Internationalization is the holy grail of many entrepreneurs, especially companies in the tech industry. Logical too. Quite apart from the adventure of expanding beyond national borders, a proven international footprint the value of a company significantly.
For No Monkey Business it is standard procedure: we take a close look at the international activities at every company that comes to us for guidance. If these international activities are not there, we investigate whether they should be there. If the conclusion is yes, internationalization is a good idea, then we help the company to get it started.
The reason is clear. The valuation of a company when it is sold is partly determined by historical results, but mainly by expected future results. That makes the company's business plan very important, as well as the so-called forecast with future results. If a company can involve other countries in that forecast, the sales market becomes much larger. This obviously has a positive effect on the expected turnover, and ultimately on the profitability.
when is internationalization not a good idea?
But first: when is internationalization not a good idea? There are a number of scenarios. What is more common is that a company wants to go too fast. Even if you have a lean & mean business plan for international expansion, that expansion still costs money and, above all, a lot of attention. In most cases, starting abroad really means starting over.
As an entrepreneur, you should therefore ask yourself whether it is not better to stay with the home market. If your market share in that home market is still low, the answer is probably yes. It is easier to grow through references and marketing in a market you know than in a foreign market you don't know. Moreover, international expansion can become a millstone around your neck if you put a lot of money into an international adventure when competitors don't.
Which also applies: internationalization must suit you. Suppose you run a business with a few traditional Dutch men/women. Speaking English is already quite an effort. Then you have to ask yourself whether you have the right team to internationalize, and if not – whether you want to make the investment in new and/or additional management to still realize that ambition.
If all the lights are green – then there are a number of scenarios for internationalization.
The scenario of PSOhub, a company in the No Monkey Business network, is almost unique – and that is why we immediately mention an example. PSOhub offers project management software and started out as an international company. Default language is English. Customer service is available 24 hours a day and therefore available in all parts of the world. Marketing is strong and focused on findability in Google – in the major English-speaking countries (United Kingdom, United States, Australia, Canada, etc.). The company now has customers in 32 countries.
A company like PSOhub will eventually have to settle in a few countries in order to continue to grow. But that is less important here. It is important in this scenario that as an entrepreneur you know how to design a product that adds universal value, in combination with the choice to only think internationally – and then also consistently include that choice in all decisions.
So it usually goes differently – and as an entrepreneur you look abroad when you have built up a strong position in your home market. Perhaps the most common way to do this is through so-called resellers, who offer your product abroad.
A number of points are important.
- Set up a professional and attractive reseller program. Resellers are hesitant to put a lot of effort into routes where they see great risks. Certainly if you are just starting out in a country, it is better to offer a high margin in addition to smooth cooperation – to renegotiate it later.
- Start with one or at most a few resellers. They know the local market. If one is successful and other parties see space, they will come naturally.
- Choosing the right reseller to start with can be difficult. When in doubt, you can call in special agencies for it. They often work with a long list and short list. If your company's technology is based on that of large tech companies such as Amazon or Microsoft, there are usually conventions and trade fairs where you can meet resellers.
If your company has built a successful reseller network, then it is a good time to open a local office as well. There is a good chance that this will lead to a new impulse, because both your resellers and your end customers ultimately find it pleasant to do business with a local party: local by local, in slang. Trusting relationships are part of every service. If you have the right local people, that aspect of trust takes on an enormous boost.
Two last aspects that are important are, on the one hand, which country you choose and, on the other hand, what your product looks like. As for the country, you can do a lot of research on that. Different barriers apply to each area: language, culture, time zone. But in the end, two basic rules apply to us:
- One product simply fits one country better than another. That needs to be investigated.
- It is easiest to be successful in English-speaking countries, because it is simply easier in the Netherlands to attract people who speak English than most other languages.
In terms of product: software can best be internationalized, and certainly if that software is offered in the cloud on a subscription basis: the so-called Software as a Service (SaaS) business models. But other companies can also be internationalized. With service providers, for example, you can investigate whether that service abroad might be more likely to be offered as a complete product. That makes it clear for a reseller.
Our checklist for internationalization:
- Start in the home market and analyze how much market share you have here, unless the world is your playing field
- If you have sufficient mass in the home market, test your proposition in another country.
- Start abroad through partners and/or resellers.
- Once you have built up sufficient mass through this network, open an office. That gives extra confidence.
- In the case of internationalization, pay extra attention to digital marketing.
- Realize that there are always big cultural differences.
Finally, when it comes to the valuation of your company: no potential buyer is impressed by desk research. Only when your company has really managed to attract customers abroad, and preferably very beautiful and relevant names, will the foreign plans also be included in the valuation. If you only have plans, no matter how good, the buyer will think: thank you for the gift. But he won't pay for it.