What do I need to consider before expanding internationally?
How to crack the US
Q: My business partner and I started our cloud software business three and a half years ago; but he has recently left the firm to pursue other projects. We are on the verge of international expansion with plans to open an office in America within the next six to nine months. However, as the sole director of the company now, I have concerns about managing international operations from our London office and am not sure if I can realistically spread myself across two continents. What factors do I need to consider before making the transition to become a global organisation?
Jos White answers:
For any expansion to stand a chance, it requires thorough research of the local market, significant upfront investment and the manpower to drive it forward. You need to be confident that there is opportunity in the US market – especially if you’re driving this alone. If you’re confident, you have to be realistic. It’s going to be hard. The US is one of the toughest markets to crack, but the rewards can be huge. I should know; at one of my businesses, MessageLabs, it took two attempts and this advice is borne out of one failure and one big success!
First, ask yourself these questions:
– Will your USP work in the US? – Do you need sales/business partners in the US to support this move? Have you got networks to tap into? – Who are your competitors? How big are they? What are their USPs? And how does yours stack up against theirs? If these answers all point to America, here is your next set of questions:
– Can your cash reserves/forecasts support the expansion? It will always take longer and cost more than you think – Do you have a trusted manager to support you? – Who is going to be the face of the company in the US and who is going to be leading the company in the UK?
So far you’ve been lucky enough to have a business partner to bounce ideas off, share the workload and the stress. Being ‘in it together’ can be a real motivator. Facing expansion and growth alone can be daunting but, on the plus side, you’ve got the chance to be autonomous and shape the business as you want. But you must have a trusted partner either out there on the ground in America or holding the fort in the UK.
You can’t treat America as a satellite region, it is an independent market. At MessageLabs we invested a great deal of time and money hiring an experienced US-based management team and I would strongly recommend you consider doing the same. The temptation will be to hire the first person who ticks most of the boxes. Don’t. You need to be really excited about your new employee too. If you aren’t then you should start again from scratch or you could regret it later.
Keep in mind that people who come from large companies often expect to have a lot of resources available to them, while those coming in from smaller companies will be used to having to fight to get things done. At this stage you need to recruit people who have the determination to make the most out of what is available.
The US is the world’s largest and most demanding market and you will need to be willing to improve and change what you’re doing in order to succeed. If you have this attitude, and a strong and trusted team supporting you, then you’ve got the key ingredients for success.
Jos White is an entrepreneur and partner at Notion Capital . He has co-founded three businesses with his brother Ben, helping to grow them each into market leaders each with revenues in excess of $100m. MessageLabs was sold to American digital security giants Symantec in a deal valued at £397m. Jos is now founding partner at Notion Capital, a venture fund and advisory business that focuses on early to mid-stage growth businesses in the internet-based services sector.