If you’re enjoying success in the local marketplace but have your eye on bigger and better things, you could be heading towards making your first international business deal.
Although there’s enormous profit to be made from entering into new markets overseas, there’s also a lot more you need to think about and prepare for to ensure it’s a lucrative move for all those involved. While there’s certainly plenty of success to be had, if you go into your first international business deal blindly you’re likely to find yourself caught in an irreparable situation later down the track.
There are countless risks and dangers associated with global trading, but if you know where the potholes are in advance you’ll spend less time putting out fires and more time focused on growing your business.
Here are 5 common pitfalls to watch out for when negotiating your first big international deal.
1. Losing out on Money Transfers
Before signing on the dotted line it’s crucial you decide on how payments will be made. This includes exchange rates, agreeing on payment platforms, and sorting out the payment terms for each new account.
If you’re a small or medium business, keeping up with exchange rates isn’t worth your time so consider locking in a rate in advance or charging in your won currency. Making and receiving international invoice payments can be riddled with fees and charges (banks can charge margins of 5% plus fees), so unless you’re backed by a larger company it’s a good idea to use services like OFX who provide an easy and cheap way to deal with all of the money changing hands.
2. Not Understanding Cultural Sensitivities
When dealing with international customers and trading in foreign markets, your pitch and communication style must be adjusted to avoid offence or losing a sale.
When looking to close a business deal ensure you’re aware of customs in the other party’s local region. In China it’s traditional to send gifts as part of business meetings, and for Russians putting your hands in your pockets is a sign of disrespect. Hugs and kisses are customary in many parts of Europe, and Japanese welcome silence during meetings as a sign of contemplation of business solutions. Before meeting with potential clients make sure you do your research.
3. Misinterpreting the Negotiation Process
A common mistake made during first international business deals is not understanding the pace and elements of the negotiation process. While it may seem logical to you from deals in your own country, It can differ greatly around the world and trip you up if you’re not careful.
In India and the Middle East negotiations are slow until trust is created. In the western world this can be mistaken for disinterest and get marked as a bad lead, where in actual fact it’s just part of how that part of the world does business. Different cultures also respond to time in various ways – North Americans and Europeans expect punctuality and directness, whereas South Americans and Africans may arrive late and engage in multiple conversations at the same time.
It’s worth understanding how negotiations work in the local country of potential clients so you avoid damaging a relationship or running yourself out of an important sale.
4. Getting Stuck in Customs
When closing deals abroad it’s easy to focus on the bigger picture and gloss over finer details, but in international business it’s the small print that can haunt you later. One of those is customs – if you don’t check them in advance, a country’s regulations or restrictions could ruin your entire deal and you’ll be left with seized inventory and a hole in your wallet.
Look up government import and export information, check rules with overseas shipping companies, and if your deal involves medical or technological products, check boards and regulatory organisations to ensure you’ve got any paperwork correct. Anything that isn’t declared or labelled properly could cause you unwanted problems at the border.
5. Landing in Legal Trouble
Differences in trade, business organisation, language and legal systems can have a substantial effect on the success of a deal. If your company isn’t covered by the right legal documents, you risk losing more than just your relationships.
Ensure your legal team is across all of your plans to go international, and have time to draw up contracts for each new deal. Include separation of duties, region-related restrictions, communication rules and clauses to protect your intellectual property. The legal outlay may be costly but you’ll thank yourself later.
Making your first international business deal can be complex and open your business up to more risk, but it doesn’t have to. By doing your due diligence and researching markets you will be entering, you’ll avoid a lot of headaches later and give your deal the best chance of helping your business grow and thrive on the world stage.
This article was originally published on Intuit’s blog http://www.intuit.com.au/r/how-to-run-your-business/5-costly-traps-avoid-first-international-business-deal/