International Connections

Have you ever been to Disneyland or Disney World? If you have, you may have been on the ride ItÂ’s A Small World. When I first took this ride, letters like "www" and ".com" were a far cry from everyday conversation. Consequently, I had no idea how small of a world it could really be.

Today, we live in a different world. You and I live in a world where we can talk to someone on the Internet even though they are thousands of miles away. We buy Christmas presents, books, tapes and many other items over the Internet from online stores that exist only on our computers. For all we know, these "shops" could be in Russia, Japan or in the next room, and we donÂ’t really care as long as the goods are shipped.

When he first conceived ItÂ’s A Small World, did Walt Disney ever think that one day it really would be a small world? Did he even dream that one day we could literally talk back and forth to one another through a keyboard on our desks? Perhaps he did, but it doesnÂ’t really matter because that day is now here and we need to learn to prosper in the environment.

But how do we prosper in this shrinking world? What are the tools we need to take advantage of a marketplace in cyberspace without losing our shirts? How does one become the next Amazon.com or Google.com? Or do we really want to make a commitment that huge?

Only you can answer some of the preceding questions, but many of them can be answered mechanically - at least there are a few questions you need to answer in a quest to go international, if thatÂ’s your desire. LetÂ’s take a look at some of the questions and their answers.

Your first decision will necessarily be whether you want to expand your operations. You might laugh at this thought, but there are plenty of businesspeople who are happy with their current operations and have no intentions of ever expanding their capabilities or product lines. The reason is that they are comfortable where they are. Income may be sufficient for their needs, their management style may require that they micromanage all parts of the company or there may be one or more other reasons. Remember, expansion does not equal greater profitability.

Ok, letÂ’s say you do decide to expand your operations. Will the expansion be to domestic markets or international markets? It may be that your product will go over well in both markets, but now is the time to start putting in the effort necessary to make the appropriate decision. What information do you need to make your decision and where will you get it? Here are a few key questions you might want to consider:

• What are my present capabilities? Do I have excess production capacity to expand into another geographic market without adding to my facilities or do I have the credit to purchase items wholesale to be sold retail? Are my products easily shipped to other parts of the country or internationally?

• Are there other areas of the country that can use my product? What other countries may benefit from my product?

• Who are my competitors in the United States? Is my product one that will appeal to people in another country? What countries may be interested in my product?

• Is my product susceptible to spoilage when shipped over long distances? If my product can spoil easily, or if it is important to get the product to customers quickly, will I be required to have more than one warehouse?

• If my product appeals to customers in another country, what will it take to do business in the other country? What about permits, taxes, etc.?

• What types of taxes am I looking at in a domestic expansion? Will I have to collect sales taxes or will I have to qualify to do business in a state and pay income/franchise taxes?

• If I want to expand to other countries, will I ship from the United States or will I be forced to establish a facility in the foreign country? How will I move the profits from a foreign country to the United States? What will my combined U.S. and International tax burden be.

• What kind of labor force is available if I need to establish a new facility or presence in another country? What are the social mores and norms in the country where I wish to expand?

• What is the political situation where I want to expand? Will local politics in my target country hamper my move? Will local politics in the United States hamper my move?

• How will I advertise to the new market? Will I be able to advertise through an Internet based model, or will it require direct advertising?

• Are there any companies that are presently competitors in the market I expect to move with which my company can merge rather than reinventing my company in a new market?

• How are foreign exchange differences likely to help or hinder my business operations?

• What is the history of my target country as touching nationalization of foreign owned businesses?

• There are many other questions, but the preceding questions are critical to your success along with one other - Who knows the new market well enough to help me break in quickly and profitably?

• What kinds of insurance will I need to protect myself and the company?

Where might you find information to answer questions like those in the preceding paragraphs? Might we suggest several sources:

• United States Small Business Administration

• United States Department of Commerce

• Economic Development web sites of the various states in the U.S.

• Economic Development web sites of the various countries in which you may have an interest

• A trade association that represents your industry

• World Trade Organization

• The World Bank

• Export-Import Bank of the United States

• WorldTradeLaw.net

These are only a few of the many sources available to assist you in making an expansion decision either within or outside of the United States. You can run a search with the terms "world trade" and find any number of sites available to assist you in making your decision if you are looking to go global. "Economic development" entered into a search engine will also yield profitable results.

The success or failure of any expansion of your business begins and ends with making the right decisions from the very start. Your ability to carry through with your decision after devising a plan will mean the difference between success and failure. Do you have the resources necessary to make the right decision? Does the choice seem daunting? Give us a call and let us help you make the right decisions. We are here to help you crystallize your needs and desires and devise a plan to achieve your goals.

Have a terrific October and please remember to exercise your Constitutional privilege to vote on November 2.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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