Dateline: Tbilisi, Georgia
I grew up 5,786 miles from here in the suburbs of Cleveland, Ohio. Throughout many years of school, our classes started each morning with a salute to the US flag.
On one particular morning, my seventh-grade teacher got after a few of my more mischievous classmates. She told them that if they didn’t think saluting the flag was worth their time, they should consider living in Red China.
Fast forward a couple of decades and I’ve just finished an enjoyable visit to Hong Kong — you know, the global financial center controlled by Red China. Despite my teacher’s warnings, I’d have to say it’s one of my favorite places in the world.
Narrow-minded views of the world are everywhere, even in today’s globalized era. The western media is littered with stereotypes about “third world countries” and how bad it would be to live there. We’ve all seen images of children begging in the streets on dusty roads in Central America or Africa.
Heck, just the other day I was watching a TV drama on a flight where the main character threatened to send his rival’s daughter from the US back to Bucharest, Romania to get what he wanted.
Oh, the horror of being sent to a charming city in a European Union-member country!
However ignorant the West may be about the rest of the world, you can still use such ignorance to your advantage. While all of your friends and colleagues are crawling over each other to get VC funding for their “pre-revenue” app that is likely to fail, you can go another direction. Instead of fighting for a small piece of the cake, take advantage of the largely untapped emerging and frontier markets to stake your claim and build a legacy.
Why you should look outside the West
You already know that today’s world is different. We’re connected in ways like never before. Yet many businesses don’t act like it. When I lived in the United States, I never met a single small business owner who had so much as given a thought to sourcing products from overseas or selling to overseas customers.
Westerners tend to be provincial. We’re told that our country is the best and we figure there’s no reason to bother going anywhere else.
However, the western job market is not so hot these days, especially for recent graduates. It costs a large company a lot of money to hire a young graduate. In some areas, it might cost them double your actual salary.
Compare that to Hong Kong, where the cost of a young hire can be as much as 40% less. You’ll quickly see why American and European companies are not in a rush to hire young, unproven talent.
The good news is that you still have the option to go into business for yourself. However, while being an entrepreneur is increasingly popular among ambitious youth in the West, they face several challenges. For example:
1. Excessive competition
I recently sat next to a young entrepreneur who lived in Romania. He started a growing business doing something very simple and was doing well. He was doing some research on businesses he could start in Canada or the United States and was blown away by how many people were already doing every single idea he had.
In markets like the US, so many young people want the allure of being a Silicon Valley entrepreneur that competition is outrageous. It’s dog eat dog. And that’s fine. But emerging and frontier markets are much more open to new ideas and are much less competitive. You’ll have a lot more room to focus on actually building a business, and not just staying in business.
2. Limited thinking
It’s true that big businesses like Google or McDonald’s or H&M make aggressive pushes to move into any and every market they can. However, most small businesses don’t.
Focusing on a core audience can make sense, but demographic changes make the rest of the world very attractive. With the world’s income and population growth happening outside of the western world, your customers in a western business will be increasingly old and poor.
While there are a lot of poor people who can’t afford your products in China, the same is true of the United States. At least in China, the poor have a chance to come up.
3. High cost of doing business
The cost of living in New York or San Francisco is out of control. I don’t care how much money I have, I don’t want to pay $5,000 a month to live in a shoebox. Add to that the high cost of living for everything else and the sky-high taxes… No thanks.
Here in Kuala Lumpur, you can hire English-speaking staff from $1,000 a month. You can eat for as little as $3 a day. You can rent a room in the city center for $250 a month.
If you’re bootstrapping a business, all of these savings can go back into your business. And, in many cases, you can legally eliminate taxes in your home country and the country where you’re running your business.
Opportunity exists where you least expect it. As an aspiring entrepreneur, you know you have to look outside of the box. So why not look outside of the geographical box, too?
The world’s emerging markets are crying out for more options, better service, faster fulfillment, and greater product selection. Consider starting and basing a business overseas. It will give you the flexibility to live cheaply, hire affordable labor, potentially save on taxes, and tap into fast-growing markets.
True, you will need to learn about your new local culture and there will be a period of adjustment. But if I can handle it, so can you.
The best piece of advice I ever received on adjusting to a new culture is to avoid being dogmatic. You can’t assume that another country is “worse than” where you come from just because they do things differently.
If you can master that, I believe going overseas can greatly increase your chances for success.
How to get started overseas
One of the biggest obstacles people face as they move or start a business overseas is knowing how to get started. My typical solution for such a challenge is something along the lines of “go get on a plane”.
It may sound trite, but the reality is that the world isn’t as different as you’ve been taught to believe. People everywhere have many of the same needs and wants as anywhere else. The business strategy in selling them what they need may be different, but the needs are very much the same.
My honest piece of advice to anyone looking to get started is to identify a region of interest to you and just go. Do a little market research — as well as a personal inventory of which countries are most appealing to you — and go there.
Many of my friends and I can personally attest to the number of opportunities you’ll see almost immediately in many of these places. It will blow you away.
I remember walking around Phnom Penh, Cambodia and seeing opportunities my first day there. While looking for aspirin I noticed that local pharmacies wasted substantial real estate that could be repurposed for other uses. It turns out I was on to something. A week later, I met a venture capitalist who had just invested in a regional start-up that was opening smaller footprint drug stores in Cambodia based on that very idea.
The takeaway? No matter how unsophisticated your business experience may be, you should be able to spot opportunities with ease. Simply hit the ground in three or four countries in your desired region.
Which countries are worth checking out?
They say that if you want to be successful, you have to do what unsuccessful people won’t. Most westerners love the creature comforts of home and would never move to Africa; no matter how many millions they could potentially make.
In general, the more frontier a market, the greater the risk and the greater the reward. If you identify an opportunity in a frontier market, your chances of success are much better than they would be in developed markets where competition is fierce. Consider these regions as among your best options:
Laos is good, but it is even more of a frontier market and less open to foreigners. More developed countries like Thailand come with too many regulations and a lot more competition.
The Middle East
Believe it or not, I’m a huge fan of doing business in the Middle East. Much as I love Chinese culture, Mainland Chinese tend to believe that western businesses are overpriced and seek out local alternatives.
Conversely, those in the Middle East are more open to doing business globally. There is a tremendous amount of wealth there for those who want to build a business catering to the high end.
You have to be more careful in this area, but there are still some real gems. While I like the idea of investing in real estate in Nicaragua’s beach towns, I saw a lot of empty shops in the capital city. Look further south to more developed Panama or the highly underrated Colombia.
Diversify internationally and start a business overseas
A quick glance at history reminds us that no empire lasted forever. Those who put all their eggs in one basket were often wiped out. While such a thing is unlikely to occur overnight, I believe it is best to be ahead of the curve. Get in on the ground floor (or at least a low floor) on the “next big thing”.
Not only will your business have a greater probability of success, but you’ll also have a better chance to exit your business. One venture capitalist I know makes investments in frontier market companies, trading at book value because the demand for investment just isn’t there yet.
In one case, he bought an Asian brewery at book value, just months after a huge global corporation purchased a brewery in a more developed Asian country for 12X book value.
This investors’ plan is to “front-run” companies that want to acquire quality assets to add to their brand portfolio. He is taking a “sit and wait” approach, just waiting for those companies to deem a country like Laos or Ukraine or Morocco important enough to invest in.
I can’t tell you exactly how things will work out when you start a business overseas. What I can tell you is that the future in the world’s emerging markets is bright, no matter what any of the talking heads in the financial media have to say.