Your answer to that will likely depend on which sector you’re operating in and how you’ve been affected by the pandemic. For some sectors such as hospitality, travel and leisure, now may be a time to reset, rebase and consolidate as the economy recovers.
For other sectors, however, demand has boomed through COVID-19. In areas such as ecommerce, information technology and media, pharma and healthcare, logistics and distribution, the market opportunity has probably never been greater.
But one thing in common to all private enterprises through the last eighteen months or so is that they have needed resilience. Whether to cope with drastically reduced or drastically increased demand, SMEs around the country have needed to be agile and responsive, staying focused and determined in extraordinary conditions. Enough lessons have probably been learned to fill a library.
Growth on the agenda
Whatever the experience has been, no healthy enterprise can afford to shut itself off from growth. Whether you will need to wait a while or whether your business is primed and looking for opportunity right now, the ambition to take your business to the next stage must surely be on the agenda.
Growth within the UK is probably the most attractive accessible option for many, by expanding into adjacent products and services. And with the significant shift to digital channels, both in B2C and B2B markets, you may not need to invest as much as you would have done previously in a physical presence in target areas: the internet will do much of the job for you.
Expansion in the UK can bring significant rewards – but it is also worth exploring the additional benefits to be gained by entering overseas markets. It’s an unfamiliar – and often daunting – concept for many private enterprises but, approached carefully and with the right planning, it has been the ticket to accelerated returns and levels of profitability for many.
Although it may feel like much has changed through COVID-19, in a sense nothing has changed. The same pre-requisites of detailed market research, due diligence and identifying opportunities apply. That said, expansion into Europe has become more complex through Brexit. It’s not one market any more. The dust is still settling on this and will become clearer as life normalises post COVID-19.
Consider the routes to entry
To minimise risk, you may want to consider what possibilities there are to start small and then scale up. For example, many businesses already have some international footprint through online channels as well as through distributors, wholesalers and resellers. Think about whether you can build on this, perhaps by creating a more formal alliance or partnership.
Partnerships and JVs are certainly a common route. Another is to ‘go organic’ and build a small presence of your own – such as through a dedicated website, distribution centre and/or a handful of sales agents - as a ‘proof of concept’. This allows you to test the water without sinking a major investment into it.
For others, where the opportunity is clear it may be that a full acquisition of an overseas business is the way to go. In many ways, conditions for this are excellent – there is a wall of private equity funding looking for a home, while debt funding from banks and other lenders remains affordable in the continuing low interest rate environment. This is a whole process in itself which we’ll cover in more detail in the next stage of this series.
Tax and compliance are key
Whatever the scale of it, and whatever the route taken, it will be essential to ensure that you’re in compliance with all local regulations and requirements, and that you handle tax correctly. Tax compliance is an increasingly important area, and one that attracts significant attention from tax authorities as well as investors and their advisors who carry out due diligence exercises. We often seen cases where complex international tax matters can cause challenges when tax due diligence exercises are being carried out.
In addition to tax risks one should also consider the opportunities available in order to enhance shareholder value. We often see businesses failing to make full use of various tax incentives available – a significant oversight!
Time to strike?
While it may feel like COVID-19 and Brexit have introduced peak levels of uncertainty and unfamiliarity, at the same time businesses are used to operating in unpredictable circumstances. Trade wars, geopolitical tensions, economic downturns – these have all been with us many times before and will be again.
If your business has the ambition to grow, now may be a time to strike as the post-pandemic recovery period creates new openings in the market – at home or overseas. It’s why we’re saying “Look beyond your business boundaries. Dare to make the next move.”
We have published a guide to steer you through these issues in more detail, and help you think about how they apply to your business. Simply click here to download Or sign up here to our KPMG Private Enterprise newsletter for more insights straight to your inbox.