Many enterprises finding their way into the Australian market experience success, yet the journey is not without its hurdles. Leveraging from years of experience advising global startups, here are some insights into issues startups encounter and strategies to mitigate them.
Optimal Business Structure
For Australian subsidiaries under international parent entities, the initial choice of business structure is pivotal due to significant commercial and tax implications. Inappropriate structures may lead to forfeited GST credits, tax losses, and assorted administrative and tax expenses during transitions between business models. Consideration should be given to Australia’s tightened transfer pricing regulations and the role of the parent entity, whether it acts as the importer, clears goods, or assumes roles like agent, distributor, branch, or subsidiary.
Market Understanding
Many businesses entering Australia lack a comprehensive grasp of the market, encompassing agents, customers, distributors, competitors, and potential threats. While some businesses assess their strengths, weaknesses, opportunities, and threats in initial stages, it may not be sufficient to navigate the complexity of Australian industries. Seeking counsel from professionals and business owners can provide valuable insights into the structural forces shaping the current market environment.
Communication and Financial Oversight
Establishing an efficient communication and monitoring system is vital for setting and achieving objectives between parent and local entities. Monthly reporting, annual reviews, and audits are methods to ensure proper communication and financial supervision.
Forging Relationships with supplies and distributors
For success, forging strong relationships and trust with suppliers and customers is imperative. International businesses often connect with familiar counterparts without recognising the advantages of developing local ties. Failure to build solid relationships with Australian suppliers and customers can lead to inefficiencies in the supply chain and detriment in distribution channels, posing a risk to the enterprise’s long-term sustainability.
Team Selection
In any business, staff performance is critical. Choosing key personnel in management, marketing, and product development is crucial. Large foreign entities sometimes rely solely on their existing employees, neglecting local talent. While this may seem cost-effective initially, it can lead to long-term issues like a lack of understanding of the local market and challenges navigating language and attitudinal differences. Conducting thorough background checks for senior management and establishing clear, tax-effective service contracts are essential. Compensation packages should incorporate incentives for both sales and profit.
With decades of experience assisting overseas startups in Australia, Accru Felsers can provide guidance on entering the market. Please feel free to reach out to us should you require further information.
