Most startups that expand into a new market are looking to scale rapidly and attract big-time investors and customers.
However, attempting international expansion and setting up an office in a foreign location comes with a good deal of risks and hurdles.
In such cases, choosing a managed office space may be the best option, allowing executives to focus on business and not the administration. Before we delve deeper into the reasons that make managed office spaces a perfect option for startups, let us understand the challenges they face when entering new markets.
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4 Challenges Startups Face When Entering New Markets
1. Pain of Setting Up a New Office
Over 82% of global startups deal with unforeseeable expenses every time they want to open a physical location from scratch. When you decide to expand your operations internationally, you must consider several parameters, like government approvals, regulatory requirements, and more.
As a result, companies can struggle with delays in the process, which translates into lower engagement with customers or clients due to missed opportunities. When planning expansions, consider opting for vendors that offer delivery guarantees and fixed timelines or coworking spaces.
2. Navigating the Legal Process
Every country, and even city, has a wide range of legal requirements and regulations applicable to companies looking to establish a new physical location. In most cases, these regulations are a matrix of tax codes, labor laws, environmental policies, and business laws, making the office setup process complex for startups.
As a result, over 15% of startups fail almost immediately due to compliance or legal blunders. Startups often underestimate the exorbitant costs associated with business address registration, hiring legal counsel, and accessing required documentation. However, you can partner with managed office space providers that provide legal and compliance support as part of the onboarding process.
3. Dealing With High Operational Costs
Traditional office spaces often come with hefty deposits, long leases, and require some upfront investment for the necessary IT, furniture, and fit-outs. Such expenses can drain your cash, especially if you have improperly budgeted for everything.
What’s more, over 38% of startups run out of finances, especially when they are part of early expansion. Such cash deficits are often caused by unplanned overhead costs and impulsive real estate purchases.
4. Setting Up Infrastructure from Scratch
Even if you find a good location and great vendors to work with, you may often end up incurring high infrastructure costs. The infrastructure costs associated with a typical office setup include secure IT systems, access to reliable hardware and amenities, and proper internet connectivity. These are must-haves for market entrants that compete with each other on professionalism and speed.
To overcome this challenge, choose offices that provide round-the-clock IT support, proven service reliability, and backup connectivity. Ensure that you have proper guarantees in place before settling on a place.
5 Reasons Startups Usually Choose Managed Offices Abroad
Now that we have looked at the primary challenges associated with managed offices, most startups opt for the workspace model due to the following reasons:
#1 Increased Speed to Market
Speed is often a differentiating factor that separates companies with a competitive advantage from those that are lagging. Managed office spaces are usually furnished, compliant, and fully connected, making multiple resources available for startups that are just finding their footing in the market.
With most managed offices offering features like “72-hour” moving guarantees and flexible leasing options, founders can finish the journey from signing the lease agreement to having a live office within days. To get the most out of a managed workspace, request explicit service-level agreements that set down policies for occupancy and onboarding. You can also leverage localized HR and legal support services offered by managed spaces when opening a foreign location.
#2 Improved Flexibility
The workspaces that startups move into should adapt to their growth and needs.
Over 60% of startups value flexibility over pricing when choosing office solutions in a foreign location. Managed workspaces offer several features such as modular layouts, flexible contracts, and custom office solutions. These amenities and features help companies scale up or down as needed.
Negotiate location transfers and short-term extensions into your lease agreement and rent contracts. For example, say your chosen managed workspace provider is expanding into three of the fastest-growing locations in the APAC region. If these are also locations you are planning to set up an office in, negotiating a location transfer can be quite beneficial.
#3 Building Better Credibility
A local address, fully functional office, and a staffed reception may not seem like a big deal in today’s virtual-first world, but they go a long way in establishing your credibility. When you are pitching to new clients or investors, credibility can be the factor that makes or breaks the deal.
By opting for well-known managed office brands, you can boost the reputation of your startups by association. Not only this, you can even gain faster and more access to venture funding and other opportunities.
#4 Access to Plug-and-Play Amenities
Perhaps, the biggest selling point for any managed workspace is access to plug-and-play amenities. Having instant access to high-speed internet, communal spaces, wellness features, event venues, and more can help startups focus on growing their business. Managed office spaces provide all these amenities and more.
For every managed space you consider, ask for detailed catalogs that list all the amenities, and clear definitions of what they can mean for your business.
#5 Better Risk Management
Expanding into a new region can often involve a lot of risks, related to security, compliance, and vacancy costs. Managed workspaces mitigate these risks by providing bundled packages that cover everything from legal compliance to electrical backups.
Even so, managed workspaces can reduce your year-one operational expenses associated with repairs and damage by 30% for expanding startups. Seek out providers who can help you with legal assistance, compliance audits, and business continuity planning in the long run.
Concluding Remarks
As startups continue to tap into the opportunities presented by the scaling global economy, flexibility and risk management have become the need of the hour. Choosing managed workspaces can help scaling startups eliminate months of operational headaches, accelerate their access to more revenue and growth. Modern managed workspaces even offer infrastructure and amenities that help companies deliver on big visions and expansion plans.
