When to Expand Internationally

In today’s increasingly chaotic business environment, more companies are concerned about growth than ever. Uncertainty over changing economic and political conditions, inflation, and with some countries now in recession (or soon to be), there is a growing anxiety around customer demand and market share.

Recent higher central government interest rates and a tightening of VC capital has resulted in many companies being less willing or able to use VC investment or debt financing to paper over business model cracks. Instead, many companies are more open to exploring new markets in the quest to increase top line revenue.

Over the last 5 years in particular there has been a significant fluctuation in international expansion, with both increases and decreases from North America into Europe, and also into China and the far east. The model has frequently been to establish operations with the hire of an in-country GM and/or head of sales, but often without much market analysis in advance. It is after all hard to understand the dynamics of a foreign territory from afar, and in a fast changing world it’s often considered easier to just head out and give it a go.

But today, many US and European companies are at a crossroads. Do we double down on our domestic markets, farming existing accounts and developing new complementary offerings to serve their needs, or do we consider searching for new growth markets? As some of the failures from 2021-2023 have shown, speculative international expansion without thoughtful planning would be a courageous and potentially loss-making move.

Having worked internationally for nearly 20 years, helping companies in Europe and the US expand transatlantically, as well as into LatAm and APAC countries, here are 10 of our observations, questions and recommendations that might help with the decision-making process.

1. Be clear on the motivation for expansion

It’s hard to resist the allure of the unknown. As the last 2000+ years have shown, humans seem to have a passion for getting in a boat and just setting off to see what’s out there. Although the excitement of experiencing different cultures, food, and people might be somewhere in our subconscious, at a business level we need more objective, rational thinking.

Is our current domestic market really saturated? Are our product offerings really as mature and feature complete as we think? Perhaps revisiting customer feedback logs (maybe using AI tools to glean inferences) may identify some new customer pain points that could be addressed to unlock new lines of revenue.

Of the many potential global international markets, which one(s) are worth targeting, and why? Have particular buying signals been observed with competitive or adjacent product offerings, and does our offering have a unique value and competitive advantage – are we better / faster / cheaper? Often, for an online SaaS business, we may organically pick up international clients. They may give us free clues as to where our offerings resonate internationally.

The above focuses on a driver for expansion being increase in top-line revenue. But there may be benefits from a bottom-line cost reduction perspective, for example hiring local talent such as developers at more competitive rates than in our domestic market. There are often government incentives for remote companies to create jobs, such as in Southern Hemisphere and ASEAN countries, for example.

2. Get an understanding of a target market

The good news is that it’s easier than ever to get insights into a target market and industry vertical. Post-pandemic there are many on-line webinars / meetups that used to be in-person, and many useful platforms for exploring company backgrounds and markets globally. It is generally time-consuming work though, so a balance of dip testing for ourselves, engaging a market research company, and talking to friendly potential remote partners (such as sales channel partners, System Integrators, as well as software development shops) is usually worthwhile. The goal is to look for as many indicators and signals of trends and opportunities as possible.

What must not be missed is Senior Leadership Team (SLT) participation and buy-in for international expansion. Having one or more of the SLT members spend time in the most promising target market(s) in person, meeting potential partners, customers, attending events, is essential. International expansion requires courage and conviction, with SLT / board level commitment.

For a sales / growth-focused expansion initiative, the goal is to form an understanding of the real customer pain points and business challenges in a remote market, and not pre-emptively search for sales and ops partners and channels. Ideal Customer Profile (ICP) considerations are covered below, and the objective here is to seek first to understand the situation.

For an ops / dev-focused expansion plan, having an opportunity to meet in person local employers, developers, and customers of potential partners is very valuable. Companies live or die by their ability to work together in the face of adversity, and so this is our opportunity to evaluate the strength and commitment of our potential new business family members.

3. Be ready for expansion

As ideas form and insights develop, for a sales-focused growth expansion plan the target Ideal Customer Profile (ICP), personas involved as users, influencers, and economic buyers, the buying behavior of the target client segment must all be thoughtfully revisited. This will be central to the success of the expansion initiative, and is covered below. But at a readiness level, we must be prepared to change our GTM approach and potentially have regionalised, localized product features in a new market. If our assumption is that we can sell our offerings ‘as is’, then we may be unprepared for dealing with a different reality.

