International Expansion: How to Define and Implement the Right GTM Strategy
Part 3 of 4: Is International Expansion Right For Your Business
In part one of this four-part series, we explored the key drivers for geo expansion: the ‘why.’ In part two we investigated whether your organization was ready to tackle geographic expansion. In the third addition of this series, we will dive into the best go-to-market strategy or the ‘how.’ We will take a deep dive into your current model, the various go-to-market options you have, provide decision criteria for you to evaluate, and define the best approach. I will also walk through the best way to organize your teams and manage the expansion process.
First and foremost, it is important to leverage your existing go-to-market strategy. At this point, you’ve proven it works; it is well-documented, repeatable, and therefore should be scalable. Having said that, there may be some tactical modifications that need to be made, but your overall approach and strategy should remain intact. If you are utilizing a direct sales model, you will need to build a team that drives awareness, lead gen, sales, and is able to onboard and support your future customers. If you are utilizing a partner-driven model, you will need to ensure your product or platform is partner-friendly and you are able to leverage some of your existing relationships and partners. If you have a hybrid model that combines elements of both, I suggest you seriously consider locking in only one of the two. This will be more efficient, less of a drain on your organization, and will increase your chances of success.
I want to take a minute and diverge from the direct or indirect sales model and encourage you to explore two lesser-used approaches — two that I feel are, if executed properly, easier, more efficient, less distracting, and far less risky.
The first approach is Build, Operate, and Transfer (B.O.T.). I’ve used this approach successfully four times during my career. It can be constructed in many different ways but simply put, it is done by partnering with an existing organization, an individual, or a group of individuals to utilize an existing, or form a new, organization (newco) to bring your product to market (establish a presence, drive brand awareness, lead generation, sales, and support), and if successful, you simply acquire them. All elements of this process are defined upfront from day one, including the acquisition price or multiplier. For this use case, I have taken the lead and approached individuals or organizations, and, in some cases, they approached me in hopes of leveraging our brand and success in our home market. I’ve used B.O.T. to expand and grow revenue in the UK, Germany, and France and have also leveraged it to increase brand awareness and acquire free customers in the Asia Pacific and the Middle East. There are a myriad of details around successfully structuring a B.O.T. partnership — a subject for another time.
The second approach is through a merger or acquisition (M&A). It is by far my favorite approach to geo expansion; I’ve used it, and seen it used, successfully many times, twice in Germany and three times in the US. The goals inherent to this approach can vary. If you acquire a competitor, partner, or reseller in a new geo, the potential benefits are as follows:
· Speed to market
· Established presence / less risk
· Instant market expertise
· Expanded product portfolio
· Established team
· Instant uptick in ARR
· Expansion ARR — upsell and cross-sell opportunities
· Eliminated a competitor or increased margin
With this approach, there are inherent risks around cultural fit, integration, customer acceptance, product adoption, etc. but these can be addressed through proper planning and execution.
Regardless of the two options discussed above, odds are you will need to leverage your existing go-to-market model, so let’s focus on that.
Leverage your current model: It’s proven, it’s what you know, and your organization is built around it and try to avoid a hybrid approach.
· Important: Stick to your guns; there will be those in the market (consultants, those you interview, etc.) that assure you “this market is different… you’ll need to change your model, you’ll need to invest more, expect less, etc.” I can tell you from experience, 95% of the time your current go-to-market motion will work perfectly.
Utilize your existing network: This is not limited to your personal network, it extends to your executive team, your board, suppliers, consultants, and if you are selling through channel partners, their affiliates, and networks.
Do the research / know the market: Use internal resources, external consultants, or both to understand the market, the competitive landscape, your competitor’s go-to-market strategies, including product positioning and pricing, as well as market penetration and market share. Also, dive deep into user personas and customer profiles. Leverage these findings to accurately refine your market entry strategy, especially your product positioning, differentiators, and pricing. Again, minor tweaks to fit the local market.
· Important: There is no better way to gain market insights than to perform real and mock interviews for market leads as well as sales and marketing execs. Target people that currently work for your competitors. Ask them pointed questions and get them talking, not only about the market but also about their strategy, what has worked, not, and how they would run things, in detail. It’s likely they want the job so they will be incredibly open and you will gain valuable insights.
Enter with commitment and intent: If you’ve checked all the boxes above and are intent on entering into a new market, then do so with commitment and intent. We’ve all been tempted to put a person on the ground to explore the opportunity and see how it goes, or possibly engaged a channel partner to explore options. In my opinion this is the wrong approach, a waste of time. Do the hard work and enter the market in a big way, commit.
Create a solid strategy and tactical plan: Engage with your team and define your GTM strategy as well as the tactical operational plan that sits underneath it.
Create a project plan: An actual detailed project plan that defines the market rollout, hiring plan, key deliverables and dependencies, timeline, etc., is mandatory to keep track of and to drive all the moving parts within the organization to ensure success. It will also dovetail into the financial model.
Model it: Create a financial model that includes your bottoms-up sales motion, ARR targets, all market entry, human capital, and sales and marketing costs, etc. This is a great exercise-it forces you to understand the costs related to the project as well as commit to a launch and execution plan and budget. It will be instrumental in helping you truly understand the project you’re about to undertake.
