4 Crucial Steps to Expanding Your Startup Internationally

Originally published on http://www.appsterhq.com

There comes a point in the lifecycle of many startups where a founder must decide whether, and if so then how, to expand into new markets.

  • If you try and launch your operations into other countries too early or without performing your due diligence then you ultimately risk sinking your entire company,
  • but if you wait too long by failing to capitalize on opportunities for international growth then you will lose out on chances to scale and build your brand.

In this article I’ll discuss 4 key steps to successfully expanding your startup beyond your home country.

International Expansion: Benefits and Challenges

Expanding your startup by developing operations on a global scale brings with it a host of potential benefits, including:

  • Additional revenue streams: expanding into new countries exposes you to broader customer bases through which you can increase your number of paying clients, boost your product/service sales, and generate greater income;
  • More resources and supplies: international expansion opens up many new opportunities for your company to acquire new resources and supplies, including capital (funding), expertise, and technologies;
  • Greater insulation against market volatility: by definition, operating in multiple markets makes your startup less immune to radical shifts (e.g., downturns) in the economy because your presence in numerous countries allow you to continue operating effectively even when one market suddenly suffers a slump;
  • Increased talent pool: pursuing global expansion potentially means opening your company up to millions of new and skilled candidates who can strengthen the talent of your workforce; and
  • Opportunities to increase diversity: global expansion brings with it the possibility to partner with, and/or hire, individuals across a wide range of cultural, racial/ethnic, religious, linguistic, and gender identities (sources: 1, 2, 3).

At the same time, startups that attempt to grow their businesses by launching into international markets are likely to face one or more of the following key challenges:

  • Difficulties finding talented personnel: Alina Dizik points out that finding local talent can be a big challenge for startups operating in new jurisdictions because 1) “some countries simply do not have enough of the skilled labor” that startups require and 2) “established local companies that know where to find talent and how to recruit local candidates” might have the upper-hand in hiring the most qualified people;
  • Complications raising the necessary capital: international expansion can be a very costly endeavour, with some startups being unable to raise enough capital to move into, and/or to keep operating within, new countries;
  • Tax and other regulatory headaches: without getting into the details, let’s just say that global expansion brings with it a host of tax and regulatory complications that, if not handled very carefully by professionals, can result in serious financial (and possibly legal) consequences for your startup; and
  • Difficulties adjusting to unique cultural traditions and customs: from hiring practices, sales processes, and customer purchasing habits to languages, tastes, and work cultures — it can sometimes be quite difficult for a startup to effectively tailor its business practices and products/services to local customs in foreign markets (sources: 1, 2, 3).

With these potential benefits and challenges covered, let’s now consider 4 crucial steps to successfully expanding your startup into new countries.

1. Have a Solid Domestic Operation

In most cases, it’s essential that you first establish a solid domestic operation before attempting to expand internationally.

Successfully launching overseas requires building on what you’ve already accomplished in your home country rather than attempting to create an entirely new venture without any regard for what you’ve been doing in your primary domestic market.

Yes, the Internet makes it possible for certain kinds of startups to be “international” from their very beginnings, e.g., companies that sell digital apps across the world.

This, however, is not the same as, for example, attempting to launch operations in Africa or Asia before establishing a functional business in Canada or Australia, where your headquarters are actually located and your company currently operates.

If your startup is not quite ready to expand internationally because you haven’t yet solidified your domestic operations then be sure to check out the following Appster resources, which detail many key aspects of successfully launching and scaling high growth startups:

Assuming that you are ready for international expansion, let’s consider some tactics for doing so.

2. Confirm That International Demand Exists

Expanding your company overseas requires extensive planning in advance, i.e., just as much — if not more than — what’s required when you launch a company domestically.

As a founder, you need to dedicate as much time, effort, and care to ascertaining the needs of international markets and foreign customers as you do to the preferences of domestic industries and clients.

Before taking any concrete action toward international expansion, you absolutely must first ensure that a market exists for your product/service.

In this context, David Lee, CFO at Stratajet, warns startups not to be too eager:

“There are many barriers to going international. Don’t go too soon. There’s a global market, global opportunity, it gets investors excited, but you also have to remember that going international has a significant cost.
It takes time, it takes capital, it takes management, organisational bandwidth, and so actually making sure that you’re not doing too much too soon is, I think, critical.”

Indeed, this is precisely why Saalim Chowdhury, venture capitalist at 500 Startups, stresses the importance of gathering data about foreign markets:

“The reality is if you’re doing well in your own country in this day and age, where we have web-based distribution, you will get enquiries from other markets with people from other countries wanting your product.
You’ve got to do your analytics however because they may not reach out to you and if that’s the case then you’ll struggle to figure out how you should be trying to serve those folks.”

