The Hidden Costs of NOT Going Global: A Startup's Guide

Many startups in the scaling stage pay attention to what is immediate and local. They concentrate on near markets, established processes, and a comfort zone that feels safe. But this incurs hidden costs. What’s more, the costs of staying local can easily exceed the merge and acquire costs of going global. And what’s the real cost of doing nothing? This is what we’ll be diving into.

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Missed Revenue Opportunities

Startups that do not pursue globalization for their operations leave potentially large revenue streams untapped. Areas like Southeast Asia, Africa, and Latin America are not just a staging ground for any growth a company might need; they are also an incredible driver of profitability. According to the International Monetary Fund (IMF), emerging markets account for 34% of the world's nominal GDP and 46% in purchasing-power-parity terms. Failing to tap into these regions means missing out on a large portion of the world’s economic activity.

Consider the case of companies like Uber and Airbnb. Both businesses achieved unicorn status partly because of their ability to scale internationally. Imagine if they had only focused on their home markets—they would have missed billions in revenue.

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Increased Competition

New businesses that do not go global face the prospect of being outpaced by overseas competitors. If a competitor establishes an international presence, it not only rules that market but also enjoys the kinds of branding and operational scales that are almost impossible to match. The Harvard Business Review has underscored the global first mover advantage that can be had by early expansion, in essence, delaying international expansion can mean losing the opportunity to establish your brand as a leader in untapped regions.

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Limited Talent Pool

Startups confine themselves to a diminutive pool of talent when they limit their hiring to local candidates. The most capable individuals are not always found in your immediate vicinity. Nations such as India and the Philippines have large numbers of highly trained tech and customer service professionals. According to a report by Deloitte, hiring on a global scale allows companies to access a vast array of skills, ideas, and even psychographics that drive growth and profitability. In contrast, startups that reinvest in a local hiring model will run the double risk of taking longer and spending more to complete their recruitment tasks. 

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Higher Operational Costs

Not going global has a few well known drawbacks. A startup might miss out on a huge international market. Or it might lose the chance to raise money from overseas investors. But the unmentioned cost of staying put is that a startup could end up with much higher operational expenses and be forced to either scale back or shut down altogether. For example, startups based in cities like San Francisco or London face steep salaries, office rents, and taxes.

By expanding to regions with lower costs of living, startups can take advantage of cost arbitrage. Establishing operations in countries with favorable economic conditions can lead to significant savings.

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Missed Innovation Opportunities

Startups can miss out on a lot when they focus only on a local market. They might bring to life a product or service relevant to a particular pin on a map, but often the most illuminating insights—those that lead to real innovation and affect a company's broader strategy—come from working with a very international team. Companies like Coca-Cola and Procter & Gamble have long used their international presence to innovate products tailored to local markets. They work with local talent and gain a much better understanding of their broader, more global consumer base. 

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Currency and Economic Risks

Counting on only one market can put startups at risk. They become too dependent on that particular region's economy and are not protected from its downturns or any currency fluctuations it may experience. Even without the kind of major global catastrophe that we are currently experiencing, it is obvious that a company whose operations are spread across several different regions is somewhat insulated from localized economic problems. By the same token, a business that operates across several different currencies does not feel the pinch nearly as much when one currency drops as does a business whose entire operation is pegged to just one currency. 

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Lack of Brand Credibility

Having a presence as a worldwide brand adds an extra level of what you might call "upstairs ness." It is kind of like having a "you must be this tall to ride" sign, and one that very few regional only brands can live behind. When "everyone" knows your name, it transitions almost effortlessly into trust and reliability, two must have qualities for any brand that has prominent goals. And with name recognition and trust come, in turn, customer retention and loyalty.

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How to Overcome Barriers to Going Global

The advantages of worldwide growth are apparent; however, many startups pull back from pursuing international markets because of the apparent obstacles. These include differences in culture and work style, in laws and regulations, and in business logistics. Yet, not to sugarcoat it, these are also the sorts of problems that any business, from mom and pop to multinational, inevitably faces. Why should international startups be any different? Of course, they should not. So let's take a look at how you can overcome some of these hurdles: 

• Leverage Technology: Tools like Slack and Zoom make it easier than ever to manage remote teams and collaborate across borders.
• Partner with Experts: Engage with international consultants or Employer of Record (EOR) services to handle compliance, payroll, and local regulations.
• Start Small: Begin with markets that share cultural or linguistic similarities to your home market. For example, a U.S.-based startup might find it easier to expand to Canada or the U.K. before venturing into Asia or Africa.

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