10 tips for entering the German market
Insights from last Ventech Meetup
Last week, Ventech organized its quarterly Meetup on a subject which is key to any start-up: how to expand internationally?
Five very experienced speakers shared their tips on the German market:
- Emmanuel Cassimatis, Director Private Equity at SAP
- Denis Ladegaillerie, CEO &co-fondateur at Believe Digital, global leader in online music distribution
- Matthieu Birach, International Growth at doctolib
- Laurent Auber, expert at Pramex, a consulting firm for international development and transactions of small- and mid-caps
- Jan Peter Heyer, German corporate lawyer at BMH BRAUTIGAM
Through the moderation of Mercurr, a B2B Marketplace for international expansion.
For you guys, here are the top 10 pieces of advice that emerged from the panel
WHAT TO DO BEFORE EXPANDING IN GERMANY
1.Make sure you’re ready to go!
Germany is a mature market. To be able to face deeply rooted competitors, make sure that your internal processes are tried and tested and that you know which KPIs to follow to monitor and improve your business.
2.Build you own immersion program
Before actually starting your business in Germany, take time to spend a few weeks there to discuss with the key local stakeholders. They will feel more confortable to share their view on the market while you’re not on the ground yet. It will help you a lot to plan your entry strategy but these talks will also make a few names of experts emerge. And guess what, this is your list of potential country managers ;)
3. Budget at least €150k- 200k for your German expansion
This includes the cost of your country manager before your first incoming cash flows (€80–90k), the cost of travels (€10k) and the costs to set-up the new business (legal fees, offices…).
4.Berlin, Munich, or Frankfort? It’s time to select the right city!
Berlin is a good place to start your German expansion: the start-ups ecosystem is flourishing; you can easily find your early adopters/first leads there. It’s also a hub spot to hire key employees and to find local investors.
But Berlin is a gateway before you go to other cities! Unlike France, the German market is incredibly decentralized and depending on your business, you’d better be based in another city: Berlin is the home gaming (and other creative sectors), Frankfurt is for the fintech industry, Munich is great for high-end tech products and Düsseldorf hosts a lot of B2B software companies.
5.You will be no one in Germany without a GMBH*
95% of German companies are GMBH. Setup yours! The minimum share capital required to establish a GmbH is €25k. At the time of registration, at least half of it (€12.5k) must be actually contributed on a bank account.
*GmbH: Gesselschaft mit beschränkter Haftung is the German pendant for LLC.
HOW TO RECRUIT IN GERMANY
6. Forget about emotion and go for numbers!
German candidates don’t care about the “equity story” of the company. They want to hear about facts, numbers and objectives. Also, don’t forget to respect the deadlines you fixed.
7.Adapt your recruitment package
As a foreign recruiter you might be surprised by the wage tax withholding system: be sure you adapt the gross salaries you offer. Also, German candidates don’t require the same benefits than French ones as part of their remuneration package . Did you know that company-cars were representing as much as 30% of the German car market ?
To give you an idea of the local trends, your should expect the following costs to recruit a country manager (add a plus 20% for welfare costs):
. €25k to €50k/year for a junior profile (<2 years’ experience),
. €50k to €80k/year for a senior profile (2-6 years’ experience)
. €80k+/year for an expert profile (>6 years’ experience)
Also good to know, the employment market for companies with less than 10 employees is very flexible. You can dismiss employees with a one month advance notice without paying any compensations…
8. Your second German hire after a GM should be a Talent Manager
Poaching is quite complex in Germany as employees are more loyal to their companies and stay longer in their job than any other European country. Having a local Talent Manager on board will make the difference.
ADAPT YOUR SALES PROCESS
9. Expect longer sales cycles
German customers are also loyal & sticky, which helps on the retention side, but which also leads to longer sales cycles. On the B2B-side, decisions are made with more people involved.
10.Customer support and delivery should become your best friends
German customers have high expectations in terms of quality of service. Needless to say, you should definitely translate your business documentation & General Terms and Conditions — English is not enough (if you want to be taken seriously).
Last but not least: be patient. Our experts agreed on the fact that it takes up to 3 years to become a well established player in Germany. A multi-local strategy is long to build… but brings a valuation premium.
