Budgeting and Planning for Overseas Expansion

BUDGETING AND PLANNING FOR OVERSEAS EXPANSION

Are you operating overseas in multiple countries or opening an office in a

new country for the first time?

We know accurately forecasting your international

budget for the coming year can be really difficult.

Reliable estimates will help you justify international expansion, compare investment and return in different countries, and when your plans are approved, set P&L

goals for your new overseas operations.

Read on to learn about important — and potentially unexpected — expenses you should consider when budgeting for an

international expansion.

What’s the bottom line?When considering overseas expansion, figuring out costs is a top priority.

Budgeting surprisesDon’t assume that experience setting up shop in one country will prepare you for expanding into a new market. Each new target country presents a unique set of challenges and related costs and timelines.

Budgeting alone doesn’t create success or failure …

But it does eliminate the menace of surprise.

How much does it cost?

EuropeAlthough it has a lower corporation tax rate than the US, the UK has some expensive ongoing employment costs and taxes that are not typically seen in the US.

EuropeWhen expanding into France, make sure you budget for translation costs because if you want your operation to thrive, you’ll need to do business in French. Hiring locals or an expat fluent in French will help with all contract negotiations.

Latin AmericaIn Mexico, budget for the “13th month” salary bonus, commonly given at Christmas. Despite an excellent public health system, supplemental coverage is fast becoming a common benefit offering from employers competing for quality staff.

Latin AmericaRecruiting top notch local staff in Brazil will require strict adherence to union standards. Reimbursement allowances for everyday expenses are expected, and getting an office in a safe, well connected area will mean paying a hefty premium.

AsiaAs one of the most expensive places in the world to live, expect real estate costs in Singapore to be at least 50% higher than in the US. And expat employees often insist on living in expensive international neighborhoods.

AsiaSetting up an entity in China is an expensive and lengthy ordeal. Once you’re established, finding and keeping English-speaking local talent can be difficult. Also keep in mind that winding down operations in China can cost even more than setting up shop there.

Preparing an accurate budget is an important step in the planning process for

international expansion.

47% of companies we asked did not have an effective budgeting process or were just managing in an ad hoc fashion.

And only 6% had full confidence in their budgeting process.

Costs will vary around the world but budgeting properly can eliminate unwanted surprises.

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