Many years ago, a Spanish client sent me a U.S. Government list of what the government called “Essential Advice for Doing Business Overseas.” That article no longer exists, but I came across the email where the client and I discussed the list and I am reprising it below, along with some of my own comments. The suggestions are basic, but important and too often ignored.
1. Diverse Markets Require Careful Research
Spain is not the United States, the United States is not Canada, Canada is not Mexico, Mexico is not Colombia, and none of these countries are Thailand, Vietnam, or China. Every country (and even most regions within every country) are a diverse market in terms of their topographies, climates, and cultures, and each has its own consumer preferences and business needs.
2. Speak the Same Language
If you are serious about doing business in a foreign country, you should be prepared to communicate in the language of that foreign country and conduct your business in that language as well. A good portion cross-border disputes stem from miscommunications arising from language differences.
3. Find the Right Partners/Customers
It is better to have a bad contract with a good partner than a great contract with a crook. Try to be certain that your partner is able and willing to do all it says it will do in your contract. Ensure that it is in your partner’s best interest to perform as agreed. Be careful that your partner is allowed by law to fulfill the promises in the contract. Check the reliability of information on your partner or customer by using independent sources. See Foreign Company Due Diligence Reports.
4. Use Clear Contracts
Do not enter into an agreement without sound legal advice. Have your own legal counsel. Your contracts should specify exact terms of payment and performance standards. Set timelines. Pay careful attention to details, such as initialing pages of contracts and signing properly. Do not rely on legal advice from your overseas partner. Beware of claims that the foreign country’s laws require specific covenants in your contract; verify this with your own counsel. Do not assume local or provincial officials have the authority to give you permits and permissions; verify their claims of authority through independent sources. It generally (but not always) makes sense to have your contracts in both the language of the foreign country and in English or in your own country’s language, but with only one language designated as the official language.
5. Ensure Project Viability
Do not rely on promises of subsidies, special considerations, or non-market sources of income to create a profit. If subsidies are offered, they should be used to augment your profits, not create them. Make certain your partner has the authority to offer subsidies and verify from independent sources that the subsidies will be paid.
6. Avoid Prohibited Agreements/Activities
Be familiar with the overarching rules governing agreements at all levels of the relevant jurisdiction. Be wary of a contract based on promises from local government officials that government rules will not be enforced. You should know the laws of the country in which you are doing business and the laws of your home country.
7. Practice Problem Prevention Practice Problem Prevention.
Try to anticipate possible problems and have an escape strategy for each stage of your project. As an example this, check out How to Prepare for the Worst in China and Why You Should.
8. Do a Risk Analysis
Use more than news media sources or your immediate partners to evaluate the market. Use independent sources that know the country, the industry, and your partner. If a project is too risky, do not do it, no matter how sexy it may seem.
9. Protect Your IP
Companies that lose their IP often never recover. If you have a successful product or brand, you need to protect those with your contracts and with proper IP registrations. See How To Protect Your IP Internationally: The Extreme Basics.
10. Getting Paid.
Pay attention to how you get paid, when you get paid, and in what currency. Inquiring about a company’s payment process should be an important part of your screening for partners/customers and projects. Use letters of credit and other financial instruments when appropriate. If you do not want to use a letter of credit, require your partners/customers make an advance payment — the bigger the better.
Anyone have anything to add?