Don’t neglect the corporate, legal, and tax research: Be sure your legal and accounting team understand the legal, finance, regulatory, and tax issues that come with operating in a new jurisdiction. Don’t be caught off guard or let this bite you in the *%^# later. Especially in the areas of employee retention and termination regulations, accounting standards, and permanent establishment taxation fronts.
· Note: Your expansion initiative will require research, strategy and a tactical plan supported by a project plan and financial model as well as an understanding of legal and tax ramifications to obtain board approval.
Benchmark Guidance: As a general rule I like to see the initial cost budget around $1.0 to $1.4 million generating between $500,000 and a million in ARR year one and has line of sight to cash flow break even within 18 months. This may vary depending on the size of the market and the average contract value.
Key person: it’s imperative to trust someone from your existing team who knows your current GTM strategy and has a proven track record to lead the charge. An added plus is someone who understands the culture and speaks the language of your target country. I admit I’ve only seen this happen once. It’s best if this person can manage the planning and startup phase as well as the execution phase. I’ve made the mistake of hiring a local in-market expert to build out the initial GTM and team. Once in the US and once in China. Both times I regretted it and went back to plan A and put in an existing member of my team.
Build the team: It goes without saying that you need to hire a local team. Be conscious of the cadence and ensure that it is realistic; don’t hire too fast or miss your targets. In addition, don’t overlook the fact that you may need to hire personnel in your home office to support the new initiative and team. This generally comes in the form of a project manager or a sales ops person.
· Important: It goes without saying that you need to hire the best people. Bear in mind that the consequences of not getting it right when you are managing them from afar, and also have to deal with foreign regulatory and employment laws, makes missing the mark 5x more painful.
· Important: Never give the person who owns the revenue or ARR number the market lead or market manager position. Building a successful sales and GTM org and hitting the growth targets is hard; it demands full-time attention. If you distract them with day-to-day operations, they will be drawn to the easier operational tasks and, without fail, will neglect their sales obligations. It’s human nature. For that reason, I never combine the two; in fact, even in a mature organization, I cringe if someone suggests we hire or promote the existing CRO to a COO/CRO position. Seen it fail many times. The person who owns the revenue number should own the revenue number. End of story.
Centralize: For cost, efficiency, and communication reasons try to centralize as many functions as possible. Especially early on, support the new geo as much as possible from home. Legal, accounting, HR come to mind. Use local resources, firms and consultants initially but once established, make a concerted effort to manage centrally. This also fights the formation of silos and fiefdoms within the organization. Avoid creating large organizations in each geo.
Make it a priority: You might say to yourself: “OK, we’ve leveraged our existing GTM, defined the plan and built the model, we have obtained board approval, hired the team and have launched… finally! We can now let them get on with it and get back to all the things I’ve neglected during the process.” This is the wrong approach! The real test lies in the execution and delivery phase, where the commitment to the expansion initiative needs to remain a top priority. Planning is easy but execution and delivery is hard. Through your actions, you can ensure the entire organization is aligned, they understand the size of the opportunity and that it is a priority. Make sure your new satellite team feels supported; that they do not feel like an island. You can do this through overcommunicating, weekly check-ins and sales reviews, by including them in the monthly all hands and the quarterly S&M planning sessions and by making sure at least one member of the executive team visits the market, and updates the team, at least once a quarter. If this ask is too much or going to be a distraction, you are not ready to expand outside of your home market.
I want to emphasize three key things: Enter the market with commitment and intent, trust an internal person with a proven track record to plan and execute on the ground and ensure the entire organization supports expansion efforts.
Let’s now briefly discuss organization and day-to-day management. For starters you need to ensure the org structure, ownership and reporting lines are clear. There needs to be an agreed-upon budget as well as a budget owner and the timing and cadence of the rollout needs to be clearly defined. Be attentive and ensure the new org. is developing in line with your existing culture of execution and delivery. And keep in mind that you’ll need to allow for initial hiccups caused by distance, time zones, language and culture differences.
When entering a new market, the initial team is focused on growing brand awareness, the sales and marketing motion, etc. and once the customer acquisition engine kicks in you’ll need to focus on onboarding and support. The organization will grow as you gain traction and succeed.
I like to view a new geo and its team as a simple extension of the existing organization. Not so dissimilar to splitting the US into East and West. Initially, your sales and marketing organization will cover the entire United States or perhaps the entire UK. As you refine your go-to-market strategy, prove market fit and scale, you will need to split the country into regions, East and West. Again, your new market is simply a new region — manage it accordingly. I generally have the new head of sales report directly into the existing chief revenue officer. Again, I want to emphasize this is a new sales team or an extension of your existing sales team, it is not a standalone office. The only delta is distance and time zone.
In summary, successful international expansion should not be viewed as a simple way to simply increase revenue, it requires a real need, strategic planning, and intent. Whether leveraging your existing strategies or exploring one of the lesser used approaches I spoke about, expanding internationally is a great opportunity if leveraged at the right time, when you are ready. And it’s not that complicated; it’s simply an extension of your existing team adapting to new region(s) while maintaining a unified approach. By following the principles defined in this series, your organization can confidently embark on a “take over the world” strategy!
I wish you a successful expansion!
