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4 mistakes companies make when expanding overseas

Growing fast? Then read this

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Jeetu Matahni
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Jeetu Matahni

SVP International Strategy and Operations, HubSpotJeetu Mahtani is the Senior Vice President and Managing Director of International Operations at HubSpot, where he is responsible for driving HubSpot's growth around the world. Jeetu launched HubSpot's… (show all) Jeetu Mahtani is the Senior Vice President and Managing Director of International Operations at HubSpot, where he is responsible for driving HubSpot's growth around the world. Jeetu launched HubSpot's international operations and has grown HubSpot's customer base outside North America significantly over the past nine years.

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You no longer need to be a Fortune 500 company to take your business global. A small startup can market and sell to customers on the other side of the world without ever leaving their zip code. Today, over half of small businesses in the United States have international customers. Not surprisingly, more and more businesses are thinking about expanding globally — and they’re thinking about it earlier than they would have a decade ago.

The challenge is, there’s no handbook for opening an office in a new region. Expanding your team, product, and operations internationally is uncharted territory for tech companies, especially for fast-growing startups. That’s why most businesses end up growing much slower than they had expected, if at all. According to an analysis from Harvard Business Review, it takes 10 years after moving into a new market for most companies selling abroad to reach just a one percent return on investment.

Expanding overseas should fuel your company’s growth, not slow it down. That’s why it’s critical to set yourself up for success before breaking ground in a new region. My colleagues at HubSpot and I learned this the hard way. Over the past six years, we’ve opened seven offices outside the US; including Paris, which just opened its doors this May.

While every market has its unique nuances and complexities, we’ve learned a lot about what not to do when expanding globally, no matter where you’re planning on opening your doors. Here are the top four mistakes to avoid when taking your company abroad.

1. Assuming you understand your market

Chances are, your business’ target persona is someone who can be found all over the world. So how do you decide which region is the best one for setting up shop? I see a lot of companies miss the mark here because they assume they understand their market and its opportunity.

Maybe you’re seeing traction pick up in Germany, for example: analytics show that your blog content is getting found locally, more leads are coming in from Germany, and the customers you have in the region are proving to be great fits. It would then make sense to double down and open up an office in Germany, right? Not necessarily.

Once you have that initial traction, the next step is to determine how strong the market opportunity actually is. Researching the market size, or Total Addressable Market (TAM), is critical, and you can use public data sources to gauge the number of businesses or consumers locally who match your persona. But size shouldn’t be your only indicator.

You should also do your research to figure out how difficult it would be for your company to operate, hire, and grow in the region. There could be some complexities to entering the market that hold you back, whether it’s tax laws, employment practices, banking processes, or the legal landscape. All of these factors should influence how strong of a fit the market is for your business not only today, but in the years to come.

2. Betting on a local leader

Some companies wait to open an office until they find the right local leader to run it. Personally, I think that’s a risky approach. Because when you’re building a new team in a new region, getting the culture right should be a top priority.

If you get the culture right, you set the team up for success in working together toward a shared mission. If you get it wrong, it can create what I call “culture debt.” You’ll not only hurt productivity and results early on, but you’ll spend way more effort trying to fix the culture over time.

That’s why instead of betting on one individual to build culture, we invest in founding teams when opening new offices. A founding team is typically a mix of the first local hires for an office, and a group of expats (which we call the “landing team”) from one of our existing offices. As you can imagine, building the right landing team is critical.

Besides being top performers in their roles, we look for employees who embody our core values, HEART (humble, empathetic, adaptable, remarkable, and transparent), and who are entrepreneurial. Does this person take initiative? Do they proactively solve problems? Do they teach and share with their peers? Those are typically good indicators that someone can navigate the ambiguity that comes with moving to a new city and building an operation from the ground up.

3. Localizing your product too late

Making your product available in a different language is hard. Localizing it is even harder. By translating your product, people who use that language natively will be able to use it – but you don’t just want them to use it, you want them to get real value from it. That’s why it’s so important to understand how users and customers interact with your product locally, and the cultural nuances that can impact their experience.

For example, the option to schedule emails in HubSpot in time zones outside the US wasn’t available until after we opened our office in Dublin and got customer feedback. Similarly, we realized after expanding that a word’s character count in German or Japanese is typically longer than it is in English, prompting a change in how we design our user interfaces.

These sound like obvious oversights now, but many startups or “scale-ups” building customer bases around the world struggle to prioritize localization. If that sounds like you, my advice is to think of localization as a phased framework when entering specific regions:

  • Phase 1: Regions that speak and use products in your native language
  • Phase 2: Regions that don’t share your native language but are able and open to interacting in it, so you may need to translate some content from time to time
  • Phase 3: Regions where the language barrier is high enough that you need to not only translate, but localize the UI of your product and relevant content
  • Phase 4: Regions that cannot get value out of your product or offering without full content (marketing materials, support documentation, legal resources, etc.) and product localization

If you’re planning to expand in a region that falls in phase 3 or 4, you need to plan ahead. Localization can be a complex process. You not only want to make sure local users and customers can get value from your product from the get-go, but that they know you’re committed to growing in the region.

4. Not leveraging your office launch

Opening day isn’t reserved for baseball: announcing that your office is officially open is a smart way to build local awareness and buzz that can impact sales, hiring, and long-term growth in a new region. Especially since most new offices won’t have many newsworthy developments within their first year or more, you don’t want to make the mistake of expanding globally under the radar. It might be the only local PR opportunity you have for awhile.

Once you know when the new office will officially be up and running, pick an external announcement date a few weeks later and start creating an integrated marketing plan. You can publish a press release-style announcement, run a social media campaign, get testimonials from local customers, and reach out to local media about the announcement.

If you plan to grow the office quickly, consider hosting a launch event as the anchor of the campaign. This is a valuable way to build relationships sooner than later with media, candidates, strategic partners, and more. But don’t worry — you don’t always have to make these connections from scratch.

Most local governments have a development association whose mission it is to help multinational companies be successful in their region. These groups are a huge help in connecting you with the local community, and in getting key local leaders involved in your launch plan.

While there’s no one-size-fits-all approach to international expansion, you’ve likely realized by now that some aspects are universal, like doing deep research on a market and its complexity, and starting off on the right foot with a strong team and launch plan.

These are some things we’ve learned at HubSpot, but we still have a lot of learning to do. The one thing we all know to be true, though, is that every company today has the chance to be a global company. That’s why reaching a new market isn’t the hard part, successfully taking your business there is.

Published June 17, 2019 — 11:55 UTC