International Expansion Planning in Three Simple Steps

If you’re working on international expansion, the planning process can sometimes feel overwhelming. Which markets should we focus on? How much should we invest? What is the right timing for making those investments? How do we maximize international growth?

To determine where to make your investments for international growth, there are really only three steps you need to follow. They are:

  1. Measure the opportunity
  2. Assess the difficulty
  3. Plot your course

You can use the acronym MAP (measure, assess, plot) to easily remember these steps. Let’s take a closer look at each one.

Step #1: Measure the opportunity

How many customers could buy your product in each country? For example, let’s say you’re selling accounting software for small businesses. To calculate your market size, you’ll want to estimate how many small businesses exist around the world who might need your software. This is a fairly straightforward process, but often trips people up. To help you quantify the opportunity, here is a detailed list of steps to follow to calculate your global market size.

Avoid the temptation of focusing on groupings of countries, regions, or continents. Remember the golden rule of international expansion: one market = one country.

Shortcut: Rank countries by GDP to get a general sense of the opportunity offered by each market. Actual market opportunity for each country will vary depending on the industry you’re in, but for most businesses, using GDP as a proxy is a safe way to roughly prioritize and/or tier specific markets.

Here is where many people make the mistake of stopping and creating their list of priority countries to focus on, based on market size alone. Keep in mind that just because a country offers you many potential customers does not mean it should be a top target for your business. Timing is everything in international expansion, and you’ll want to consider your investments carefully along with the potential return on them.

Step #2: Assess the difficulty.

Once you understand how much opportunity exists in each country, you’ll next want to determine how hard it will be to reach each of the markets you’ve looked at above. Knowing the difficulty associated with a new market is even more important than knowing the market size.

Figuring out the difficulty of a given market will tell you how much time and money you’ll need to invest. To say this another way, if you don’t take the difficulty into account, you won’t see results as fast or as cost-effectively as you otherwise could. Surprisingly, this is one of the most commonly overlooked steps in international planning processes. Companies often get overly excited by the prospect of large markets, forgetting that the challenges of a market will dictate how fast, and to what degree, they can see success.

Determining the complexity of a market for your company is quite a bit more involved than figuring out the market size. Complexity depends on items that relate not just to the country itself, but to your own company’s ability to achieve product-market fit and operate successfully at the local level. It reminds me of the phrase “peeling the onion,” since there are multiple layers involved.

Here are the layers you’ll want to consider:

  • Path. What path or paths are available to you for going to market? Will you work with resellers? Strategic alliances? Product integrations? Direct sales force? Are there any countries where you already have built relationships or where you have unique opportunities available?
  • Ease. How easy will it be for your company to actually do business in other markets? Definitely use the ease of doing business scores to get a general sense of each country, which is a good baseline for ease of entry, but also a generic measure. In addition, you should also factor in time zones, which adds a great deal of complexity for most businesses. Depending on the business you’re in, the local competitive situation can also factor into this section. Also, local regulatory, cybersecurity, and data privacy issues may impact you more depending on what you’re selling and to which types of customers.
  • Economy. Do some basic economic homework on markets you’re considering. Is the economy itself stable? Is the purchasing power of businesses and consumers you sell on a growth trajectory? Is unemployment or inflation on the rise? If you succeed there, will it expose you to a high degree of currency fluctuation? If so, do you have hedging strategies ready to go? Does the country offer any benefits to aligned markets, such as trade agreements or shared currencies? Will you have a local bank account or collect via a reseller? Can local customers easily pay you, or will they be hit with local tax penalties for making a purchase from a foreign company? Do you offer local payment methods that are typical for this country?
  • Language. What countries already speak your company’s language? This is one of the simplest, but most important factors for you to consider. For example, if you’re a US-based company, the fastest path to international expansion is almost invariably via developed English-speaking markets with cultural similarity. These include markets like Canada, the United Kingdom, Ireland, Australia, and New Zealand. You can also see quick success in developed English-tolerant markets, such as the Nordic countries and Benelux, as well as developed markets with more cultural differences, such as Singapore and the UAE. As a classic example on the other end of the language spectrum, Japan is not a difficult country to do business in by many measures, but English proficiency is very low. Many Western companies underestimate how much of an impact this really has and how much investment will be needed in the Japanese language, across all areas of the business, to ensure strong success in the market. Localization is a strong path to growth, but usually one you’ll want to pursue after you have some international experience under your belt in your own language.

