High Street Partners' Blog

New CFO Survey Confirms: Aggressive International Expansion is the New Normal

By John Clancy, Executive Vice President, High Street Partners

John Clancy, Executive Vice President, High Street PartnersThe results are in, and they confirm that American business is only getting more aggressive about expanding internationally. That’s according to a recent survey conducted jointly by High Street Partners and our partner CFO Magazine. The survey canvassed CFOs and other high-ranking executives at firms with annual revenues between $50 million and $1 billion that had established international operations or were interested in doing so. The results indicate that rather than a flash in the pan, the trend of aggressive expansion abroad is becoming part of the new normal.

Nearly two-thirds of the executives surveyed indicated they had set “much more aggressive” (9% of respondents) or “somewhat more aggressive” (56%) growth targets for revenues from international customers in 2013 than in 2012. Only one-fifth of respondents were scaling back international growth targets.CFO Research and High Street Partners Report: Pushing the Boundaries of Overseas Business

Currently, 12% of respondents have no foreign customers or customers in only one foreign country. But three years from now, only 5% of respondents plan to have customers in less than two foreign countries. Meanwhile, while only 20% of respondents currently serve customers in more than 20 countries, 32% plan to have customers in more than 20 countries in three years. And two-thirds of respondents expect international markets to be among their company’s top priorities over the next three years.

All of this indicates that international expansion is becoming an integral part of American businesses’ long-term strategies, rather than a short-term trend. For many small and mid-size businesses, the recession that began in 2008 acted as the catalyst for international expansion. With American markets slumping, executives found that the only way to achieve the growth they wanted was to find it overseas. And those who did make the leap found that the technological and logistical barriers to successfully running overseas operations had fallen dramatically in recent years. So is international expansion just a fad, a short-term strategy for muddling through a cyclical downturn?

These survey results and HSP’s experience in the field both confirm that it isn’t. It’s not just that falling technological barriers have made it more feasible for small and midsize firms to expand internationally. Demand for products and services are no longer limited by geographic boundaries, customs, or languages. The world economy is open for business and companies of all sizes can now efficiently and effectively expand internationally.

This insight is corroborated by the motivations that executives reported for their firms’ interest in international markets. For three-fourths, their interest skewed toward growing revenues and their client base. Only 8% of respondents reported that their interest skewed towards reducing the bottom line. In the past, international expansion has been associated with outsourcing jobs to cheaper foreign labor. But our survey shows that for the vast majority of small and midsize businesses, international expansion is about more open-ended growth potential rather than the limited benefits of reducing costs.

The takeaway: For American executives, those lines on the world map that once looked like 50-foot walls are shrinking to the size of speed bumps, and it looks like they’ll stay that way. Here’s the bottom line on international expansion, if done right you have nothing to lose and everything to gain. If done incorrectly, or not at all, you have plenty to lose, including customers, and revenue.

Want to dig deeper into the survey findings? Download the full report now.