Growing your business takes a lot of work and passion. For most passionate business owners, a lot of times the work they put into their business does not actually feel like work. It is enjoyable! What can be more satisfying than seeing your business evolve from the start up stages to a cash cow! During times like this, we see that our clients harbour thoughts of taking their business to the next level and expand their business outside of Canada. Here are some points to consider, as some our clients have, before making a move to another market:
1) Current Operations: If you have a sound foundation and an established business with positive cash flow and profits, taking your business to another country may be easier. Remember, expanding your business will result in a cash flow strain, put a strain on production and can eat away at your current profits. Many times a company decides to expand too soon into a foreign market way too soon and result in business failure; therefore, doing your research and paying attention to cash flow and your business capacity is very important.
2) Market considerations: What would the market be for your business outside of Canada? Who are your competitors? Would you have a strong consumer base for your goods or services? Asking these questions and figuring out whether you can compete in a different market is an important consideration. Doing your research and learning more about the foreign market is important and getting out there yourself is a good idea.
3) Operations and Logistics: Where will you be performing your day to day activities? How will you set up shop abroad and how will you be able to manage it? Would you need an office space or hire a sales representative for the business? How will you get your goods and services across the border and how will you be able to oversee operations? Answering these questions are the toughest and require a lot more work. Having a business plan and a strategy to enter a foreign market is a must.
4) Tax and accounting implications: Carrying out business in another country will result in tax consequences. Having a physical location in another country, such as the USA, will result in filing taxes in a foreign jurisdiction. There generally is some treaty relief for businesses carrying out business outside Canada with the other countries such as USA. The important concept is residency & having a permanent establishment, and if it is considered that your business is resident in a foreign country such as the USA, you will need to file a USA corporate tax return. You will need to consider whether you should incorporate a foreign corporation and what is the best way to reorganize your corporate structure.
5) Financing: You will need the cashflow to support this decision, and if that is not there and you require a working capital or expansion loan, visit ED EDC, they are a Canadian government bank that support entrepreneurs for expansion outside of Canada.
Expanding your business is an important decision that needs to be well calculated. Expanding too soon can result in business losses and a hit to your cash flow. If you would like to have more input from us on what to consider for your business and your goals to expand outside of Canada, feel free to contact an MP Group professional.