The time has come to venture beyond the borders of your home country. You’ve decided that the next step towards your big, hairy, audacious goal is to test the waters in a large, unified market like the U.S. On the horizon, where blue skies meet the road, is this burning question: How much is this going to cost?
If you’re feeling daunted and may be tempted to dust off your playbook from your scrappy beginnings, don’t. Just like in sport, it usually comes down to match-ups. You’re now the away team and the players are different. Sometimes, the rules are a little different, too. It’s a brand new ball game in a bigger arena. More likely than not, you’ll need to graduate from scrappy.
The good news is there’s something in between scrappy and flush with millions in reserve. First thing’s first, you need a practical, methodical, and realistic approach for this dream to be realized. The key is to craft a plan that is matched up with very specific questions you need answers and to test assumptions—a plan that puts your team into hyper-learning mode while avoiding costly mistakes on a world stage.
It’s not just about time and money. There’s a lot to consider about how much impact expansion will have on your home team. Personally and professionally, they will be affected in ways that are hard to fully quantify. The impact of expansion on your home team should be well considered. They often pay a price that’s hard to quantify and under-appreciated.
What are your known unknowns?
If you have a general idea of what success looks like, great! It’s time to fine-tune it and get down to specifics. What do you want to know? What questions do you want answered? What assumptions must be validated? The most common question we get is: How quickly can I get paying U.S. clients?
Let’s take one step back and look at the big assumption within the question above—that there are buyers in the U.S. market for your product. Not to be rude or impolite, but this is square one: Who, if anyone, in the U.S. will buy what I’m selling?
From our experience with many European company founders, we came up with sample questions and goals that are much more specific:
- Can I get feedback from local prospects on the viability of my product or service?
- If it is viable, how long is the sales process? What is the cost to acquire a customer?
- How do we stack up against the competition? Can we defend our product and pricing?
You want to find out as much as you can about the first few early adopters of your product or service. Honing in on the most important questions or goals you want to tackle will go a long way in designing a plan to match. It’s a good way to ensure that your goals, expectations, and budgets are aligned.
Preparing your home team for success
Expanding into a bigger international market will be transformative for your business and your team. Before you secure a partner or take on your first hire in the away country, look at your existing team members and the level of support they’ll be able to provide.
As mentioned above, this undertaking will have an impact on your current team. Servicing another market will take a toll—in some cases, a heavy one. Make sure that your local budget for workforce/labor expenses can tolerate a moderate to significant increase.
The following are key areas you should prepare to ramp up or reinforce. Hires will be on a rolling basis. At the outset, you will require very little technical sales and almost no client-success hours. As you build the sales pipeline, there will be more calls and demos, so you will require technical sales support. After you start winning deals in the U.S., it’s crucial to have the right people in client success.
- Product and sales training for the country manager and/or partner. Be prepared for the country manager/partner that you’ve hired in the U.S. to spend one to two weeks at your headquarters. A strong rapport with your home team will be important for smooth collaboration and, ultimately, for keeping future customers happy.
- HQ provides technical sales support. You may require team members to put in longer hours or take on a second shift, which may be disruptive to their personal lives. Thank them profusely now, during the calm before the storm :). You also will likely have to pay them more to make such adjustments to their personal lives.
- HQ will provide client success. As above, local staff will have to adjust their working hours to support U.S.-client on boarding and support. In some cases, you might need to hire new people who have experience with U.S. customers. Also, assess your team’s processes and capabilities. You may need to make changes or provide additional tech and training.
- HQ will provide accounting and legal support. You definitely don’t want to leave tasks such as invoicing and drafting new contracts up to your country manager/partner. Having to take care of administrative tasks like these will only slow them down.
For overall success, the U.S. country manager/partner must be able to go out and bring in clients with confidence that all of the above support is available. To quantify the impact of U.S. expansion on your home team, you may want to track expenses related to the following:
- Additional hours for support staff at HQ
- Training for current and new team members
- Additions to your tech stack for administration, back office, sales, and marketing operations
Budgeting for your first 6 to 12 months in the U.S.
During this time, expect to really level up your learning. Focus on the most important questions that you listed. Keep them top of mind. Make every move and every dollar count towards bringing you a step closer to the answers you need.
The key elements during this critical time frame are:
- Hiring a partner/consultant or country manager
- Marketing personnel and programs
Country/region management (estimated monthly $10,000–20,000)
Picking the right partner or person is your most important move; it’s also the hardest. There’s a lot to consider: experience level, mix of services, full-time or part-time capacity, and geography/time zone.