These four layers of difficulty that you’ll want to consider — Path, Ease, Economy, Language — make up the acronym PEEL, so it’s easy to remember as you think about peeling back the layers of this onion, which again, is the lynchpin of your international expansion strategy.

Shortcut: Sounds pretty basic, but before you go into a new market, talk to the people who already know the market. Talk to people who live in the market itself — your target customers, your partners and business contacts, and of course, your local employees if you have them. Their voices matter most.

Also, talk to people who lead international expansion at other companies. Many people have learned the hard way about venturing into other markets and are eager to prevent others from learning the same lessons. Look for companies that are similar to you, selling to the same types of customers, even if they are in different industries. It’s easy to get lost in data, but there is no better research you can do for your international expansion efforts than the qualitative kind.

Step #3: Plot your course.

Now that you understand the opportunity that awaits your business (from Step #1) and you have a sense of which countries will be the least and most difficult to enter (from Step #2), it’s time to figure out where you’re ready to focus. How do you plot the right course? As you keep in mind the outputs of the first two steps, here are several new elements to consider.

Look for Signs of Market Readiness

What are the early indications of readiness you’re seeing from different markets? Look at the data at the country level, no matter how small your presence is in each. The early signs you see in a market are extremely important indicators of future potential, so watch them closely. If you have partners in other countries, do any countries have outsized success compared to your home market? Is your average selling price much higher in some countries than others? Do some customers in certain countries grow or renew at higher rates?

Take a careful look at positive indicators, even if the data isn’t sizable yet. Chances are, these are “good fit” countries where you already have decent product market fit, even if they are not the biggest countries for you. You’re looking for market signals that will tell you where you should be leaning in more. When looking at these signs in early phases of expansion, pay less attention to your top of funnel metrics (such as traffic data which skews heavily toward a country’s population size), and look more closely at middle and bottom of funnel metrics instead, especially close rates, average sales cycle length, and customer and revenue retention metrics.

Determine Your Time Horizon

What is the time horizon that you’re working from? Every business has a natural operating cadence. SaaS businesses are often on a monthly cadence due to the focus on monthly recurring revenue (MRR). Many tech companies also operate on an annual or semi-annual cycle for planning. Public companies usually operate on a quarterly one too. Some businesses plan multiple years out into their future, especially when they are large. Smaller businesses tend to think in smaller time horizons. No matter the cadence, be sure to align your international plans to the larger, global target your company has already committed to.

Do you have a specific long-term revenue target or some other company “moon shot” target that you can work backward from? International planning normally requires thinking on longer time horizons than your domestic business might be accustomed to. This is why it’s very important to focus on specific countries, making a concentrated impact across a finite group of strategic targets, than spreading yourselves and your colleagues too thin. If you don’t prioritize and keep a clear focus, you’ll run the risk of addressing too many markets at once, which can create complexity.

For SaaS and e-commerce businesses especially, having large numbers of customers from many countries can be a natural consequence of attracting visitors to your website from many markets at once. It’s fine if you’re drawing in traffic and customers from all over the world, and to pay attention to these signals too. Just be careful not to assume that just because there is interest in your product or service from a given country that you have product-market fit there. Often, the markets that are hungriest for your product are ones that might not be easy to address, so you’ll need a clear and step-wise plan to target them, often with a longer time horizon than you might think.

Harness Enthusiasm for Local Markets

Chances are you have someone at your company who is excited to drive your international business forward. For many companies, it’s a person with passion to explore the world, an expat who wants to move home, or a combination of people with international interests, both personal and professional. Identify these employees, or even partners if you have them. Where is the passion, and how can you harness it and align it with the items you’ve outlined in the steps above?

Don’t underestimate the entrepreneurial spirit required to drive international expansion. Each new international venture requires a “founding team” who is committed to the market and passionate about your company’s success there. The characteristics of start-up founders are often the same as those who can be successful leading the charge for your international growth. Selecting leaders to pioneer your expansion into new markets can be tricky too. It’s hard to learn a new business and a new corporate culture overnight while also creating a “founding team” in a new country, and especially if it’s in another language.

