Startup expansion guide: Where should you begin?

As a startup, international expansion might sound like a far-fetched dream. You already have enough on your plate juggling budgets, operations, and people, without thinking about crossing international borders.

However, not only is international expansion an achievable goal — it can provide immediate solutions to those problems.

In this article, we’ll explain exactly how. We’ll also show you how working with a global HR partner removes all the complexities of expanding abroad, enabling you to focus on running your business more effectively.

So let’s get started.

What is international expansion for startups?

International expansion is the process of growing your business operations beyond your own domestic borders, and generating new revenue streams.

For most startups, it’s a gradual and targeted process. At first, it might involve selling a product directly in a neighboring country, rather than targeting entire regions straight away.

It can also take many forms. These include:

• Exporting: Selling your products and/or services to customers in other countries

• Licensing: Granting other businesses the right to use your IP (such as a software license)

• Merging: Joining with (or, in advanced cases, acquiring) another business to access new capabilities or technologies

• Partnering: Establishing a mutually beneficial arrangement with another business to leverage capabilities (often in different verticals)

Whatever your approach, it often means that you’ll need to hire abroad, usually in those target markets.

When is the right time to expand abroad?

This depends entirely on the circumstances of your business. Generally speaking, though, signs that it might be time to expand include:

• Market saturation in your local/domestic market

• An uptick in demand from international customers

• Favorable economic conditions and low competition in other markets

• The capability in your business to scale and grow accordingly

What are the benefits of international expansion for startups?

For startups, there are numerous benefits to international expansion, including:

Access to the best talent

One of the biggest advantages of international expansion is the ability to tap into a much larger talent pool. When you’re not restricted by geography, you’re far more likely to find the right candidate in terms of experience, skills, and culture fit.

This is particularly valuable if you’re looking for a candidate that has a very specific skill set.

"Our field — ASO — is still a relatively new specialization, so people with even three or four years’ experience are incredibly rare and difficult to find. And when we do find them, they are based all around the world."

Zuzanna Forell, HR manager at Phiture

With people your most valuable resource, this can be a key growth driver for your business.

Cost-effective hiring

Hiring internationally is also often far more cost-effective, which is crucial for budget-conscious startups. Why settle for someone with a limited skill set and high salary demands, when you can hire the perfect candidate for less?

For instance, our internal research shows that many startups look to hire in traditional, competitive tech cities, such as London (89%), Berlin (87%), and New York City (84%). But there is an absolute wealth of talent and opportunities in emerging, untapped tech hubs across the globe, including Kolkata, New Taipei City, and Warsaw.

“When you’re a startup that cares about efficiency and burn rate, and you don’t want to throw money out the window, you need to hire internationally. Through Remote, it's much simpler than anticipated."

Richard Gödel, co-founder of meetergo

A competitive advantage

Entering a new market before your competitors enables you to “get ahead of the curve,” and establish credibility and brand recognition. Even as a small business, you can make big waves if you have the right product or service.

You may also be able to forge new partnerships and collaborations, allowing you to tap into new segments and markets, and grow the potential of your business.

What are the challenges of international expansion for startups?

For your expansion to have a chance of success, you’ll need to overcome several challenges and avoid the most common mistakes.

Let’s say, for instance, that you want to start selling your product in a different country. You decide to hire a business development manager and a customer support agent in that country.

To do this, you’ll need to:

Be able to legally hire there

Unfortunately, you can’t just identify a suitable candidate, offer them a job, and wire them some money. To legally hire your new team members, you must either:

1. Set up your own legal entity in that country

2. Use an employer of record (EOR)

Setting up an entity is traditionally the common approach, but this process can be complex, expensive, and significantly time-consuming. It’s also not scalable if, further down the road, you want to hire in other countries too.

The alternative is to work with an EOR provider, like Remote. The EOR acts as the legal employer of your new team members, and ensures everything is fully compliant. It also handles all the key HR functions, such as payroll, benefits, and day-to-day HR management. How does an EOR work?

Using an EOR is often far more cost-effective, and also much quicker, enabling you to hire and onboard new team members in a matter of days.

“The onboarding experience is seamless and the timelines have sped up dramatically. I’m constantly surprised at how quickly things happen. It’s a fantastic weight off my mind.”

