans, you took the opportunity to expand? Sailing into the economic storm isn’t without its risks, but it does present opportunities for businesses who are willing and able to commit. Here are some reasons why – with the right preparation – now could be the time to expand your business abroad.
Weaker competition
An economic period as difficult as the one we’re currently in doesn’t discriminate. If business is tough for you, it’s tough for everyone else, and it may well be worse where you’re looking to expand. That shouldn’t be a cause for concern, though, but one for optimism. If you can afford to expand abroad right now, doing so may allow you to take advantage of the weaknesses of your rivals, and grow your influence while they lack the resources to react.
As your competitors are scaling back their marketing efforts, you can invest in yours. As they consolidate their output around proven products and services, you can launch new ones. As they stick to only what is safe and reliable, you can take risks, and be bold in how you court and retain customers. A strong enough launch can put you on a footing to carve a permanent niche in a market, right at a point where competitors will struggle to address your sudden arrival – both because they will lack the funds and won’t be expecting a challenge.
Cheap office space
One of the more difficult aspects of expanding your business abroad is the need for office space. Starting a business in most countries will require a registered address, as will opening a business bank account, another common step in the formation process. This can be a particular issue in pricey capital cities such as Paris, a problem we often see with clients looking to start a business in France.
While you can save money by using a serviced or virtual office, the aftershocks of the pandemic are combining with current financial instability to affect rentals. Thanks to the rise in remote working, many businesses have chosen to scale down their physical presence as other expenses bite, or even move to a fully remote model. This means a surplus of affordable office space in many countries – a boon for businesses looking to establish themselves internationally.
Investment in innovation
Paradoxical as it might seem, an economic downturn can actually incentivise investment. As listed companies tend to perform poorly in recessions, diminishing the value of your average stock portfolio, smaller and more innovative businesses can represent sound investments. While this won’t fit every form of business expansion, a rising startup that’s looking to expand into new markets could find it easier to secure the requisite funding.
Innovative startups looking to expand abroad can cause disruption in tumultuous markets, and – with the right approach – establish themselves more quickly than would be possible in a more stable period. As well as providing both immediate and long-term returns for investors, innovative businesses can also benefit from falls in interest rates, which are designed to incentivise consumer spending – something that could help shift your leading-edge products and services.
Valuable currency shifts
One of the symptoms of the current economic climate is the fluctuation in major currencies. While the US dollar is in rude health, other key currencies such as the euro, pound sterling and yen have struggled recently. Expanding from the US into one of these currency areas not only gives you access to dozens of different markets, but also allows you to harness this difference in values, reducing your initial expenditure.
Naturally, the fact that these currencies are weaker will reduce the value of any income you receive, at least for as long as those currencies remain weak. But sticking to these stable key currencies will reduce the chance of your investment being suddenly devalued. And the most difficult and risky part of expansion – the initial capital investment in premises, equipment and supplies – will make establishing yourself easier than it would have been.
Keen countries
An economic downturn is bad news for everyone, but it’s particularly problematic for governments. High inflation means lower consumer spending, meaning less money for businesses, meaning less tax revenue. This means less money for governments who have already had to prop up businesses through the pandemic, and now have to look at cutting their budgets across the board.
The consequence of this is that countries are more desperate than ever to attract foreign investment, even if this clashes with a stated desire to lower immigration. Many countries across Europe and the rest of the world have or are seeking to improve their investor visas, including expanding tech visas, lowering investment capital requirements, and reducing the wage requirements and other restrictions on worker visas to plug skills gaps. All of this is great news for expanding businesses, and gives you a wealth of great destinations to choose from.
Expanding your business abroad during a recession goes against most business instincts, but in this at least, fortune favours the brave. While there is no guarantee that any business venture will work out, let alone one in this period, the current economic difficulties present a number of opportunities for businesses and entrepreneurs who are available to capitalise.
As established companies revert to a cautious and pragmatic approach, steeling themselves against the economic shockwaves, you can surf them in. By taking advantage of investment opportunities, being bold where others shy away, and filling the void of disappearing competitors, your business could gain a foothold abroad that establishes a global empire.
This post was written by Katya Puyraud, co-owner and founder of company formation experts Euro Start Entreprises. Euro Start helps entrepreneurs to start businesses in France, the UK and 28 other countries worldwide.
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