Startups are full of new ideas, energy, and inspiration during their incipient days, and fuelled with the ambition to make a mark in the market. However, given the sheer difficulty in surviving in a competitive environment and growing in an international market, it can be difficult to hit the bull’s eye – especially with mounting global expansion costs. Tech startups hold immense potential to scale up their business, owing to the highly scalable nature of their products and services. However, attracting investors and customers in a foreign land can turn out to be a daunting task for them. Startups need a strategy.
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The biggest challenge that a tech startup faces while scaling up to a global level is finding the right people with the skill sets and expertise that it needs to expand. When a startup plans to expand and look for opportunities in the international arena, it needs people who can add value to the business, rather than just becoming an additional line on its payroll.
Another challenge for a tech startup is to grasp insights about the domestic market, the demand of customers, the right channels of revenue, and the existing competition in a foreign market. This may prompt a company to opt for the most obvious choice – establishing a business in a foreign country to hire talent locally, decipher the right products, and understand the existing demand and supply.
This option is viable for a large corporate house that has access to sufficient funds to fuel its expansion, but for a startup, it may be a recipe for disaster. While the option of establishing a business entity in the foreign market by way of a branch office, subsidiary, or joint venture is also available to tech startups, global expansion costs associated with it can drain the startup of its funds. This makes it critical for tech companies to find an alternative that can help them overcome these challenges while expanding globally.
An Expansion Alternative
Establishing a new business entity in a foreign market is a long-term engagement that requires commitment in both time and funds. Once the startup opts for this option, it becomes obliged to hold its ground for a long period even if it starts struggling to make its ends meet.
The global expansion costs of setting up a new entity, complying with the local laws, and the hiring process combined can overwhelm the startup’s budget. A financially viable alternative can be found in PEOs – Professional Employer Organizations which can help a tech startup in building up a market entry strategy and finding the right talent without the need to set up an entity.
Opting for a PEO’s services gives a startup the needed flexibility to adapt to market conditions of a country while retaining the option to move in and out of the market freely without worrying about the exit regulations and costs associated therewith.
On average, tech startups can save more than 60 percent of their global expansion costs by opting for the services of PEO. PEOs give tech companies the ability to expand while they manage employees on the company’s behalf and take care of retaining the talent, handling employment-related tax compliances, and managing payrolls.
Young tech companies can associate with PEOs who have networks in the global market to save on the global expansion costs associated with market assessment and human resource management, without the need to have a physical presence in the foreign country.
International PEOs are also the most viable option for tech companies that do not have a well-defined plan regarding their human resource structure and want to hire employees as and when their market share grows. This enables them to grow without the need to bind themselves to a foreign market, especially in a country where the market risks are higher than others.
PEOs can facilitate an early start and easy entry for tech startups due to their established presence and the ability to create a nexus between employees and companies, while the companies focus on attracting investors and acquiring customers.
How PEOs Can Cut Down Global Expansion Costs
When a company plans international expansions, it is important for it to assess the benefits and challenges associated with the market, find the right audience for its products, comprehend the local laws and regulations, and hire the right people for the job. Setting up an entity for this exhausts not only funds but also requires startup founders to study the market and find the right product fit to be able to break-even during the early days and ultimately turn profitable.
PEOs save tech executives the time required to develop their market entry strategies by providing them with the requisite insights and market analysis. This eliminates the need to comprehend whether or not the market is the right fit for the startup’s products or services.
In addition to this, the global expansion costs for a startup predominantly comprises finding local experts who can help the company in discerning the employment laws, compliance regulations, contractual obligations, etc. The processes are inherently expensive and a single omission over the local laws can add to the financial burden of the startup. Working with PEOs can reduce this burden and cut down the risks and costs a startup is exposed to when it enters a new market.
How Global PEOs Can Help
International PEOs like Horizons serve not only as an Employer of Record, but also as professional recruiters for startups. This helps startups to establish a commercial footing in multiple global markets. With NHGP, tech startups can access services for employee onboarding, market entry strategy, legal and taxation compliance, payroll management, and contract management while cutting down their global expansion costs.
Tech startups can profit by outsourcing their HR responsibilities to a PEO like Horizons. In doing so, they not only cut down their costs and efforts, but they free up time to focus on their business growth and broader expansion goals.
