What is more profitable: to open your own company abroad or to buy a ready-made business?

At one time, globalization opened up for many companies access to the international market. Now, in the era of global redistribution, going abroad can give companies new opportunities.

Despite the many benefits associated with scaling a business internationally, many companies experience setbacks in such projects. This is mainly due to the lack of preparedness of companies, both from a theoretical and practical point of view.

The benefits of going abroad for your business:

1. The company can gain new markets, attract new customers and increase sales and revenues, as well as brand awareness on a more global scale. The company can bring products and services to a new market that were not previously available there and gain access to a new and active customer base.
2. Expansion to another country will allow the company to reduce dependence on the national market in which it is already established. In addition, this creates a more sustainable situation for the company in the medium and long term.
3. The expansion of international business provides an opportunity to use the experience, technology and know-how of specialists from another country in their field. This can improve the company's business processes and increase sales.
4. Working with people from different cultures and backgrounds can give a company access to more talented and experienced experts, which can help them understand how things work in a new country.
5. International expansion will allow the company to stay ahead of its competitors and take advantage of its first-mover advantage, which can lead to higher sales and overall revenue.

But going abroad has its own risks:

1. An important problem is the language and cultural barrier, which can become an obstacle to products or services that are not adapted to the mentality and habits of another country. Therefore, before entering the market, it is necessary to conduct research on the target market in order to avoid cultural differences, which can become a disadvantage for the brand and lead to loss of money and time.
2. Another disadvantage is the additional taxes and fees that must be paid when selling products in other countries. Double taxation avoidance agreements can solve the problem, but it is necessary to consider whether they are concluded with this particular country.
3. Instability in exchange rates can also lead to income volatility. Therefore, it is necessary to closely monitor fluctuations and adjust prices in a timely manner.
4. You must take into account local laws and standards that may require regulation of the company's production processes. Therefore, it is necessary to take care in advance of compliance with local safety standards or other purely local restrictions of the country.

Despite a number of shortcomings, entering the international arena gives a new impetus to the development of your business, new opportunities and markets for growth and, accordingly, additional profit.

So open your own company or buy a ready-made business?

How can you start your business abroad? There are two options — open your own company (or a local representative office of the main company) or buy a ready-made business in the target market. Each option has its own advantages and disadvantages that should be analyzed and taken into account.

The benefits of starting your own business are:

• Full control over the launch of the business, that is, the ability to start, immediately implementing your management, production and sales technologies.
• Guarantee of freedom of the new company from encumbrances and obligations.
• Availability of tax incentives or grace periods in some countries for starting new businesses.

However, a number of significant disadvantages can outweigh this way of starting your own business.

Disadvantages of opening your own company abroad:

• Starting your own business from scratch can be a very costly and capital intensive process.
• Lack of credit history and market reputation can make it difficult or impossible to get bank loans.
• Entering the market from scratch will lead to difficulties and a long process of adaptation.
• The lack of qualified personnel, reliable and trusted suppliers and distribution channels — all of them must be sought, hired, attracted.
• Lack of professional reputation and well-known brand in this particular country and, as a result, lack of trust in the company.
• The need to obtain licenses, certificates, patents for certain activities — in some countries, this process is full of costly bureaucracy and can drag on for months or years.

Buying a ready-made business abroad can be a more profitable and less risky alternative. Let's consider several reasons why this purchase option is easier and more acceptable.

Benefits of buying a ready-made company:

• An already proven and established business model. When buying a ready-made business, you get an already established model that has proven its effectiveness in practice. This can greatly reduce the time and effort required to turn a profit.
• Already assembled client base, which will take time when starting a business from scratch. In addition, you will need less money and effort to attract new customers.
• Availability of established procedures, regulations, technologies. A ready-made business already has an established system of doing business, which can greatly facilitate the work, especially at the initial stage. You can use these procedures and technologies to optimize your operations and improve efficiency.
• The purchased company has the necessary patents, certificates and licenses to conduct activities (unless, of course, they are issued personally to the owner, but to a legal entity).
• It's easier to secure funding. Most foreign banks are more inclined to lend to an established business than to an unknown start-up. From the point of view of banking institutions, there are fewer risks associated with financing a business that has already proven itself capable of generating income.
• Less risks. One of the main advantages is that you can immediately evaluate its financial results. This can reduce the risk of financial losses and failures in the initial period.
• Access to previous owner experience. You have the opportunity to gain valuable knowledge from the previous owner and management staff.

Some nuances of buying a ready-made business:

• The need for thorough research to ensure that the business is legitimate and to avoid potential legal issues.
• Audit check of the company for debt obligations, loans, license expiration dates, patents, etc.
• The need to carefully check the company's reputation in the market.
• The risks of acquiring problems associated with moving to a new country, such as language barriers, cultural differences, tax and legal issues.

Thus, the option of buying a ready-made business is the most profitable. This is often an easier way to enter the international arena. However, before making such a purchase, it is necessary to conduct a thorough analysis and evaluate all the risks and opportunities, and this work should be entrusted to the appropriate specialists. One of such professional teams operating in the international market, — this is Russian-Eurasian Business Broker (REAB).