On the Ops side, there are options and considerations. Frequently we will need, for either regulatory reasons or to meet the buying criteria of larger companies, to have a legal presence in the target market. We should also be able to transact in the local currency in a tax-compliant way. Customers in foreign markets may have limited appetite to transact with us if we add additional friction to completing contracts, or make it hard for them to simply pay us. Small details like NDA and service contract legal jurisdiction, in the event of a dispute, matter: what’s our ability to participate in a foreign judiciary system, should a customer account fail in a worst case scenario?

On the product / offerings, sales and marketing side, internationalizing / localizing our product’s and company’s features, documentation, support, sales and operations language and functions needs to be planned. Global internet connectivity and latency is generally very good, but there may be emotional and regulatory reasons, as well as performance considerations, that mean that data residency and sovereignty, and compliance with local laws, necessitate local data storage in-country and federation of our back end systems to support a regional, distrbuted model.

For our sales Go-To-Market strategy, we have different options depending upon B2C, B2B, or B2B2C motion, and our ICP buying criteria and behaviors. Involving a local in-country sales channel partner can be a good way of both providing practical field team augmentation, as well as local knowledge. But this comes with a number of potential drawbacks and overheads, which are worth exploring: a) partner companies will require enablement, localized sales materials, and regular management, b) partners will probably also be selling competing offerings and so will need to be nurtured and incentivised to work on our behalf in preference over others, and c) should sales performance be lackluster, we may not find out if it was due to deficiencies in our product, or poor sales execution by the partner.

This may be obvious, but is frequently forgotten: having internal meetings, taking customer calls, and providing customer support 6-12 hours before or after our normal work day is exhausting. We need to be clear what our operating hours for the target market will be, and how we will provide staff coverage and appropriate remuneration, as well as mental wellbeing support. Offering a service with business hours that are 5+ hours out from the target market business hours timezone can be a barrier to sales.

4. The challenges of entering a new market

If we are clear on our need for international expansion, and have our eyes open on ops, product, sales and marketing preparation, we may still find that there are a range of cultural, legal and practical challenges serving a new international market. Most often, it is unexpected changes in competition, and increasingly unexpected political and economic challenges, that can present new challenges.

Particularly as AI-powered solutions and software development tools continue to accelerate product development, any technical advantage may be short-lived. New competition can arise, and existing incumbents can adapt as we disrupt their markets as a new entrant vendor. Having responsive, agile and fast Product Lifecycle Management (PLM), sales, and marketing functions will be essential to act on any new opportunities or threats.

The area that most likely presents challenges, however, is how our assumptions and former success with our GTM approach, ICP definition, and understanding of buyer personas and buying behaviors, can prove to be wrong in a new foreign market. To a certain extent a good sales channel partnership can alleviate the situation by giving preemptive advice as well as up to the minute insights and feedback on the evolving landscape. We must be willing to revisit all our assumptions, and take nothing as certain in a new market.

5. Validate, validate, validate!

With a defined target ICP, personas, and an understanding of the buying behavior for our target market, we must remember that these are always hypotheses that are based on assumptions. Just as in the early days capturing our initial domestic market, we must ‘stay scrappy’ and be willing to work in full startup mode. Velocity and speed of hypothesis validation through sales and marketing activity is far more important once engaged in a new market, than continued theoretical research on its own.

Once we have some initial sales success in a new market, these early customers, even if enthusiastic advocates and champions for our offerings, might not be representative of the true market potential. As always, these early wins inform our product and services roadmap, but do not define it. Continual validation and monitoring of the maturity of the target market is essential.

Another situation that can arise is that we experience high demand for technical trials, with client prospects requesting PoCs. Although this is a promising signal, again we must validate the sincerity and authenticity of the requests. The prospects may just be looking to learn from us, and are not yet ready to buy; early warnings where a large number of product or engineering team members participate, but economic buyers or senior stakeholders do not, are negative signs not to be ignored.

Even if a client prospect insists that they are genuinely open to procuring our solution, it’s always worth validating that they have recently, and hopefully regularly, bought from similarly-sized foreign companies before. If this will be the first time for them, and they usually buy from well-known vendors or partners, then we should be prepared to rethink our GTM engagement model, and if nothing else dig our heels in to talk to procurement as soon as possible during the sales cycle, in parallel with technical evaluation of our offerings. Buying behaviors always trump product requirements, and the known bad incumbent offerings will usually beat our unknown great offerings, for a client whose buying behavior is biased against supplier risk.

