Recently I presented and mentored at the Phoenix Startup Week, where I met many technology entrepreneurs. While most companies start expanding into international markets as part of their growth stage, there are many reasons why even the earliest startup stage company should begin planning for international as early as possible.
Start With the End in Mind
As with all entrepreneurial ventures, it’s important to start with the end game. Do you plan to sell your company to private equity investors in five years? Do you want to have an Initial Public Offering? Or do you plan to keep building this company until your retirement and then pass it on to your children? Each exit leads to a separate set of international expansion decisions.
Start by asking:
• What role(s) would international expansion play in the company’s growth?
International expansion could be a growth accelerator building company for the long term. Expansion could also mean lowering risks of depending on one market even in economic downturns. And international markets often expose a company’s leaders to new product ideas and business practices that can improve overall company success.
• Can the profits be maximized before the exit?
Alternatively, international operations may not be fully profitable by the time the company gets acquired and therefore counterproductive. Again, it’s all about the exit strategy!
• What do you want as future positioning against your competition?
Especially in some niche industries, being the world industry leader is key to stronger branding and better negotiation positions with suppliers. I have also seen many companies expand internationally by acquiring their former competitors in other countries.
Preparations Start Now
It is hard to imagine this future global company when the current challenges are issues like being able to write payroll checks at the end of the month or getting the new product release to market. But if these early stage efforts are successful, international clients will come knocking on your door very soon. Here are some simple, proactive steps you can take now to be a little more ready:
1. Outside Resources Should Be Internationally Scalable. Can your accounting firm handle international transactions and overseas reporting? If it’s a firm with an expanded international presence, they can. If you use someone that is lower cost and local, then it’s fine for now. But be ready to switch when the time comes. That’s true for legal counsel, IT, marketing services and suppliers.
2. Talent Management Needs to Include Global Competency. As your company begins to add staff, be sure to seek talent that has international experience or at least interest in building a global company. Few job descriptions in the startup and even growth stage companies even consider cross-cultural skills and experience.
3. Prepare Products and Services for Expansion. Sometimes it’s something simple like using Metric System in product design instead of the American-centric English Measurement System. But it can also include product sizing and packaging sizing. As products are packed into shipping containers, it helps when they all fit efficiently into those spaces. This is usually an afterthought.
Most technology startup companies I know began their international expansion as a reaction to an overseas client approaching them to purchase products or services. Then a second client comes in. After several of these international clients discover the company’s offering, the company’s leadership team starts to wonder if there are more international markets.
When the international clients begin to find you, it’s time to get serious about international expansion planning. When you are ready for this next step, please contact me if I can be of assistance in market research, expansion planning, or finding the right in-country introductions.