When is the best time to expand internationally?

Now that many of the world’s economies are growing again following the worst financial crisis since the Great Depression, many firms in the architecture, engineering and construction (AEC) industry are considering—or reconsidering—whether the time is right to expand internationally.

The short answer is that any time can be the right time. One could put forward a business case for expansion in any market climate, but it all depends on your expectations, level of confidence, available resources, preparation and dedication. 

International expansion can be highly rewarding for AEC firms. It can diversify your revenue stream, provide rewarding design and innovation opportunities, support staff growth and development, take the firm in new directions, and help satisfy the financial expectations of the firm's shareholders.

However, if you haven’t pursued international growth before, or if your international initiatives haven't borne the fruit you had hoped, you can improve your chances of success by following a few key steps:

1. Temet Nosce: ’Know Thyself’, for those who have never taken Latin or seen the film ‘The Matrix’. This means having an innate sense of your practice’s purpose, its mission, its reason for being, and its capabilities and limitations. You need to understand what kind of ambitions your leadership has and what it is you are actually capable of offering to clients overseas. You also need to have that key person or people identified who will own the effort–to the point of being ready to relocate overseas if necessary. 

Many firms dream up fantastic plans of international expansion, but when it comes to that first trip, and catching a flight on a Friday night or Saturday morning to attend meetings at the start of the workweek in the Middle East (Sunday), and being gone for one or two weeks each month, suddenly all the ‘family gathering’ and ‘school play’ excuses start coming out, not to mention the lump in the CFO’s throat when they see the costs, and then the trip gets abandoned. 

We all have our priorities, but make sure you know why you want to pursue international business, who can really commit their time, and how much time and money the firm is ready to put on the table, before you elevate everyone’s expectations.

2. Do your homework: If you want something badly enough, you can create a business plan to justify any initiative–but be ready for the board to poke so many holes in it that it will look like Swiss cheese. You can argue that in any market, whether growing, stagnating or declining, there is always some level of demand for design and construction services, and there are firms out there who will service whatever work is available. Since AEC firms provide a service, you can tailor it to suit just about any clients or market conditions anywhere in the world. 

The questions you need to answer for yourself are: Which markets make the most sense for you to invest in? How well do you know the markets? What is a realistic business plan? What levels of existence are you prepared to accept year on year (and what is your walkaway position if it all goes wrong)? 

If you are excellent at what you do, with the references to prove it, and you can clearly match your differentiated offer to what your international clients need, then you should be in a better position to succeed. If you don't really have the product excellence or differentiating factors (great design, unique delivery capabilities, technological processes, etc.) to offer international clients, you may be wasting your time, as having a good relationship with someone only goes so far when they have to put their neck on the line.

Firms fail when they cannot clearly articulate their offering in a way that demonstrates advantages and gives clients confidence in them. I've done it myself: I started my firm in the middle of an abyss (that 'worst financial crisis since the Great Depression' that I referred to earlier), but it's been successful (so far) because I've been able to demonstrate specific unique value to my clients.

3. Develop a plan: No war, chess match or football game (English or American) has ever been won without a plan. And business is war between competing firms; it's a zero-sum game in which someone wins and someone loses, as there is only one contract up for grabs. Creating an international business development and marketing plan can be a fairly straightforward process, but the details are far from easy, and you will need qualified professional help. 

Here's a simplified outline for a typical BD and marketing plan:

  • Internal business audit - actual vs. goal for sales, profitability, ROI, other key performance indicators as appropriate
  • External market audit - PESTLE analysis, market research, competitor research
  • SWOT analysis
  • Mission, vision, values, philosophy
  • Goals & Objectives
  • Strategies
  • Tactics, tools & resources
  • Implementation plan
  • Budget
  • Monitoring and measurement plan

Quite a lot of detail goes into each section (which would be the subject of several lengthy articles, or even a book, of which there have been dozens written). The point is you'd better be prepared with a solid plan, especially if you need to convince your board, and either your bank or external investors, to make the investment.

I find it hard to answer the question “Which is the most important part of the plan?”, as it is something that needs to be done holistically—one part shouldn't  really stand on its own; it needs to be an integrated and comprehensive piece of work. 

That being said, for me the sections on Strategies, Tactics and Implementation are critical, because that is where the action is that will determine your success or failure. All the rest is important for research and planning purposes, and it must be done, but without the proper actions being implemented, it’s just an academic exercise that will gather dust on the virtual shelf.

4. Commit the resources: It all comes down to time and money. You have to put in the effort to achieve the rewards, it’s that simple. One flying visit to a foreign country organised by your overseas trade agency to meet a few business contacts is highly unlikely to result in any contracts. After all, this is a people business, and it takes a while to win people over—'three cups of tea' as they say in India—unless you are fortunate enough to operate in that rarified atmosphere in which your firm is in demand on a global scale, but this accounts for only a privileged few practices. 

Clients hiring an international firm understand that they are taking some added risk over hiring a local firm, but they are doing so because of the 'promise' of better results or competitive advantage or any number of high-level strategic factors. Therefore, you'd better be able to communicate your ability to deliver the goods—and then do it!

There are myriad activities that take place before introduction meetings with clients, and then between those first meetings and closing deals. In fact the introduction and deal-closing meetings might account for as little as five percent of the overall effort. Many firm principals, particularly those with fee-earning responsibilities, just do not have enough time, or necessarily the right skills, for the other 95% of activities, which have become increasingly complex over the years. 

This is where your business development team comes in, to deliver the effort that is required to research and target the appropriate clients, help build relationships with them and their trusted advisers, raise their awareness of your firm and its capabilities, follow up on and continue tracking the progress of potential opportunities, and position your practice in their minds in order to eventually secure the work.

Staying out of the abyss
Success will ultimately depend on the demand for your services internationally from your existing and target clients. But you still need to follow the simple steps above to ensure you have an understanding of that potential demand, how you can meet it profitably, that you can articulate your unique offer to clients, and that you can implement the appropriate strategies and tactics to win your share. 

Please feel free to contact me if I can be of any help. 

Sincerely,
Richard
© Abyss Global Ltd.