Please enjoy this great article and sage advice from Leslie Bubello, Vice President, SomethingNew, LLC, lesliebubello@gmail.com
Here I will share 5 considerations when expanding your sales efforts overseas. Companies have several options when seeking international customers:
- working through resellers, distributors or other 3rd party channels
- hiring a local sales person within the country in which they wish to expand
- sending a salesperson from HQ to establish a beachhead
Oftentimes for expediency, companies choose to dip a “toe in the water” by sending a salesperson to a country or region where they see opportunity because they
- Have existing customers there
- See it as a much bigger market than in their home market
As a person with early career experience moving from the United States to Malaysia (and later the UK), my company chose the latter option and I’ll share some of my key takeaways.
And please note, I’m making an assumption that the readers of this article will be with a smaller company, in the range of 5-100 employees with none of the resources of Fortune 500 or even middle market companies, including extensive market research, expertise in global culture, legal counsel, and an establish international presence, among other things.
Before you go yourself or send one of your top salespeople overseas, answer these five questions carefully.
1.) What is our time horizon and what financial resources can we commit?
It takes time, focus and resources to make in-roads in a new market. It’s unlikely you will see immediate results. Are you sending one person to another country without the benefit of technical resources such as a pre-sales engineer or marketing support? At a recent trade excursion sponsored by the British Department for International Trade for the Insurtech industry, one participant said “Companies consistently underinvest in marketing when they come to the U.S.” Sales leaders must be prepared for longer sales cycles because your brand is not known, you have no local reference customers, and potential clients may question your long- term commitment and ability to support them should you fail to secure other customers. Your designated business development person will need time to find the right location to set up an office, to identify housing, to obtain local services such as internet, buy or lease a car, obtain business cards, join local industry groups, etc. In my personal experience over 20 years ago, even the process of getting a local phone number was exceptionally time consuming and involved standing in line at the phone company for several hours and waiting multiple days for service to be established. Obviously, obstacles such as these depend on the market. Bottom line, when it comes to defining your time horizon to see results, expect to add at least 60-90 days to your regular sales cycle.
Investment:
Expect to allocate a significant portion of your first year’s sales budget to travel. I’ve seen many companies who seek to establish a foothold in the US market underestimate the enormity of the country. Given that Texas alone is the size of France, one must consider travel time and cost if you anticipate canvassing customers across the country. The eye-popping rents of the San Francisco/Silicon Valley, Boston and New York markets may be cost prohibitive and it may make sense to locate in lower cost areas as long as you can access these larger markets. Public transportation options are much less developed than European cities and a car is almost always required. Business travel in the US is frequently much more expensive than in Europe for instance where there are providers such as Easyjet who offer flights for less than $50. When you are deciding where you or your salesperson will be based, consider the cost of living in that city vs the addressable market and the accessibility of that market via air and train transportation.
Marketing is another key area of expense. Do you have a website and/or collateral translated to the local language? Even if your company HQ operates in English, is your outreach “Americanized”? Budget too for significant participation in conferences and tradeshows, one of the best ways to survey a market and develop contacts locally.
2.) How well do we understand the culture?
In this day and age of globalization, we are much more likely to have familiarity with another country’s cuisine, brands, and politics. Nevertheless, don’t assume knowledge of the country only through movies or the news. Case in point – Israel as seen on the news is often depicted as a war zone. This perception is completely inaccurate. Investing some time to understand the political history, cultural traditions and local language will be appreciated in your host country. While South East Asia wasn’t entirely unknown to me, I wasn’t prepared for how a young saleswoman would be received in an Islamic country. For instance, my male prospects refused to shake my hand because it is disrespectful to touch women in their religion. As an independent female, l was a novelty to say the least as their traditions about women’s roles were so very different than in the United States. In some cases, this worked in my favor as they were willing to take a meeting out of sheer curiosity. However, I experienced overt sexism and inappropriate propositioning on a routine basis. I will say this is not unique to South East Asia as I had numerous similar experiences in the UK. While this isn’t an article about sexism in the workplace, I bring it up as an example of how unexpected cultural differences can be obstacles to one’s success abroad.
If you are coming to the United States from another country, you may be shocked by regional differences in styles of communication, cuisine, and social interactions. There are probably 4 distinct regions in the US culturally. The West Coast (California to Seattle) is known to be much more relaxed in their business language as well as their clothing choices. Southern States are typically more formal yet friendly. In the North East (Maine to Rhode Island), people are generally more reserved socially. Not to leave out Mid-Westerners; they are often described as very nice. Texas regards itself as a country all its own! Adding to this complexity is the fact that there is a great deal of geographic AND socio-economic mobility in the United States particularly compared to many other countries. Cultural awareness is a soft skill that will serve you well before embarking on international sales.
3.) What are the immigration policies?
Don’t assume you can conduct business in another country without deeply investigating their policies. When I worked in the United Kingdom and Malaysia over 20 years ago, I got caught out at immigration while returning to England after a brief trip to Norway which was rather stressful. Afterall, I had an apartment, a social life and a career based in London and I wasn’t certain I could resume it! In the end, I had to return to the US while my visa was sorted which was costly in terms of sales productivity. There are several options to work in the US; probably the easiest to obtain, although a short-term solution, is the intracompany transferee visa. For more information, see link:
4.) How much do you understand the addressable market?
Again, this was pre-Google days when the whole world was not available at the palm of our hands. I was representing a software company with a solution for physical asset management. Our target market was companies with desk top computers of 250+. Well guess what, it turns out that in all of Malaysia at that time there were maybe 5 companies that fit the bill (mostly banks with IT decisions made outside of Kuala Lumpur). A richer customer base would be found in Singapore, a neighboring country with a prohibitively high cost of living but within an easy reach of KL. It makes sense to do as much upfront research as possible on where a majority of your prospective customers are based. For example, if your solution relates to the insurance industry, there are several significant Insurers based in Hartford, CT Remember too that decision making may be dispersed geographically and this will be important to know. For instance, xyz company is HQ’d in NYC but it’s Information Technology group is based in Dallas. IT decisions for Equally, if most of your target base is in NYC
5.) What are the tax consequences of my presence in this country?
As both an individual and a foreign entity operating in a new market, you will have to understand in advance if there are any tax consequences. Uniquely, US citizens are taxed for all income over $105k earned overseas. In contrast, UK citizens are not liable for taxes on income earned overseas. Also, any pension or retirement benefits accrued in another country may not be transferable to the US when you repatriate. For instance, I still have a pension in the UK that I cannot transfer to the US, even to an account with similar tax status.
In summary, deciding to set up sales operations in another country is complicated! Do your research.
Here is some suggested reading:
https://hbr.org/2015/09/the-most-common-mistakes-companies-make-with-global-marketing
https://www.inc.com/articles/2009/11/how-to-sell-internationally.html
https://www.salesforce.com/products/sales-cloud/resources/international-sales-strategy/
https://hbr.org/2016/04/does-your-company-have-what-it-takes-to-go-global
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
Question the Questions by Octopus Ventures (a great market entry guide)
Companies who can assist with taxable presence questions:
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Fantastic article Leslie!