By Adam Reynolds, CEO of webexpenses
In the last two years webexpenses has transformed from a small UK based company into an innovative global solution with offices in Sydney, Brisbane and the latest venture in Austin, Texas. Webexpenses CEO, Adam Reynolds reflects on the four key financial elements that have been pivotal to the success of the expansion.
1. Financial planning is key
Financial planning is crucial when expanding your business, it is the deciding factor for location, strategy and goals. We began with analysing our business expenditure over a projected three-year period, covering all areas of the business such as recruitment, systems, people, development, marketing, events, office costs. Although these costs are subject to fluctuation, they give a good insight into short term and long term business expenditure.
As well as company outgoings you also need to consider return, profit and multiple financial outcomes. Although you cannot predict the market reaction to a new business, it's a good idea to scenario model potential returns. General guidance suggests that anything under three years for an overseas entity to start being self-sufficient is very good.
2. Choose the right investment strategy
You have to explore both investment strategies to make sure you select the best suited one to your business as well as preparing for both successes and failures.
High value strategy
The maximum impact approach, invest heavily, build teams and campaigns and launch big from the onset to achieve quick returns. This technique however can be risky, uncontrollable variables that can come with a new market may slow down the process of a high revenue return.
The drip approach
The gradual approach of lower investment, learning and tweaking as you go. By building a smaller but more dynamic team, once you have an awareness of the key factors in the region then you continue to drip in the investment, building the team and market awareness. Economically this is a safer plan, but returns will take much longer to yield.
The key to making a decision on investment strategy is understanding your financial funding, how much money you have to invest, where it is coming from, how long will it last and what the breakeven point is. There are a range of options - self funding, equity release, borrowing, external investment.
3. Local and global management
It’s important to prepare your team for what the potential challenges are when managing an expansion. Ultimately one of the main factors that need to be considered is whether it’s possible to manage the financial elements in the local country. Will the accounting practices and tax implications be managed in-house or will you use a specialist consultancy? How will the team forecast and invoice across multiple territories as well as the group? Will the software that is in place manage this or will new applications need to be put in place and embedded?
Once the territory move has started, the finance team needs to continue the agility. At webexpenses we generally review our plans/forecast on a monthly basis and revise up or down based on actual performance and also market conditions.
If investment is being exchanged into overseas currency the market performance will impact, for example the Brexit decision last year took the conversion of £ Sterling to AUD from £1=$2.2 to £1=$1.6. On a half-million-pound investment that fluctuation equates to $300,000 AUD, which had a severe impact on both our planning and execution – a quarter of our planned investment had just potentially disappeared.
4. Stay agile and review
Expanding your business can be a long process, so you need to put all relevant practices into motion to ensure it’s a successful one.
It’s important to continuously review the system and approaches you have in place to effectively plan for the future. Ultimately business costs will be multiplied so be financially smart, build in contingency plans and over estimate on outgoings to ensure no nasty surprises.
Adam Reynolds, CEO of webexpenses, is speaking at Global Expansion Summit 2017.