Nicole Fallon similarly emphasizes the notion that startups must “invest time and energy into researching potential foreign markets” because “a product that sells well in one’s home country may not necessarily have the same appeal elsewhere.”

How, though, should you go about calculating the size, shape, and demand of foreign markets?

Here are some key tactics to employ:

  1. As a preliminary, make sure you clearly understand the fundamentals of: market demand; monetizable customer pain; product-market fit; the differences between total available market, serviceable available market, and target market; tried and tested techniques for calculating local market size; and of “crossing the chasm” — see our articles (1, 2, 3, 4, 5) for guidance.
  2. Research your competition: learn as much as you can about companies similar to yours that are currently operating in the specific foreign markets that you intend to infiltrate; collect data on business plans, sales figures, products, targeted demographics, and so on. Also, pay attention to the histories of companies that have transitioned into these global markets: how can your startup learn from their successes and failures?
  3. Use simple web campaigns and capture forms: a relatively inexpensive way to gauge demand for your product/service in a foreign market is to launch a simple web campaign, consisting of a landing page and the purchasing of specific AdWords terms, that targets consumers in the country(ies) in which you’d like to expand. You can pair this with the use of capture forms that allow prospects to sign up for your mailing list. This approach not only let you estimate how much interest there is in your company’s offering(s) but you can also leverage this list at a later date when you actually start operating overseas.
  4. “Suit up” and physically travel to the specific countries in which you hope to launch: Nicole Fallon explains this strategy well:
“It’s often advisable to travel to the country or countries you want to expand into in order to really do your homework and get a first-hand idea of how your business will fare.
This will give you the opportunity to not only conduct research and test your product in the foreign marketplace, but also to experience the culture and social norms of the people you’ll be marketing to.”

The importance of this final point cannot be under-stated.

Tapping into existing business and entrepreneurial networks operating in your startup’s new target market can help you establish key partners in the region.

Local entrepreneurial and business organizations can also function as resources for helping you become “acclimated” to the cultural, social, and economic landscapes of new countries.

It is, thus, imperative that representatives from your company travel internationally as much as is reasonably possible.

Whilst taking meetings in person is a lengthy process, “having boots on the ground” will often produce better results — in terms of establishing real business relationships — than merely resorting to communicating online (e.g., via Skype).

3. Ensure That You Possess Sufficient Resources

As a startup looking to expand into international markets, you must ensure that your company possesses adequate resources — in terms of finance, technology, personnel, etc. — to continue domestic operations whilst launching and operating in foreign markets.

Nicole Fallon puts the matter like this:

“Trying to juggle an overseas operation while maintaining your current domestic customer base with a small staff is incredibly difficult, and you likely won’t be able to sustain your growth. Before you decide to expand, make sure you have the financial and structural stability to add staff members who can handle the new influx of work that comes with such growth.”

In this context, then, not only must you compile a team dedicated explicitly to international expansion but you also must examine how the operations at your home office might change if you send some of your top employees overseas to run the new operation.

Additionally, you must explicitly consider the kinds and amounts of resources you will need on the ground in the new markets.

For starters, you will usually require a physical office.

And, if your company creates physical goods then manufacturing, distribution, and warehousing all must be established as well.

Again, this is another reason why it’s vital to try and establish real relationships with business partners overseas: in the absence of such concrete connections, your chances of success drop dramatically.

Such relationships, of course, take lots of time and money to establish, which once again emphasizes the need to raise sufficient cash before attempting to expand internationally.

4. Pay Attention to Culture

Successful global expansion requires that you pay lots of attention to culture — both the business culture of your startup and of your new commercial partners and the local social and cultural realities of the new areas into which you’re expanding.

International growth is likely to affect your startup’s business culture in two ways:

  1. The vision, philosophy, and key objectives of your company will gradually evolve as you devote more time and energy to building a global brand and creating products/services with global reach; and
  2. Your overseas employees will tend to reflect the values of their local cultures, which contributes to your ability to effectively conduct business in other countries but it also means that you must take care to ensure that your startup continues to promote a shared vision and set of core principles across different continents.

Thus, be sure to protect against the possibility of your company’s philosophical core fading away as your international operations become more and more financially successful.

At the same time, much care has to be taken to ensure that strong relationships can form organically within your new markets.

Your goal here must be to establish meaningful and authentic connections that facilitate successful working partnerships within the local culture.

The last thing you want is for your company to come across an outside force with little understanding of foreign market needs, local customs, and regional ways of living.

Make sure you do your research by learning about the needs of the local market and the values and habits of the local people.

This will require:

  • Translating your marketing messages and products/services into local languages and ensuring that meaning is not lost along the way; and
  • Determining the extent to which foreign markets expect your company to adapt to local customs and values (something quite common in France, Japan, and various nations of the Middle East) (source).

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Originally published at http://www.appsterhq.com
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