So you think you’re ready for U.S. expansion? If you’re seriously pondering this question, congratulations! First, your startup must have been among the 10 percent fortunate enough to continue the journey, instead of having to pack your bags and go home. Then, you achieved solid product/market fit and have a well-established reputation in your home market. Now you’re ready to expand your horizons. Break a bottle of champagne across the bow of your Goodship B2B! But before you set sail, face your true north and give an honest assessment of your readiness.
What we aim to cover here are two main areas: “Preparing for the Journey,” with three prerequisites to expansion, and “The Journey of Building Begins,” laying out the three stages of expansion. The former will enumerate the critical elements that create the right conditions for success, sprinkled with a few caveats or roadblocks. The latter is the map to the ultimate destination/objective:
GOAL: To build a predictable and scalable customer-acquisition strategy
in the U.S. market.
Preparing for the Journey
Let’s begin by taking a look at your current team, process, and resources. Think of these critical elements as your coordinates that plot your starting point. This is your current context in the grand scheme of market expansion.
Your Team (X-Axis)
Building a local business requires a mix of skills from marketing, sales, customer success, and operations. Ask yourself: Is the team I have in place ready? Do my sales and marketing leaders have the right skills, experience, and availability for expansion? As founder and/or CEO, am I (or is one of my co-founders) ready to champion the initiative and give this serious step the time and attention it requires?If you can’t answer the last question in the affirmative, you may want to turn your ship around, but the other two questions could be solved by finding the right local partner who is highly entrepreneurial. Such a partner can serve as a co-captain who can objectively analyze your existing team, and identify and fill potential gaps necessary to enter the U.S. market.
ROADBLOCK: Hiring a single person for your U.S. outpost.
This is a common first step that’s usually not that fruitful and often leads to frustration.
It’s usually a lone specialist (e.g. “Senior Enterprise Account Executive”) who has spent most of their career in that role. This person might work very well in a highly structured, well-optimized sales system for a recognizable brand name. Their focus is closing deals, the leads for which are generated and qualified by their team. Unfortunately, they will probably struggle when working mostly solo for an unknown startup where they have to build the initial acquisition strategy and sales process. They’re responsible for all of the sales enablement materials, and also for hunting, closing, and performing some customer-success functions.
Your Processes (Y-Axis)
The U.S. is a hyper-competitive, sophisticated market that requires operational polish from its vendors and suppliers. Ideally, you have a validated local (as in home country) sales process that you can build on. Your team must be working within a framework that has proven to capture leads, close sales, and keep customers. Additionally, if your team isn’t already customer-success minded—at a level matching the demands of U.S. customers—make it a high priority to provide training to remedy that. We’ve seen, too often, teams caught flat-footed when expected to deliver same-day response times to critical client requests.
If your operations sit at the intersection of hope and chaos, you may not be ready to expand and compete. Don’t be fooled by the American smile. U.S. clients are friendly and forgiving…until something goes wrong that costs them a lot of money or makes a decision-maker look bad. A lack of process is like setting a trap for yourself.
Your Resources (Z-Axis)
Time and money—it’s important to assess your resources and reserves in these two areas. Are you well-capitalized? If not, what is your net monthly positive cash flow? Are you prepared to let a 12-month discovery process unfold?
By our estimation, an investment of at least $250K will be required to test product/market fit in the U.S. Another way to estimate an investment in international expansion is a “rule of thumb” according to Rob Moffat of Balderton Capital, a venture-capital firm based in London. He says to “budget enough cash and time so that the international market can reach 10 percent of the scale of your home market. Then double both numbers.”
ROADBLOCK: The expectation that U.S. expansion will be self-funding.
We’ve seen some startups give their effort three months to generate revenue, which they plan to reinvest in expansion. On the fourth month, they are inclined to pull the plug if there’s no revenue. There are simply too many variables to account for and unknowns to be known in selling into a new market. There are risks for both you and your prospective clients. If you need or expect to generate revenue within the first three months in a new country, you may need to rethink your readiness for expansion.
