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What are some ways that smaller businesses which want to go abroad can spread out the risk?
Expanding overseas is a key engine of growth for many local companies, and venturing abroad can help businesses diversify risks, lower the cost of products and services, and reach new markets. With our extensive footprint across Asia, the Middle East and Africa and more than 150-year history, our commercial bank has partnered numerous clients to support them in expanding their businesses. We have seen that expansion is not without risk and smaller businesses should consider the following:
- Work with the right local partners - Overseas expansion can be dauntingly expensive and partnering an already established local company to help with international expansion can help spread out the risk for smaller businesses. This can also help with the management of costs, as resources can be significantly increased without a corresponding increase in costs.
It is, however, important to do due diligence on potential partners in the new market before expanding there and small businesses should take advantage of business verification services if available and ensure that they do robust background checks on potential partners, buyers, agents or distributors.
- Tap government funding and resources - International Enterprise (IE) Singapore is the government agency that partners local firms to venture overseas, and last year it helped secure more than 450 deals around the world, a large proportion of them in China and South-east Asia. It also provided assistance to about 37,000 local companies in 2016, 80 per cent of them being small and medium enterprises. Small businesses should look at leveraging the support provided by IE, which includes both financial and non-financial assistance.
Risks can be spread out through tapping grants (such as the Global Company Partnership Grant), and capitalising on resources provided in the areas of market knowledge, customised business matching, and networking opportunities with experts in the respective fields.
- Hire the right people - Talent attraction and retention are important ingredients of success. Some small businesses, in their rush to hire new employees so as to establish a business presence quickly, hire the wrong people. It is important to look for people with the right skillset and who can identify with the company's mission and values.
While it may be best to send an experienced team from the company headquarters to handhold the overseas team until the transition period is over, it is critical that the new team is empowered and trained to run the business, given that they have the local knowledge. This will also ensure that the leadership team does not make the common mistake of neglecting its home market as it expands overseas.
- The writer is market head, South and South-east Asia, Standard Chartered Private Bank.