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International Development: Three Mistakes to Avoid in Funding it

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Firms that fail abroad very often go on a project that is poorly calibrated, with poorly estimated costs. Arnaud Leurent, Director of International Development at GLOBAL APPROACH CONSULTING (GAC), a consulting firm specialising in innovative companies, looks back at the main mistakes in financing international development.

Financing lies at the heart of successful international development. A company that misjudges outsourced costs, does not properly gauge the CA potential of its new market or does not know how to present its project to obtain subsidies takes all the risks of failure.

Arnaud Leurent reminds us "International development in a country generally costs at least 100,000 euros per year. This financing must be provided for upstream and we must prepare for international development in project mode. Nothing can be left to chance, we must avoid opportunism. A look back at what must absolutely be avoided:

1st mistake: Doing without market research

Going international and not finding out about the depth of the market concerned, the habits of the country, the presence and market shares of competitors on the spot... it's like playing the lottery! The chances of success exist but are extremely slim.

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Unlike gambling, it is possible to maximize your chances of success. To do so, an export or international development project must start with a market study that proves that the company will make money where it goes. This is an essential factor in deciding which countries to invest in, even if it means giving up destinations in the current climate.

Arnaud Leurent explains: "For example, you don't go to Brazil because it's the fashionable country with a favourable tax system. We have to go there first and foremost because the market offers real potential for the activity concerned. Many companies are attacking these "Eldorado" countries, which, although they have potential, are above all extremely difficult to conquer.

2nd mistake: Doing without a business plan

Yes, setting up a business plan requires mobilizing key resources: marketing, finance, trade, which are not always readily available. However, the more an international development project is prepared upstream and focused on its various aspects, the more the main internal players take ownership of the project, detail it and thus maximise the chances of success for the group.
A business plan including a three-year action plan is required. It proves that the company has foreseen its costs and has gathered enough to last for the first few years.

 "You have to plan for the costs associated with adapting products and services, the time allocated to the project, travel, production of communication tools, lawyers on site: the budget rises quickly," continues Arnaud Leurent. "If a country is too expensive, it may be wise to move to a neighbouring country. For example, Chile is a good alternative to Brazil for a presence in Latin America.

3rd mistake: Do not apply for grants

A logical consequence of poor market research and a poorly calibrated budget: companies may not apply for subsidies or may not apply for enough subsidies. "Many companies are not aware of the costs of international development; a good business plan gives them visibility. It also makes their project credible when applying for aid and subsidies, whether in France or in the target country," Arnaud Leurent reminds us.

It should be noted that France is one of the countries in the world that offers the most public aid for exports and international development. This is a strong competitive advantage that should not be overlooked.

But the company must be able to demonstrate that it has taken into account all its costs and that it has been well validated by a market study that it will generate a turnover and a real margin on the spot. An essential equation to start on the right financing. This guarantees both the company's sustainability in its new market and its overall development.

Arnaud Leurent underlines: "Through international development, VSEs become SMEs, SMEs in TWAs and larger companies can open subsidiaries". Taking the time to prepare international financing pays off in return.

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About Global Approach Consulting

Global Approach Consulting (GAC) is an international brand of Grande Armée Conseil dedicated to innovative companies. GAC helps innovative companies obtain the best public funding and implement sustainable solutions in terms of :
- Taxation of research including Research Tax Credit
- public aid and subsidies for innovation
- export and international development assistance

With more than ten years of experience, the GAC team is composed of 280 scientists, tax and financial specialists serving more than 2,500 clients in France (Paris, Lyon, Toulouse, Lille) and more widely in Europe, Latin America, Canada and Asia-Pacific.   www.global-approach-consulting.com

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