The Journey of Building Begins
After working with a multitude of B2B clients, we’ve seen the success of this approach play out every time. There are essentially three stages: Go-to-Market, Market Validation, and Market Expansion. This proven framework leaves room for you to adjust to your unique circumstances and allow for experimentation, while guarding against the biases and hunches in decision making.
Count this one as a self-imposed roadblock, or a checkpoint of sorts, on your journey. Before your team takes on the heavy lift of entry into a competitive market, ask: Are you reading the market correctly? Your team must do the homework to ensure that you’re not entering a market that is mature, saturated, or even worse, one that’s declining.
Your team must be able to identify market trends. In funnel speak, the buyers must be in the awareness to consideration phases of the problem or pain point.They may be aware of the developing ecosystem of solutions, but are not yet fixated on a solution. In other words, there’s room for new players. There will be a lot of upside to being in this position, provided that you’re prepared for the tradeoff of being the one to educate the market, which can be costly.
Go-to-Market Strategy (Timeline: 1 Month)
This a month for laying down the foundation to gain a deep understanding of where you are in the marketplace. We’ll find out how you stack up against the competition and who your ideal customer is in the U.S. This process results in a well-defined Initial Customer-Acquisition Strategy.
- Competitive Analysis. In your home market, your customers know you; it’s why they’ve picked you over your competitors. Discovering your identity and context in a new market starts with a comprehensive competitive analysis. It’s important to evaluate the traction of your competitors—their funding, market focus, marketing channels, and strategy. This will help you identify your competitive advantages and how to articulate it to prospective customers in a way that creates separation from the competition.
- Buyer Persona Workshop: Next up is getting to know the buyers in your new market. It’s highly recommended to conduct a Buyer Persona workshop. This is very useful in the selling process as it puts a human face onto your ideal customer. Knowing the traits and motivations of decision makers and influencers will inform and direct your branding and marketing. We may find that the title/role, function, or department differ greatly from what they are in your home market. Here is our complimentary Buyer Persona Template.
- Marketing Strategy: A thorough review of your current marketing strategy and materials is important. Identify which pieces might also work for the U.S. market and what’s missing according to a content plan mapped against the Buyer’s Journey. All appropriate marketing materials (e.g. website, blog posts, guides, and whitepapers) should be flagged for localization. Check our our complimentary Content Mapping Worksheet and Marketing Channel Plan.
- Sales Strategy: Take a deep dive into your sales process in order to optimize for the U.S., but don’t overthink it, as the best way to test a sales process is by running prospects through it. All appropriate sales-enablement materials (e.g. presentation decks, case studies) should be flagged for localization.
Now it’s time to pull it all together—everything you know about your offering vis-a-vis your competitors’ and who your ideal customer is. Plus, you’re now armed and ready with content designed for U.S. buyers. Your prize/deliverable:
GOAL: Initial Customer-Acquisition Strategy
We recommend that you start with a narrow niche—i.e., two verticals at most, and focus on a specific problem you are able to solve better than anyone else. Below are your options for acquiring customers. It’s best to stay focused to maximize your learning about a particular channel.
- Outbound Sales: This is the most affordable, by far, and most direct. These leads will be qualified since you’re able to target exactly who you want; however, they may not be sales-ready. General timing: six months or longer sales cycle.
- Partnerships: This strategy is not appropriate for all product types. Developing a channel of system integrators and consulting partners, resellers, or technology partners is resource-intensive. Developing partnerships requires a proven, highly entrepreneurial team, that can close and onboard/train partners. With partnerships, there is an extra step, because you first have to sign and train partners (the first sales cycle), and then enable them to sell to their end clients (the second sales cycle). General timing: longer than Outbound Sales, six to 12 months.
- Paid (Outbound) Marketing Programs:
- Paid Search: These will be high-intent leads, as they are actively searching for a solution; however, they may not necessarily be qualified since you’re unable to target specific companies and decision makers. Cost has high variability, as you may need to budget more for competitive keywords or phrases. General timing: The shortest sales cycle.
