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Is there a low-cost way to test foreign markets? Our experts have the answer.
(Business 2.0 Magazine) -- Q: I'm told that it can cost $200,000 to $500,000 to open up a foreign office. Is there a cheaper way to set up shop with only a sales rep or two, if you just want to test the market? -- Scot Wingo, CEO, ChannelAdvisor
A: First, there's the "fake it until you make it" approach: Get a local number using Skype and just pretend you have an office on the ground. What if you get a nibble and actually need to take a meeting? Book your ticket and sign up for a "virtual office" with an outfit like Regus, suggests Scott Hildula of PR consultancy Red Umbrella Group. A basic setup, which gets your name in the lobby directory, a receptionist, and other shared resources, will set you back $175 a month.
If things look promising, there are steps you can take at home to make your infrastructure easier to expand. Seth Blank, a Silicon Valley IT operations executive, recommends moving your phone system over to VOIP as soon as possible. A basic system from Switchvox, an open-source PBX running on cheap hardware, starts at $995. With that in place, when you're ready to open an office, you can just plug some VOIP phones into an Internet connection, avoiding the need to navigate complex international phone tariffs and foreign telecom bureaucracies.
But beyond that, setting up shop for real does get complicated and costly. Ken Brady, director of international strategies at Centric, an L.A.-based interactive agency, sympathizes with your chicken-or-egg dilemma. "Having offices in Shanghai and Tokyo is proving invaluable for our company, but it was very hard to know for sure until we were on the ground in both places," he says.
Brady's cost-saving solution: Test the market by finding a partner abroad who's interested in a long-term relationship with your company. Start out by sharing some office space. If things work out, that partner can also help you navigate local rules and regulations for starting a business, defraying your costs until your local operation gets to scale.
Q: My company builds online communities for websites. Many of my partners ask that we add a clause to the website's terms and conditions stating that "all applicable laws apply." Wouldn't that mean that we'd be subject to the laws of all countries from which people access our sites? -- Brian Loew, CEO, ClinicaHealth
A: How to put this delicately? Your partners are being silly. "It's tautological, redundant, and confusing -- all the things you don't want in a legal contract," says Gaby Darbyshire, Gawker Media's legal director. And if an international user has a complaint, he's going to try to sue you under his country's laws anyway, says Rebecca Eisenberg, general counsel at AdBrite, an online advertising network. So why add vague language that merely invites lawsuits?
While it's a good idea to run your business in a way that's compatible with, for instance, the European Union's rules on consumer data protection, Eisenberg says, you shouldn't make any kind of legal guarantee to your partners that you will comply with international laws. If you make that guarantee, you'll bear the legal risk of foreign lawsuits -- and if your contract indemnifies them, you may end up paying your partners' legal fees too.
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