V-Sub is a vastly experienced expansion and support vehicle for any company wanting to set up operations in Europe or Asia. We can start it from scratch or supplement and replace (if required) your existing investment.
Please don't call V-Sub if you are not after straight talking from a management team experienced in the collaborative planning, execution and support for any aspect of international operations expansion.
We provide dedicated sales or support resources, all of the infrastructure including accounting, marketing and data or any subset as required.
Irrespective of whether we end up doing business together, our aim is to provide honest information in plain language that will enable you to make a considered decision regarding your new expansion or in support of your existing operation.
We have our much loved Hall Of Shame that gives real life examples of what not to do, how it went wrong and what happened next (you know who you are or in some cases were).
Companies looking to expand their sales operation into a different geographic region typically ask the same questions.
V-Sub has been running outsourced operations for over 10 years and we know the answers to these questions.
HALL OF SHAME
Believe it or not our Hall Of Shame is brought to you by popular demand from our clients and prospects. If you have any anonymous stories that you would like to share, feel free to contact us. Your experiences may help others avoid similar mistakes. Chatting with V-Sub irrespective of whether we ultimately do business could save a lot of pain, save a lot of time and save a lot of money.
Distributor Going Broke
Many companies view Distributors as a safe and easy way to open up their international markets. Be very aware to choose your distributors carefully, and don’t fall in the trap of a US software vendor whose Distributor continued to take reseller/customer orders long after they knew they were broke. The US vendor had zero chance of re-cooping the six figure sum owed to them from their Distributor who closed their company and re-opened the next day with a different corporate name with all their debts cleared. The US company aggravated their own problem by attempting to pursue this through the Distributor’s local European court. As happens in virtually all such cases the local court ruled against the US vendor and they wasted another $35,000 in legal fees.
Unsupervised remote offices will regrettably lead to abuses by employees. One particular sole employee in a UK office representing a US software firm took it upon himself to set up a reseller and using leads supplied to him by his employer he proceeded to sell a competitor product for nearly two years before a chance discovery by his employer.
There’s not enough room on the internet to catalogue every HR disaster befalling US companies in Europe. Almost everyone has a tale to tell. In general, proceed with extreme caution particularly in European countries outside of the UK.
Some lowlights we can mention here include:
HR Italian Employee
The hiring of a sales employee in Italy who didn’t perform their duties. This employee was engaged for only 5 months before being fired. The Italian claims court awarded them a large six figure sum in compensation.
HR German Employee
Another company fired a German employee for non-performance. The German court awarded the employee one year’s salary and benefits. This is completely standard in Germany. However, an arrest warrant was sent out for the Directors of the German subsidiary, one of whom happened to be the CFO of the US parent who was unaware that the German employee had even been fired.
HR UK Hire and Fire at Will
Hire at will, fire at will – The most common HR mistake of US companies coming to EMEA. Neither is allowed, process must be followed. A UK candidate recently successfully claimed against a US software company that his application was not dealt with in an appropriate manner. The candidate was in any case hopelessly under-qualified, however the court ruled that ‘regardless of a person’s suitability or otherwise for a role they applied for, to be told verbally that they are deficient is grossly unacceptable’, they added that as the candidate’s ‘ feelings were hurt’ they were awarded an undisclosed claim.
Limited Company Set Up
$10,000 to set up a limited company in the UK. A US software company of sub-$1,000,000 worldwide revenue recently paid this to set up their UK company. The real cost is a fraction of this via V-Sub.
Tax Structure Set Up
A six figure sum for a tax structure. Another US company paid this for an efficient tax structure for their European subsidiaries. Unfortunately no European entities were every set up and total worldwide licence sales never exceeded this $100,000 total and the VC closed out the company.
Almost a six figure sum a year for accounting fees. This was for a European subsidiary with revenue of under $1,000,000 a year. Worse still was the fact that not only were filings made late invoking penalties and fines but that such basic day to day items such as cash collection were not part of the engagement contract meaning that $237,000 of sales were never collected from customers over a four year period.
No Charge VAT
Forgetting to charge VAT – Several US vendors we’ve spoken to have inadvertently not included VAT (sales tax) on UK billings with a UK office. The UK’s Inland Revenue are rather hot on this topic with the end result being a rather expensive and embarrassing one for the vendor who had to issue a series of revised invoices to their customers.
The European Union
Publicly, the EU states that all commercial conduct can occur without barrier within any member country. Perhaps unsurprisingly this isn’t true, for example there are in the respective member states very different VAT rates, employment law rules, tax rates, currencies used and variations in market rates for employees.
Notwithstanding the above, one US vendor felt it commercially prudent for them to based in Switzerland to be as they put it ‘at the heart of the EU and the Euro. In fact, Switzerland is in neither and never will be having adopted a policy of perpetual neutrality since the middle ages. The US vendor went on to say that the language skills and ‘cultural dynamism of French, German and Italian influence’ made a great talent pool from which they could choose their employees. In reality this ‘cultural dynamism’ is a figment of someone’s imagination with the net result being a very large six figure sum of investment from this vendor which folded in eighteen months and a magnitude of legal and HR issues which even the most sanguine commentator would label as onerous, even for EMEA.
Recruitment Fees and Retained Searches
Beware the retained fee charge from ‘expert’ recruiters. Large headhunting firms in Europe will charge retainers because of their name. Inevitably they will supply very expensive candidates who are far from necessarily the right employees for a particular circumstance.
One particular vendor paid $40,000 for a VP Europe in start up mode for a US software company. The search firm supplied eleven candidates who were in the vendor’s eyes not nearly good enough. To be fair to the vendor nine of these candidates had never worked in the software industry before, so it’s reasonable to assume they were correct in their assessment of the remaining two candidates. Six months later they hired another candidate from another firm on a success only basis.
It’s notoriously difficult to implement and manage cost control for remote offices, with it being near impossible for US parent companies to have a command of local market rates and it verges on folly to expect foreign employees to adhere to company processes for expense control.
One US software company was shocked to find their 3 man UK field sales team incurring expenses and putting in a claim for re-imbursement for $47,000 covering a 6 month period, with a majority of the costs being for mobile telephony of which a large proportion were personal calls. The problem was exacerbated by incorrect tax filing for some of these expenses as the Inland Revenue considered some of these items to be benefits in kind versus expenses.