Startups: Why do we feel like we must expand overseas?

I’m at a bit of a crossroads for Colony. Our first centre at Kia Peng is profitable and doing really well. We’ve experienced consistent month and month growth since we started which is something that surprises even myself.

When we first started Colony I told investors that I wanted to open one first, and make sure it was profitable before I opened another. I forecasted that it would take one year to break even but we did it in 3 months so I started looking for a 2nd location much quicker than I expected.

Today the 2nd location is being built while I’m looking at other locations since I notice we’re really running out of space in the first one and in order to grow I need more inventory. At the same time we’ve been blessed, we’ve been given opportunities by interested parties regionally to bring Colony to their countries.

“Regional expansion” plays really well to the ears of investors. It tells a great story because the effective market is a lot bigger than just one country, and it allows us to raise money at higher valuations. That’s the theory… in practice though there are challenges to that.

In practice, an overseas operation is rarely run as well as the local operation.

Neither can a company grasp dominance of an overseas market like they do at home. In the cases that they do, it requires the founder to literally live and breathe the air there. It’s hard to effectively run a business remotely.

So how do multinationals do it? How does Shangri-la have so many well run hotels all around the world.

Well for that the company has to be ready. The culture, process, training and team has to be established and strong enough to introduce a new country and assimilate that into the mix. That’s something that often takes time and can’t be rushed. So the limitation in regional expansion is often time… not money.

Start with why

When I thought about whether we should expand, I decided to start with why. Why expand regionally?

If you ask many companies, the answer is “To find growth” because the Malaysian market isn’t big enough. Now don’t get me wrong, the Malaysian market is certainly big enough for many Malaysia-focused companies that are valued in the billions today ranging from property developers to oil and gas businesses. So when we say the market isn’t big enough, it often means that in our vertical, the market just isn’t big enough.

That makes me wonder, if the market isn’t big enough in a country, and if expanding overseas has always been met with semi-success, then is it even a business worth starting? Why not go for a business that is BIG enough in ONE country?

In expanding overseas, should “finding growth” be the main question we ask ourselves or instead “how much money can I make?”.

That’s the dilemma I face with Colony now. Is it time to go overseas? Many companies are racing to expand regionally, do we have to be one of them? Or can we dominate one country, one city even. The real estate market after all is HUGE. Malaysian companies spend about RM6 billion a year on office rent in KL alone.

What do you think?

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