Creating local leaders tends to work best when it’s someone tried, tested, and trusted by your company, as opposed to someone who simply knows the local market. Local leaders who know your business and industry well can be good asset too, especially if they are passionate about seeing growth in their own country. Keep an eye out for such people with passion, both internally and externally, and give them these opportunities.

And remember, it’s a lot easier to find such people internally if you’ve been hiring people with international backgrounds from the earliest days of your company history. Make it a recruitment priority to hire people who hail from other countries and speak other languages. These are usually the people who will know your business and a local market well enough to take it across borders.

Prioritize and Create Your Plan of Action

The last part is my favorite. Now you get to pull all these pieces together and narrow down your choices. This enables you to create a clear plan of action for your business with measurable goals. All international goals must tie back to your company’s broader business objectives in concrete ways.

To use a simple example, let’s say your company plans to add $4M in revenue next year and $2M should be from international. You’ve determined that Canada is a large enough market to be attractive (Step #1), and easy enough to do business in (Step #2). If your ASP is $20,000, you’ll need to close 100 customers.

Can your average salesperson close 2 deals per week? Or will you need more salespeople to achieve this goal? If so, perhaps you have a talented salesperson who can call on Canada from your home country and focus just on that market, and you backfill that person with another US rep to take over their current territory and quota.

Or, perhaps you have partners, or could obtain some, who can help you achieve this goal, and you work with them on a customized incentive plan to ensure that they help you hit this target. The key thing here is to focus more deeply on specific markets, and not go too shallow into too many at once. Often, a deeper focus on a smaller number of markets will take you further, faster.

This last set of items to focus on in Step #3 can be easily remembered with another acronym STEP: signs, time, enthusiasm, plan. Ultimately, the plan is your final output of this exercise, incorporating the details, looking back at the signs, making sure you have the right time horizon, integrating people who already have enthusiasm, and making sure you have done a good job at identifying the layers of complexity (PEEL) in these markets in step #2, and after getting a sense of market size in step #1.

Plan Your International Expansion

International expansion planning can seem overwhelming. But ultimately, the MAP process is fairly simple. You’ll encounter this process in numerous forms at different companies no matter the industry or home country. But these three steps are each important individually, and hugely powerful when combined. Make sure not to skimp on any of them. If demand for your product is high throughout the world, you may succeed in spite of it, but ultimately, your international growth won’t be as fast or as cost-effective as it could be.

Remember, market complexity is the single most important element to factor into your planning process to ensure steady, achievable international expansion success.

Market size is important too, but it’s really the “dreamer” component that gets people excited about how much opportunity there is for your business. That’s important too. However, your time and budget are not unlimited. Even with large injections of venture capital, you’ll want to show a strong ROI, so you have to make choices. Market complexity is the sometimes cold, hard “realist” view that tells you how much it will cost you (time + money) to enter that market. This is the view that your board, investors, and Finance team will rally behind — and you should too.

Once you have buy-in for the international growth dreams and understand the constraints involved in achieving them, plotting your course is down to the operational team. Your true expansion plan — the list of actions you should take, by when, and what the outcomes will be — can only come after you’ve dreamed big, and importantly, after you’ve taken a step back to look at market realities to determine what’s feasible.

After you’ve done those first two steps, you get to take the “action” view of the team who ultimately puts the concrete plans in place and makes them happen. That’s the fun part — leading the team toward these goals. In some companies a sole person creates the plan, or a cross-functional group, or a combination of folks. Your plan will be highly customized to your own company, your size, your business model, your resources, and your goals. All three elements of the MAP are important, as they combine to make up a comprehensive international expansion plan that is unique to your company and that can put you on a faster path to global success.

Nataly Kelly

Nataly is vice president of international operations and strategy at HubSpot and has previously held diverse roles leading marketing, research, product development, and localization. She writes for Harvard Business Review on topics of international marketing and business. Nataly grew up in rural Illinois, lives in Boston, and has visited 57 countries (so far).

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