Global Report

How to prepare for the inevitable hurdles of overseas expansion

One Canadian exporter learns that every market has its challenges

Hurdles with a fast lane

(Julian Watt/Getty)

Expanding overseas looked easy enough. In order to land contracts with big hotel chains, Roger Sholanki’s spa-management software firm had to go international so it could service hotel franchisees in dozens of countries. But because Book4Time’s software resides in the cloud, Sholanki figured his company could easily service any hotel with an internet connection: “We thought all we’d need to do is support multiple languages, local currencies and tax laws.”

But no one had warned him about fiscal printers.

Before Book4Time can service a hotel property, the Markham, Ont.-based firm must integrate its software for handling transactions at the hotel’s spa—everything from managing reservations to processing payments—into the hotel’s computer network. Sholanki, the company’s CEO, says “it was a big shocker for us” to discover that countries such as Russia, Italy and Peru require every sizable business to use devices known as fiscal printers. These store a record of every transaction that tax auditors can download to verify the business has paid all taxes owing. Yet these countries were unhelpful when Book4Time tried to comply with this requirement. They wouldn’t provide a copy of the regulations, nor permit a hotel to export a fiscal printer to Book4Time so it could determine how to integrate its software with the printer.

This is just one of a long list of surprises Book4Time has run into while rolling out its software across chains such as Hyatt, Four Seasons and Starwood Hotels. “What they tell you at the corporate office and what you discover out there are quite different,” says Sholanki.

Going global has been integral to Book4Time’s five-year revenue growth of 667%, enough to place No. 105 on the 2013 PROFIT 500 ranking of Canada’s Fastest-Growing Companies. Fully 90% of Book4Time’s sales come from exports, and by late 2014 it will operate in almost 50 countries.

Like many firms, Book4Time became an exporter not in pursuit of global domination but in pursuit of prospects with worldwide operations. Sholanki cautions fellow entrepreneurs considering export-led growth not to underestimate the challenges they’ll face. Even if you’ve done your homework, you should expect the unexpected, such as irksome regulations and odd business practices. Allocate more time and money for penetrating new markets than you think you’ll need. And, although government agencies such as Export Development Canada (EDC) offer valuable help, don’t assume they’ll have an answer to every hurdle you’ll encounter.

“EDC tried to help us with the fiscal printers by connecting us with some embassies,” says Sholanki, “but the embassies didn’t have much information.” His firm eventually hired companies that distribute tech equipment in these countries to integrate Book4Time’s software with the printers.

Sholanki’s firm has also run into unanticipated costs with corporate clients. For instance, integrating Book4Time’s software with a hotel chain’s CRM system, gift card and loyalty programs is a long and pricey process. Sholanki was surprised to discover that some corporate offices don’t have a budget for this, forcing his firm to eat the cost.

He has also been taken aback by some local business practices. Clients in Qatar meeting with two Book4Time employees spoke only to the male junior trainer, ignoring his senior colleague because she’s a woman. Hotel operators in Peru and some other countries disregard the master agreement with the corporate office and make up their own rules about when they’ll pay. (Fortunately, no one has defaulted.) Book4Time was mystified when, after integrating its software into a Chinese hotel’s network, this client wouldn’t pay up. It turned out this hotel had an unusual approval system that forbade payment until the project manager had given a formal signoff. And Book4Time ran into a bottleneck in Russia, where local billionaires own most of its hotel clients. “The owner himself will review and sign the contract,” says Sholanki. “He won’t delegate that.”

Yet Sholanki laughs—although a bit ruefully—as he talks about such challenges. Despite the headaches, his company’s overseas expansion has been crucial in differentiating it among the 30 players in its sector.

Book4Time has always striven to stand out from the pack. Sholanki founded it in 2004 on the software as a service (SaaS) model—the first SaaS enterprise solution in its category—at a time when most companies were wary of software not hosted on their own network. There are now half a dozen SaaS players in this sector and customer sentiment has shifted in favour of cloud-based services.

Although Book4Time sells to independent spas as well as hotels, it has focused on the latter target—the mid enterprise space of global hotel giants—to drive growth. And while Sholanki admits that doing business abroad has proven far more complex than expected, he says it has been worth it by giving his company a leg up on its rivals: “We’re the leader because we’re the most international.”