Rob Wellner, chief revenue officer at global expansion solutions provider Velocity Global, explores how businesses use international growth to make themselves more resilient in the face of the economic fallout of the pandemic.
The mood music of the pandemic changed in recent weeks. The approval of the Oxford vaccine and a mass rollout underway mean the green shoots of optimism begin to emerge, despite the more aggressive coronavirus strain that forced the UK back into full lockdown. The resilience of the British people is clear and the same can be said of many businesses.
There is light at the end of the tunnel, but businesses should expect the economic impact of the pandemic to last far longer than the virus itself. Firms in the UK have their newly defined relationship with the EU to consider as well. Businesses welcome the news of a trade deal, but a hard border and the end of the free movement adds cost, time, and administrative complexity to the process of moving supplies and people in and around the continent.
Economic volatility and uncertainty are a global norm for some time to come. So how do businesses make themselves more resilient and achieve growth in the face of it?
Playing the field
It may seem counter-intuitive at an economically turbulent time to enter new, untested markets. But a business is far better equipped to manage instability and show resilience if it isn’t dependant on a single region or country for its revenue and workforce.
In the patchy recovery from Covid-19, certain markets will bounce back faster than others. One only looks at the varying speeds different countries are deploying vaccines to know this will be true.
A business with a presence in two or more international markets gives itself a financial buffer against economic turbulence in one area to capitalize on stability and growth in another.
This approach mitigates risk and focuses on growth but comes with its own challenges and obstacles.
Challenges of expansion
Three common questions asked by businesses in the midst of expansion plans are: “How much will it cost? How long will it take? How do I expand internationally during a travel ban?”
The first two of these concerns are nothing new. Establishing a legal entity in a new foreign market is almost always time-consuming and expensive. Consequently, exit from a market when it does not deliver expected results is that much more painful due to the upfront investment.
Travel bans are a more recent development caused by Covid. Widespread international travel restrictions make it extremely difficult to move between countries, even for business purposes. A team of employees from company headquarters cannot travel to a new location in order to establish a presence.
Time, money, and regulations can be navigated through a more agile approach to international expansion.
To move quickly and efficiently, businesses leverage a local workforce in a new market, rather than paying for relocation and immigration. They expedite expansion and test a market without the need to set up a foreign legal entity.
One option is to use an Employer of Record, sometimes called an International Professional Employer Organisation (PEO). An International PEO uses its pre-existing compliant network of business units to hire workers in a given location on a firm’s behalf.
This enables a company to build a presence in a new country quickly, often in a matter of days, without the significant financial outlay normally associated with full entity establishment.
The speed and flexibility of this approach allows businesses to test the waters in a country or region, build a customer base, and tap into local talent. This option also mitigates risk. If market conditions change or don’t deliver the desired results, a business can exit quickly. In the current uncertain environment, that flexibility is paramount.
Covid-19 makes fundamental elements of traditional global expansion, such as entity establishment and migrating workers, incredibly difficult. More flexible, faster approaches to overseas growth like international PEO offer firms a way to reap the benefits of expansion – growth and financial resilience – despite these barriers.
As life after the coronavirus slowly comes into view, businesses will contend with its global economic impact for a long time to come. Exploring new foreign markets is one key to develop the resilience to survive the aftermath of Covid-19. That expansion happens now.