3 Ways to Mitigate Risk with International Expansion

Many leaders shy away from international expansion because they are afraid of the risks associated with it, but going global can be an excellent opportunity for reaching new markets and achieving your company’s growth goals. If you’re considering new growth options, here are three steps to minimize these liabilities when expanding internationally.

1. Find the right markets

The biggest way to mitigate risk is to make sure you are in the right markets. Thorough research involves more than reading a few second-hand reports and you may need to interview in-country experts who have a clearer picture of the realities of doing business in the country. We recommend benchmarking your market research findings against measurable criteria to determine if a specific market is the best choice for achieving your company’s growth strategy.

2. Use the right deal structure

Deal structuring is an important piece in successful international expansion. Many companies begin international expansion with external growth, by partnering with an outside organization to enter the market rather than going it alone. If you are looking at making investments in an international company, you may start out with purchasing less than 100% of the company. Minority investment, less than 50% investment, can give you a feel for that company you are investing in while you determine if you’d like to acquire 100% of the company in the future or “break up” by selling your stake in the business if things don’t work out.

3. Do your due diligence

Regardless of deal structure, it’s important to be confident about the marketplace. If you are using a partner, even in a distribution agreement, make sure you take advantage of the tools available to conduct background checks and speak to others who are also using the distributor.

Often our clients who are looking to go international are approached by distributors promising them the world, but when it comes to references or putting together a fair deal on paper, they become squirrely. This is a significant red flag. Doing your due diligence on any type of partner you use is a critical way to mitigate risk when going international.

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