Expanding is something every business dreams of when first starting out, but can easily appear daunting. In a post-Brexit world, you might not think that expanding to Europe is worth it. But with growth being the name of the game for so many entrepreneurs, it’s something you’re likely going to have to consider at some point in the future.
Europe is the first location most UK businesses land on when they first start thinking about expansion, with the EU still holding huge potential even after Brexit.
In this guide, we’ll take you through everything you need to know about expanding your business into Europe, including insight from those that have done it.
What are the benefits of expanding into Europe?
The EU generates billions of Euros in e-commerce every year, making it a massive opportunity for any type of business interested in expanding. Here’s some of the top reasons why you should be considering it.
Bigger market, bigger access
The EU is made up of around 447 million people. That’s a lot of potential customers! This increased customer base opens up new avenues for business – not just in the amount of people there are to sell to, but also in terms of networking. A sizeable 43 per cent of business owners cited skills and talent as a major attraction when choosing a country for international expansion, and there’s a lot of it to draw from.
A better supply chain
Establishing a supply chain in the EU is a great long-term goal that can reap benefits across your business. By doing this, you’ll be able to reduce the time and cost of shipping your products, which will give you a good foothold if you want to expand even further across world markets.
Diversify your business and reduce risks
While relying on one market can give you focus when running your business, it actually can be quite risky. If that market falters or experiences difficulties, you’ll be stuck with it. Expanding into others (such as the EU), reduces these risks while also diversifying your business at the same time.
The EU’s biggest markets
Europe contains six of the ten world’s richest countries, so any business should be thrilled at the prospect of expanding there. Here’s a few of the major countries you should be looking at:
Germany
Germany is the EU’s biggest economy, and thus should be a key target for anyone expanding their business. Online shopping is huge in Germany and is part of an overall strong consumer market, so getting a foothold here can reap some big rewards.
France
With a market estimated at over 140 billion Euros and as a hub for high-end and luxury goods, France is a market that is ready to be tapped. While the country has always favoured brick-and-mortar shops over online shopping, online marketplaces are now beginning to penetrate the French market, which could be a great opportunity for a discerning British business.
Netherlands
Online shopping is a big market in the Netherlands, and despite its small population, the country has a large amount of spending power. Over 90 per cent of people in the Netherlands can speak English, making it a great ‘starter’ market if you don’t necessarily have the resources for translation or native-speaking customer service.
The expansion checklist: what you should consider
Once you’ve decided you’d like to expand into Europe, you need to make sure you’re prepared. Here’s our checklist for anyone considering it.
Ensure you already have a solid base
Before you begin thinking about expanding into Europe, you should ensure that you have a solid base to work from. Too many businesses attempt to run before they can walk and expand too early, so don’t make the same mistake. Making sure you have enough stock to fill demand and can ship abroad without incurring too many costs are just a few of the things you’ll need to think about.
You can do this by analysing where your business is at, both financially and in terms of infrastructure. Expanding into another region isn’t something you can do casually, so ask yourself if there’s more you can do to expand in the UK before you start in Europe. There’s likely more growth you can wring from the UK market, and once you’re sure you’ve maximised your potential, you’ll be ready to begin expanding.
According to research from digital payments solutions provider, takepayments, ten per cent of small businesses stated that their current suppliers and network would struggle to meet demand if their company grew rapidly.
In response to the data, Jodie Wilkinson, head of strategic partnerships at takepayments, said that businesses needed to consider the risks before expanding:
“Small businesses in the UK have had a host of challenges to deal with in the past few years, especially when it comes to supply and logistics. Record inflation rates, decrease in consumer spending, an energy crisis, labour shortages and environmental concerns are just the tip of the iceberg and have caused multiple upsets to supply chain management.
Although larger companies might be able to shoulder the extra costs, 9 per cent of SMEs have ceased trading internationally since 2018.”
Research your market
Once you’re ready to start, it’s important to undertake some research into the European market. Understanding the buying habits of your new potential customers (as well as your European competitors), will give you a significant edge before building your strategy. Think about your brand and how it will be interpreted in the European market, as well as what the current trends are in your industry.
Fraser Smeaton, CEO of MorphCostumes, said that understanding cultural differences was a key part of doing business in Europe:
“The key to cracking Europe is understanding how cultural nuances will affect your business, a lot is similar but there are more differences in the detail than may be immediately obvious. Sure, there’s the simple things like language and currency, but there’s many more cultural considerations to take into account.
We’re a fancy dress business and it wasn’t until we expanded into Europe that we realised ‘dress-up occasions’ were often different depending on each country, for example Carnival, which is celebrated over Lent across Europe. It’s bigger than Halloween across Germany, Italy, Spain and the Netherlands.”
Consider commerce
Setting up your own online store is one of the most common ways that businesses expand into Europe, as you’ll most likely have one already. Using this method generally gives you more control over the expansion, but you’ll have to find manual payment solutions for other currencies as well as shipping and handling.
Another common option is getting the help of a third-party storefront. Both Amazon and eBay are key ways to quickly and easily expand into other territories, thanks to their built-in customer bases and automatic currency exchange. Plenty of UK businesses already use third parties such as these, and if you’re one of them, you may have a ready-made solution to expansion.
Customer service
Customer service is one of those aspects that can be taken for granted in English-speaking countries. Now that you’re getting ready to expand into other countries, you’ll need to think about multilingual customer support.
Whether this is automated or manned, being able to talk with customers in their own language will help you build trust among your customer base and shows that you’re dedicated to doing business in Europe.
Register for EU VAT
This will probably take up most of your admin time but is a vital part of the process. While being familiar with VAT and tax requirements is a forgone conclusion in the UK, you’ll need to ensure you’re just as clued up on the equivalent for any other country you want to trade in when expanding into Europe.
Tax is complicated and shouldn’t be second-guessed. Specialist companies that focus on tax obligations can help you navigate this, and if you already have a business accountant you should sit down with them before getting started.
Apply for an EORI number
UK businesses wishing to work in Europe require an Economic Operator Registration and Identification (EORI) number. This essentially tracks customs information for those trading across countries.
Since Brexit, the UK requires customs checks on everything it exports, and this is the same for small businesses and sole traders. The sooner you can get your EORI number sorted, the sooner you can start trading.
So whether you’re just starting your business journey or ready for expansion, it’s fair to say you can’t take on Europe lightly. While customs regulations and tax restrictions might make it seem difficult, ensuring you’ve done the right preparations is half the battle. Once you’re set up, though, there’s a huge amount of opportunities.
Read more
5 things European founders need to know about breaking America – Will Capper, co-founder of job discovery platform DirectlyApply, gives his top tips on how to make it big in America when you’re a small European start-up.
The top six life lessons all successful entrepreneurs know – Tom Wood, CEO of Cazana.com shares the six life lessons that have helped him to succeed in business.
4 guiding principles for overwhelmed CFOs of high-growth businesses – Here are some principles to live by for overwhelmed CFOs in high-growth businesses.