- Paid Social: Consider this for your top-of-the-funnel awareness campaigns. Don’t expect to see a high-intent signal among these leads. General timing: Longer sales cycle than Paid Search because of the lack of intent.
Why didn’t we include inbound marketing? Unlike an outbound marketing program, which can start generating leads immediately after going live, inbound marketing is a marathon, not a sprint. If your goal is to validate a market in a single year, then our general advice is not to invest heavily into inbound marketing until after 12 months, as it generally takes 12–24 months before you start seeing significant success with inbound.
Market Validation (Timeline: 6–12 Months)
It’s execution time! This phase will be focused on building your foundation. Pick no more than two or three customer-acquisition channels, then test each channel and double down on the one that’s generating the most traction.
Your team will be in intense learning mode to lock down the local customer-success strategy. Keep your eye on this prize/deliverable:
GOAL: U.S. Case Studies as Social Proof
These case studies will be critical in helping scale the business, and in later rounds, these will prove to be very useful, especially as you try to move up-market where customers want to de-risk their investment.
ROADBLOCK: Beware the false positive, thinking you have
product/market fit (PMF) with a handful of customers.
We’ve seen startup teams that manage to secure a few early adopters. Even if they’ve neither done the homework nor applied any discipline to their sales approach.
So, how do you know that you’ve achieved true product/market fit? When you have at least 10–30 paying customers within a specific vertical and your net promoter score (NPS) is north of 40. Reaching this milestone will allow you to create segmentation you can rely on based on a focused sample size to study. But don’t hang your hat just yet.
“PMF is not a magic elixir. It signifies an important milestone that is necessary, but not sufficient, for success. Once a company has PMF, it still must find a sustainable growth model and create a moat against competitors, and so on.” Read more about PMF here: 12 Things About Product/Market Fit.
Market Expansion (Timeline: Next 6 Months)
Congratulations again! You now have your first set of U.S. customers and the social proof to help you scale. The next six months will be devoted to strengthening the foundation. You’ll be putting down some roots and establishing a permanent outpost in your new country.
- Local Operations, Legal, and Accounting.
- Registering as a Local Entity: Being a bona fide U.S. company will further smooth the path for acquiring local customers. They’ll be more at ease with familiar legal protection and language when signing an agreement with a U.S. entity. You can hire a U.S. law firm that is well-versed with the needs of a startup and will likely give you favorable terms and fees.
- Local Office: You have a few options here based on your needs and policy, such as a coworking space (e.g. WeWork). You may need a local address only and have all your team work remotely.
- Local Bank Account: After registering your business and securing a local address, open a U.S. bank account. This will make it easier for local customers to send you payments, instead of pointing them to an offshore account.
- Accounting: Hire a local accountant who understands the tax laws (federal, state, and municipal). Again, there are many accountants or accounting firms that are familiar with the needs of a tech startup.
- Next Round of Local Hires: These first hires will be devoted to keeping your early customers happy. They will be very important in helping you secure more customers!
- Customer Success
- Business Development & Sales
- Technical Sales
- Scale and Expand: Keep building on the one customer-acquisition channel that’s delivering results. Simultaneously, you can start testing additional channels with confidence. At the end of the 13-month process, here’s what you can look forward to knowing:
- Your exact customer-acquisition cost (CAC)
- How to project the lifetime value (LTV) of your customers
- To aim for a ratio of CAC:LTV of 1:3. This is another good rule of thumb if you’re a SaaS player. The lifetime value of a client must be three times what it cost you to acquire them, otherwise the business model is unsustainable in the long term.
Ultimately, with the approach laid out, you’ll end up with something more valuable than the one-to-three customers you might luck upon without a process. You’ll have this as a prized process:
GOAL: A proven customer-acquisition strategy that is
both predictable and scalable.
If you’re ready to compete in the U.S. for the first time, the most important trait is brutal honesty as founders and leaders. You’ll also benefit from a strong, local core partner—who will be less brutal but equally honest—whom you can trust to help you analyze, validate, and scale your U.S. strategy.