Why Push Your Company Overseas?

This is a guest post from Paul Higgins, Consultant with Rapid Innovation Group

At a high level, there are two reasons to push your business overseas: to chase new revenue or reduce existing costs.

Imperial College Business School Professor Erkko Autio calls these two strategies upstream (expanding for efficiency savings by moving towards greater, cheaper resources) and downstream (expanding for growth by moving toward new customers).

For instance, upstream overseas expansion is a common consideration for reducing costs in your product development, testing, finance, accounting, or customer service. While this may sound more relevant to large corporates than entrepreneurs, it can be a valid step for growth-stage firms — as long as you do not limit the quality of an area that is a key differentiator for your business.

For downstream expansion, the time for a growth-stage business to go overseas is typically dictated by the size of your domestic market and your investors’ growth requirements. Some U.S. startups have a domestic target market that is easily sufficient to be a great success; French VCs have told me that a good exit requires revenues outside the domestic market; Irish startups get on a plane to London on Day 1.

The importance of cultural awareness in new territories cannot be emphasised enough when chasing revenues overseas.

For example, a U.K. company that focuses exclusively on its domestic market may comfortably satisfy its growth objectives for the first five years, and perhaps only need to develop an approach to going overseas after it has won hundreds of customers.

By that stage it will have a refined revenue-generation process that works well in the U.K. It may have a large field sales force or an inside sales team supported by a professional marketing outfit. The team will feel completely confident about how to sell. Now, put them in front of their first prospect overseas and they will naturally use the same strategies and tactics that work so well in the U.K.

At the same stage of growth, a pan-European firm that had to go overseas to find its tenth customer, while its revenue-generation processes have not been formalized to the same degree, will have an advantage in competitive pitches.

With exposure to five or six different territories, the pan-European player will appreciate the differences earlier and will adjust their sales processes to take these differences into account. In a head-to-head contest, it may well be this experience that gives them the edge.

It is important for any management team with ambitions to build a serious, sizeable company to appreciate the global potential of its market. Artificially constraining your growth by choosing at first to focus exclusively on your domestic market can put you at a disadvantage at a later date when you need to maintain your early growth rate.

Paul Higgins is a consultant with Rapid Innovation Group, a U.K.-based strategy and execution firm that helps emerging tech companies accelerate their revenue growth and achieve market leadership. For more insight from Paul, check out the Rapid Innovation Group blog and follow him on Twitter @paulhigginz.