When and how to scale a B2B enterprise internationally?
I have had the chance to attend many product meets, conferences, and meet many decision makers of various software enterprises. One question that always piques their interest is to know the right time to expand internationally. I have a few thoughts on the matter, and that states the very reason behind this article. This article is for enterprises that have been able to gain domestic success and is now looking for expanding to other markets.
I agree, to induce traction in the B2B software industry is a backbreaker. And if you have managed to win a few customers, Kudos to that. It is definitely a herculean task, and you have managed to stay in the game. I am a great believer of Darwin’s theory of evolution, and I go by his principle. If you wish to survive, you got to evolve. Same goes for enterprises, especially in software industries where constant innovation is the key to success. There is an interesting article on the transformation of Indian Software Enterprises by Dev Khare which I would like you to read. It illustrates the evolution of Indian software enterprise, and how they leveraged on their technologies to gain global strength. The evolution of software enterprises have been divided into four waves, coinciding with three trends:
1) Enterprise software moving from desktop to client-server to cloud
2) Evolution of Indian industry post 1991 liberalization
3) Increased experience of Indians at successful US product companies.
Since you have successfully completed the first step (delivering a product and getting a few customers), you must be thinking of international expansion. And let me guess, a few of your friends have already advised you to sell in APAC, an African company is in search for an alliance, you have heard that it’s easy to hire in Middle East, and so on. Trust me when I say this, you are not alone. Every B2B software Product company has thought the same, and many have done it.
Take a breather. There will be lots of opportunities that will present themselves, and most of them will seem quite lucrative, but the first one that comes your way is not the best.
Do your research around market size (Analysts, Reports, Competition) and identify the biggest market in the globe for the domain you are operating in. Rather than targeting the entire globe at once, one market where you can focus your resources yields better results. There’s a good chance that the largest market is the USA. ( If it’s India, and it’s large enough then you have identified a niche market. Kudos!.) But if it is US, what is stopping you from making that your next target market. The answer is most probably, “It is too expensive”. I agree, but it is also the biggest market for your product. You will get to compete with the best in the industry and create your own niche and prosper. Pinpoint on an unexplored vertical in that market, a vertical that has never been touched by competition. If this brings chills to your spine, retrace your steps and ask yourself why you started this company.
The second step is to acquire a few initial customers by executing an experimental PPC campaign targeted to potential US customers. Recruit a guy to manage the campaign, and wait for your first lead. Once you have a few prospective customers, make your first sale in that market. This would validate that your product would sell in the US.
Now that you are convinced that it is within your realm of possibility, establish an entity in US. It is not as hard as it sounds. Girish Mathrubootham, CEO of Customer Support provider, Freshdesk has clearly portrayed how their enterprises incorporated a Us corporation from outside the USA. He talks on how they were able to expand to US, and the basic requirements in doing so.
The third step is to start thinking about relevant partnerships and alliances in the ecosystem, create an inside sales and online lead generation process.
Now we fly to US, Yeah!, But it is still going to be expensive. So make sure you have enough fuel to reach your target. The marketing expenses will turn out to be huge and there is going to be a significant difference in how leads are generated. One example - Research on the PPC campaigns run by big shots in the industry and analyze on how they strategize their marketing expenses. They bid relevant keywords at exorbitant prices to keep the competition out (Relevant keywords are normally bid at 100-150 USD). New entrepreneurs find it hard to compete against these enterprises at these unwarranted prices.
Sales costs will be through the roof (Try Glassdoor and see your competitors’ sales guy’s pay grade). But don't let this turn you down. My advice is to start looking for venture capitalists, and there are plenty out there who are in pursuit of high-growth companies from India who want to sell to the west.
The main idea is to think beyond a few initial sales. Product leadership should be the main objective, rather than selling the cheapest product in the market. Maneuver your product to unparalleled functionality and craftsmanship through strategic and functional improvements. Identify that niche where you can make an offer they cannot refuse.
Going through the above steps, you would have developed a model and might have modified your product for the US market; this may tempt you to replicate this model for other markets in the future. But restrain yourself from doing so. No two markets are the same. Each market requires a clear understanding of you who are selling to, your competition, product positioning, pricing, cost structure and channels. Ensure that you have enough knowledge of the market to capitalize before you advance.
As Chanakya once said - Choose your wars wisely. Start by winning a few battles and then wage a full scale war.
About the Author:
Sachin Bhatia is the Co-founder and Executive Vice-President-Cloud Business at Drishti-soft Solutions. He is a contact center specialist, who has been instrumental in taking Drishti’s next-generation communications solutions to multiple geographies and has spearheaded the launch of its cloud contact center solution, Texo.