6. GTM strategy and PMF

This is easy to forget when expanding internationally: to obtain Product/Market Fit (PMF), we must always first find a market that addresses a defined business problem or pain point, then look for solutions in that market that solves those pain points, and then finally look for the product gap into which we can hopefully position ourselves and stand out with unique value.

Ideally we will have gone through this process with our initial domestic market success and GTM strategy definition to find our initial PMF. Repeating this approach in the target international market is essential.

It is tempting to assume that with successful market traction in our domestic market in our back pocket, that we can simply find ways to package our product offering in localized solutions in a new international market, but this is high risk. We can get lucky, but optimism is not a strategy.

7. New markets = new thinking

If we have taken on all the previous points and are engaged in a new market, validating as we go, we should still remain open to the need to revisit our founding business assumptions. Dusting off a business canvas to cross-check our positioning can be useful, and we should be willing to radically think different. Assumption impact mapping can be a powerful tool to identify which foundational assumptions, if found to be false, will have the biggest risk to our success, and prioritize our activities accordingly to prove or disprove them accordingly.

Often our initial sales success provides a useful rearview mirror from which tactics can be developed, but this may or may not be well calibrated for a new foreign market. Strategic thinking may turn out to be quite different, to capture the ‘best’ customers in the shortest timescales and meet our expansion goals.

8. The early hires are crucial

There may be a temptation to hire a regional General Manager (GM) as one of the first hires. This is understandable, in providing a point of presence to coordinate the process of expansion and enabling delegation of functions. But in practice, only 24% of companies entering Europe surveyed in 2023 hired a GM first, and in general even after 3 years of operations only 41% had one. Rather than hiring a GM, working with a regional expansion partner able to quarterback operations can accelerate the process and normally offer better value for money, particularly if they can operate on a fractional basis.

Similarly, essential regional functions such as HR, payroll, accounting, legal compliance, talent sourcing / recruitment, can all be outsourced to a local expansion partner. “HR as a service” (HRaaS) is increasingly common, and minimizes the risks and up front investments. Particularly for expansion into Europe, hiring and firing is not as easy as in the US. Candidates are more risk averse, notice periods are longer, and firing someone after 24 months in a role is subject to legal constraints.

It can be tempting to just start with a sales VP, a rockstar able to ‘smile and dial’ and crack new markets with their heroics. This tactic may work in the US, but is less likely to succeed in isolation in Europe or the rest of the world. Buying behaviors and sales cycles are more complex; most likely marketing activity to build the brand is essential to accelerate sales and deliver the shortest sales cycles.

Instead of hiring in-country GM, ops or a lone sales VP, it is better to focus on the roles that benefit most from an in-person presence, that represent a strategic investment in-country aligned with the expansion goals. Usually this would include sales, marketing, pre-sales, customer success and perhaps customer support. This will enable the fastest route to developing a repeatable sales motion and retention of customers.

9. Work visa considerations

Usually the early trips when establishing a presence in a foreign territory can be conducted with a tourist visa. For entry into the US, for example, the ESTA Visa Waiver program is fine for occasional trips to attend meetings and conferences. There are limits on the length of stay (90 days in a 180 day period) and it is unwise to try to push the limits, for example visiting for two months, leaving for a week, then returning for another two months. If for any reason you are denied entry at the US customs border, trying to re-enter the country at a later date can be very difficult.

If a work visa / permit is needed in order to effectively work as an employee in another country, then it is wise to start the process as early as possible. For entry into the US, the E-1 Treaty Trader Visa is normally the most appropriate visa, enabling a company to send one or more employees to the US to work. However, this visa normally is granted on the understanding that the majority of the company’s revenue comes, or will come, from the US via a US employer, and the visa application process is long (typically 5 months). The final decision cannot be appealed, and so careful planning and preparation (usually working with a specialist immigration visa law firm) is essential.

Alternatively for US immigration, an O-1 visa for “individuals with extraordinary ability or achievement” can be appropriate for senior team members, who perhaps are well known on the international conference circuit or are founders with a well-known VC. Again, using specialist immigration law firm support is highly advisable.

10. Enjoy the journey!

Finally, building a business internationally can be a wonderful experience. Eating different cuisine, and getting to see the world through the eyes of others, is a privilege that many of us would otherwise at best experience through the cocktail-tinged lenses of an annual summer vacation abroad.

If the thought of international travel leaves you cold, then perhaps you would be better off finding other colleagues who would value the opportunity and thrive in new environments.

But otherwise, there has never been a better time to work globally – if the business case and motivation for expansion is sound.

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