Are you attracted to growth opportunities and new markets abroad? Are you considering international expansion? It’s a tempting thought to want to boost your revenue and brand recognition if you’re already doing well on your home turf.
But wait, before you make a giant leap into the unknown, take the correct steps and ensure you have a properly thought-out strategy to understand what is required to prepare for international expansion.There are several steps toward taking a necessarily methodical approach.
The first and most important one is to be clear on the why? Why do you want to expand to international markets, and why now in this current climate? How do you know your business is ready for international expansion? There’s always a risk in testing out new markets or verticals. Be clear that your organization’s capabilities match up to the necessary qualifications for international expansion and check out the answers to these questions by developing a well-thought-out plan of action. Check honed and consistent metrics before you decide on any international expansion, because while the growth and exposure can be a good thing, managing it properly, and knowing what is required to prepare for international expansion is the ultimate key to success. Otherwise you’re just putting money down the toilet.
You may feel the time is right, but is it also the right time for your company infrastructure, your network, and corporate culture and organization as a whole? It’s a given requirement to ensure your whole team is ready, from the senior members of your company through to your suppliers. Long-term commitment from everyone is the key to success and will help you avoid jeopardizing your venture to expand further down the line when it may be too late. Reflecting on your existing sales processes and garnering commitment from your team, with everyone knowing what to expect will ensure a strong sales pipeline going forward into new horizons.
Once the timing issues have been addressed, how do you decide where would be best in order to prepare for international expansion? If it is the right time for your business to head overseas, then likely North America, Europe or Asia are the right target markets — but remember these are continents with many countries, cultures and markets within. During 2020, a difficult year by any standards, the European tech market exceeded all expectations, and many European countries continue to rapidly scale, according to this Atomico report. What about Asia? Local players dominate China’s tech scene as reported by the Financial Times, but India, contrastingly, sees American giants fighting for dominance.
Who is your ideal customer in terms of vertical? What about type and size? As reported in Business News Daily, one of the biggest considerations has to be whether your business can actually build a strong customer base internationally. What’s a nice idea may not be realistically viable. A product that sells well in your home country may not have the same appeal in your target international markets, and will have to be strong enough to withstand and outplay the local competition. Your approach in how to sell abroad needs to be built around one or two key verticals, and your international sales and marketing team will be consequently built around those. Allow for cultural differences too, in addition to language barriers. Together with your international team, you’ll have to translate what your target roles within your target verticals abroad will expect from you, as opposed to your home market. Business may be more formal or totally informal, your usual method of Zoom or Teams might be replaced with a meeting over a coffee or a working breakfast. In several countries, essential parts of the deal are done over WhatsApp.
It’s a good time to reach back to favorite customers at home and see what really worked to see if it’s a transferable process to win new favorites abroad. Lay out your target countries, verticals, personas and service portfolio and look again to decide what is successful, and what’s not. Examine those metrics and replicate them as you begin your international expansion venture, referring back constantly to keep on track as you build and launch your team.
In addition to the support from your existing team, you want to think about making decisions on your hiring method abroad. You will absolutely need a project manager from the offset, a senior member of your existing team who will oversee the expansion and be accountable for the success of your new venture while monitoring all of the various departments and partners for deliverables. The project manager will be able to create a timeline with feasible commitment dates in order to map your entire expansion that will sync with your existing business targets and ensure you aren’t stretched too thinly.
Setting up a local entity doesn’t have to mean setting up local branch offices, at least not to start. You may want to transfer some in-house staff, leverage local outsourcing services, or run everything from your existing HQ, while using an Employer of Record (EoR) service, like our partners Globalization Partners, who will support your business by compliantly employing workers for you.
There are ways to hire the right international team faster, without having to set up the local legal entity. International expansion and the success of your product abroad rests on your ability to attract and work with the best of local talent, for these people will undoubtedly understand the local market better than you ever will — and they’ll know how to reach that local market in the local language and culture.
Do your international expansion math. For example, with a target of £1 million and assuming that each customer brings an annual recurring revenue (ARR) of £50,000. That means you need a lead generation pipeline worth about £4 million with 300 leads in your new market to turn into 80 opportunities to turn into 20 closed deals requiring 300 leads to hit your numbers. Given that there are 260 working days in a year, a full-time sales development representative will deliver about 10 leads a month back at home. How many leads does a full-time SDR deliver in your U.S. home country? Usually, about ten leads a month. That’s 130 leads a year if you have one lead every other day. You realize from the start you probably need two full-time SDRs to hit that 300-lead pipeline.
It’s almost impossible to second guess how markets abroad function without real local knowledge, so it’s good to be as well informed as you can possibly be with some clearly planned preparation. Do your homework thoroughly. You will need to run an in-depth market research plan of the locations where you are considering expansion. Your sales and products may behave differently in foreign locations, and something as obvious as supply and demand may be markedly different to those you are familiar with. Read up on local market research reports, check out SaaS comparison sites, learn what are the trade associations in those areas, attend in-person and online international fairs and get to know who are the main players and stalk their websites and product reviews. Who supplies them and who are their key clients? What about government statistics and annual reports? What about brand recognition?
And don’t forget to check how your brand matches up and would be perceived in a new marketplace. How does your brand name translate in another language? (That can be disastrous!)
Addressing and exploring all of these options will assist in providing you with a clear sense of possible incremental revenue and help you set realistic expectations. It may sound obvious, but match your product development with the prospective new market’s requirements. As François Cazor for Forbes notes: Don’t underestimate the challenges involved in international expansion. Expansion for the sake of expansion or chasing after a mythical market you assume is untapped is unlikely to succeed. By contrast, the ideal recipe is to align product or service development with the local market’s needs. That takes understanding your local competition and mapping your marketing, messaging and unique value proposition around their needs.
When in Rome. Compliance breeds compliance and it’s always a good idea to be aware of and follow the rules with due diligence. From the first step of registering your business with the authorities of the country where you have chosen to expand, to creating localized agreements and contracts. Another country usually means other industry regulations to follow so ensure you are up to speed on all of the legal requirements. For example, your European lead development team has to be up-to-date and compliant with GDPR, the European privacy regulation. We have spoken about the possibility of expatriating existing staff and they will need the required and valid work visas — and, if things don’t work out, the required pay-outs. And don’t forget to maintain detailed records of each step of your expansion for global compliance.
If you are considering international expansion because of financial challenges in your home country, or a sharp sales decline at home, then it’s probably the wrong time to expand abroad. If your home market is strong and secure, you will be in a much better position to expand to new and unfamiliar markets internationally. If you do not have a solid financial foundation then you will not be able to draw on it in order to support the initial investment required until you realize a first return. So line up financing as a matter of priority and remember that insufficient financial resources are probably the most common problem in international expansions, which can have a serious impact on your entire company. It takes on average about a year to see a ROI in a new tech market or vertical, but there is plenty of evidence and appetite for growth and funding to include equity and investment, debt-funding, grants and business loans.
If you have a clear strategy and examine all the pitfalls, and conclude that the time is right for international expansion, then don’t wait too long. Once everything is in place and properly managed, it’s good to remember that your overseas competitors will not wait to expand to your home turf, so get the ball rolling. Now that you know what is required to prepare for international expansion, what are you waiting for?