Four Principles for Starting a Business Internationally

When I travel, I often pick up a copy of Entrepreneur magazine.  The summer 2021 issue included a section on international franchising, which intrigued me. While the topic does not directly relate to IBEC, there were several principles which are of interest to any business startup, whether working internationally or only domestically.

Apparently, O’tacos is all the rage in France, and their success has skyrocketed there and in several other countries. But 14 months after O’tacos opened its store in the USA, it closed – a failed experiment.

The story continued with discussions of the difficulty of working internationally.  Ray Hays of FranLaunch USA, suggests there are four key principles. While Hays focuses on foreigners trying to get started in America, the principles apply to business startups in countries foreign to the owner, the product, the culture, or the management style of any North American.

  1. Demonstrate proof of concept (POC). All business plans are based on proof of your business concept. Can you provide evidence that customers in sufficient numbers want what you are offering? This usually requires a working prototype, beta testing, and actual customer purchase orders. An entrepreneur in East Asia assumed everyone would want him to be their photographer. Despite being good at his craft, he neglected the business concept of POC. Simply put, there were not sufficient customers in his area to sustain a business. 
  1. Create a realistic financial plan. For many entrepreneurs, this is the hardest part. There may be a POC, and even a compelling story which describes how a big problem will be solved. Frankly, startup people need to have hard-wired financial people on the scene preparing realistic numbers. We all know people who have suffered, or their business has died due to cash flow problems.
  1. Enlist boots on the ground. There are so many nuances in doing business in another culture and language. For example, O’tacos had difficulty managing the lunch hour rush in New York. Anyone who has had lunch in France knows that meals take a long time there.  There are scores of adjustments which are needed when working abroad. “Culture eats strategy for breakfast” is true inside and outside your business.
  1. Seek legal guidance early on. Two IBEC coaches worked with an agricultural business in eastern Europe. The business had a serious loss of product and cash its first year in operation.  It was assumed that a contract would be honored, but they discovered that contracts in that culture were considered suggestions and guidelines.  A local law expert should have been consulted at the beginning.

Larry W. Sharp, BAM Support Specialist, IBEC Ventures
Larry.Sharp@ibecventures.com

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