Kayleigh Smart, Head of People at Pento

Navigate local legislation and regulations

Every country has its own labor, tax, and employment laws, and when you hire there, you’ll need to comply fully with them. This can be complex, time-consuming, and extremely costly — especially as laws frequently change.

If you hire through your own entity, you’ll need to handle all of this in-house, or outsource to local third parties.

When you work with an EOR, the EOR provider handles and ensures full compliance with local labor laws and payroll taxes.

“Remote gives us access to country-specific legal counsel and tax teams all through a single contact point. I don’t have to pay horrendous fees or do these things myself. It makes things a lot easier and more efficient.”

Sophie Brügmann, Head of Operations at Lessmore

Understand cultural and market differences

Expanding into a foreign market requires an understanding of local market dynamics, consumer preferences, and cultural nuances. This is particularly important in areas such as marketing, sales, and business development.

It also applies to hiring. People in your new country may have different expectations when it comes to salary, salary structures, benefits, and company culture. And to ensure that you can attract them, you need to understand these differences.

Remote’s local, in-house experts can guide and advise you on this, enabling you to cherry pick an attractive benefits package, for instance. You can also use our Salary Explorer tool to better understand local salary expectations.

Understanding the challenges of benefits

When hiring abroad, it’s important to pay particular attention to benefits. Benefits are a crucial recruitment and retention tool, but they can vary massively between countries.

For example, you may not offer health insurance in your own country, but it might be a legal requirement in your target country. You may not offer childcare assistance as a benefit, but it may be expected.

Understanding and managing these variances can make all the difference. That’s why it’s advisable to work with a global HR partner who can advise you on local requirements and expectations, and put together a competitive package.

With Remote, you can even offer equity incentives across borders. Learn more about Remote Equity.

Set up banking and payroll

Depending on the country you’re expanding to, you may need to deal with a different currency, banking system, and financial landscape, all of which requires local expertise.

You’ll also need to figure out how you’re going to set up payroll and pay your team members. If you are using your own entity, you’ll either need to do this in-house, or outsource to a trustworthy provider.

When you work with an EOR, this is handled by the EOR provider.

Global HR —

5 min

EOR, Payroll, or both: What does your business need?

Understand the difference between EOR and payroll services — and clarify which one your business needs to pay your international team members.

Expanding your startup with contractors

When expanding abroad, many startups prefer to work with independent contractors, either as a temporary measure to test the waters, or because they require flexibility for certain roles. Depending on the size and scale of your expansion, you may opt to hire a combination of employees and contractors.

This can be an excellent way to accelerate and consolidate your growth abroad, but you also need to be aware of the potential risks.

Many governments — particularly in western Europe — have strict guidelines (and, increasingly, legislation) around companies hiring contractors, but then treating them like employees. This is known as misclassification. Learn more about misclassification.

To ensure that you are not misclassifying your team members — even accidentally — you need to understand the law in each country. You also need to be able to create locally-compliant contractor agreements, pay your contractors in the currency they require and, if relevant, fill out any required tax paperwork.

Remote’s Contractor Management platform can handle all of this for you.

“Working with contractors allows us to test a new market, or bring a new addition into the team quickly. We’re not stuck in a situation if we need to change focus. That agility is so important to our growth."

Li-ran Navon, CEO and founder of Sauce

International startup expansion with Remote

As you can see, understanding, navigating, and complying with the laws of another country can be costly, complex, and time-consuming — unless you partner with a global HR expert that can handle everything for you.

With Remote, you simply identify the candidate you want to hire — regardless of where they are based — and we do the rest, including:

• Onboarding

• Payroll

• Benefits administration (including global equity incentives)

• Day-to-day HR management (including time and expense tracking, and self-serve)

• Contract drafting

• Local guidance and support from our in-house, on-the-ground experts at every stage of the employment lifecycle

"If we coordinated everything in-house, we’d have to hire an extra four people to manage the entities, local solicitors, tax firms, accountants, payroll, and translation services. It would cost upwards of $500,000 extra per year. Remote takes that burden off our plate."

Luke McKinlay, VP of Finance at Fountain

For any startup — funded or bootstrapped — international expansion is not a far-fetched dream. With Remote, it’s easily achievable and the potential benefits are huge, whether you’re looking to hire that developer with the perfect skill set, or simply leverage market expertise.

To learn more — and see how exactly we can help your business grow — speak to one of our friendly experts today.

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