A local consultant might charge you a flat retainer that covers region management, business development and sales, some client success, and some marketing-management costs. If it’s an individual hire, you’ll have to cover their salary plus additional specialists (potentially on a contract or freelance basis) to support him/her.
Another factor to consider is the partner’s or manager’s location. A popular choice among European companies is to secure someone on the east coast of the U.S. It helps to have overlapping business hours and shorter travel when necessary. However, if you find an early bird on the west coast who’s a better fit, go for it!
Alternatively, you may want to pick a partner or manager who has easier access to your customer market. For example, if you must be near big auto companies, someone based in Detroit, Michigan, with the right experience may be a good choice for you. (Fun fact: While Detroit is in the Eastern Standard Time zone, some parts of the state of Michigan are in the Central time zone.) Another good hub is Denver, where there is a good talent pool, usually at lower salary levels than those on the coasts.
Marketing (estimated monthly $10,000–20,000)
U.S. Marketing Manager (part-time or as needed). If you pick a partner instead of an individual to manage the country, your partner agency may have someone on staff who can perform this function as part of your arrangement. In this case, the cost for a U.S. Marketing Manager may be included in the retainer.
If you’re employing an individual country manager instead, you’ll need someone to localize all your existing, relevant content. Localization might be a seamless process for companies from English-speaking countries, such as the UK.
In addition to needing new marketing and sales materials, someone will need to build, manage, and optimize local customer-acquisition programs. It’s highly recommended to choose someone who’s prepared to wear many hats within the marketing function. Budget at least $5,000 per month for this part-time role.
Paid Marketing. At an absolute minimum, plan to test one paid customer-acquisition channel such as paid search (e.g. Adwords) or paid social (e.g. LinkedIn). We generally advise that companies start by testing at least two channels at a monthly budget of $5,000 per channel. Investing in paid marketing channels will serve as a guardrail in case success of the outbound sales channel takes longer than anticipated. Things change very quickly. If you don’t put down your marketing stakes early, you may pay the price later. You may inadvertently allow your competitors to box you out of cost-effective keywords or audiences. A great advantage is also in learning—more, faster, sooner.
Events (optional and involves a high variability in costs). It’s easy to overdo events. Within your sector, list the most important events where prospective customers or partners show up. For each event, gather as much data as possible to determine if it might make sense for you to go as an attendee, or whether it might be a viable sponsorship opportunity. Timing your efforts around big industry events may be an important component of your go-to-market strategy; however, they can take a monumental amount of effort. Budget for two to four events per year. Make sure there’s clarity on your desired return on these events—to increased brand awareness, generate leads, or close deals.
Travel and miscellaneous (highly variable costs). Today, it’s not unheard of to close a six-figure annual sales contract without ever meeting the decision-makers face to face. However, we recommend that you have a travel budget because in-person meetings can sometimes make or break the decision. For instance, if your competitor doesn’t bother to visit the prospect, you may edge them out.
Seeing people in person and meeting stakeholders across their organization can go a very long way to winning them. You’ll learn so much about their company culture and how they operate. A human face and handshake can really enhance a once digital-only connection.
Make a conservative estimate for a few days of travel every one to two months. If the partner or country manager you brought on board is within close proximity to a cluster of prospects, you may save a ton in travel expenses.
Legal. Expect to spend some money on localizing legal documents at the outset while you’re still validating the market—and no, we don’t recommend that you save money by using Google Translate to localize your legal agreements (neither would Google.)
You’ll want these on hand and ready for signing some initial clients:
- License/master service agreement (MSA)
- Non-disclosure agreement (NDA)
- Your referral/sales partner agreement, if it’s a channel you’re using
Our assumption here is that you are not going to open a U.S. entity until you’ve validated the U.S. market, but if you plan to establish a U.S. entity from the get-go, you’ll need a local law firm that’s able to support you on an ongoing basis. Costs can vary for legal services, but you should budget at least $1,000 per month if you are, in fact, planning to establish a local entity.
OK, how much is this really going to cost?
It’s good to remind your founding team that embarking on U.S. market expansion is an exercise in testing. While there are no guarantees to be had, you can look forward to learning, answering questions, having a-ha! moments, or solving mysteries. Even if you find out that there is product-market fit, but the cost of customer acquisition is too high, you’ll be far better off knowing than not knowing.
Considering all the variability and best estimates above, the right partner can help you optimize a budget of approximately $100,000 per quarter. This will set you up with a plan that is conservative to moderate.
If you found this informative, be sure to check out our previous post, A Map to U.S. Market Entry: The Process is the Destination.