“Which country is the most attractive market for my expansion in Latin America?” –
“What is the best strategy to enter and conquer this market?” –
“How do I find the right partner to support my business in Latin America?” –
“What are the costs and risks involved in our market entry and how can we control them?”
If you are in charge of expanding your company’s presence in Latin America you will inevitably be confronted with questions such as these. And you will have to come up with the right answers. Every case might result in a different answer, yet there are some generally valid points that every company or investor should keep in mind when planning to do business or invest in Latin America.
Here’s what I have learned in 9 years of advising and supporting foreign companies and investors as Market Entry Specialist in Latin America:
Step 7: Time to Crunch The Numbers: Create Your Budget
Once you have selected the country, defined the strategy and business model and chosen the local experts, it is time to plan the budget for your venture. Your research will have given you a rough idea of your sales potential in the short and long term. My advice: Be very, very conservative in your sales projections and generous when defining the timeline for your break even point. It goes without saying that each case is different and that the time to reach break even does vary wildly, and – let’s face it – in some cases this moment never comes. But whenever I meet a company who expects to start making money in the first year of entering Latin America I recommend them to either add one or two years to their timeline or to better go looking in another part of the world for their expansion. I know this sounds harsh but I have seen too many companies with unrealistic sales projections and insufficient financial endurance who, after a short adventure left the region with nothing but losses and disappointments. Those companies have one thing in common: they did not take the time to get to know the country first, do their research, use the help of local experts to get a realistic picture of the market potential and then create a budget that actually makes sense.
Summary: How to create a realistic budget for your market entry
- Research the market to reach realistic sales projections – be conservative!
- Use the help of local experts to understand the labor costs, the pros and cons of different labor contracts, risks related to employing local staff etc.
- Get various quotations for the expert services you will require (e.g. legal, accounting, tax, HR, admin, customs, relocation, property agents)
- Use the help of local experts to get a clear picture of the fees and taxes that will apply for you (income tax, local taxes, company registration fees, import tariffs, etc.) and what your options are to minimize your tax burden.
- Worst case scenario: Quantify and include your exit costs (liquidation of labor contracts and local company, early termination penalties of supplier contracts, legal fees etc.)
- Include a reserve / buffer for unforeseen expenses.
- Always keep in mind: No budget or business plan ever works out exactly as planned and clocks in Latin America are ticking slower, so be conservative and allow for enough time to reach break even!
Following the 9 steps during your market entry process will bring you a big step closer to success. At Ongresso, we help you unlock the potential of Latin America by assisting you with successful market entry and long-term growth in the region.
Contact us to set up a free consultation to talk about how we can help you succeed in Latin America.
Daniel Breitenmoser is the Founder and CEO of Ongresso, a Market Specialist in Latin America who assists foreign companies with market entry and the achievement of long term success in the region. In his 9 years in Latin America, Daniel has helped an extensive list of clients across a variety of industries understand local business culture and implement their business model. His passion is to share his knowledge with like-minded people to jointly unlock the potential of Latin America. Originally from Switzerland, Daniel has found his new home in Medellin, Colombia.
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