Bootstrapping your way to international growth
Bootstrapping any business is crazy ride – you’re cash-strapped, resource-constrained and constantly time poor. It requires creativity, innovation and occasionally serendipity to walk a tightrope without the safety net of funding.
In our quest to expand Yellowfin internationally we’ve certainly been through many challenges. We underestimated the stress that additional time zones and cultural differences would place on our business and didn’t foresee how challenging it would be to find the right people or right entry model for each geography.
It’s certainly been an interesting journey and there’s plenty that we would do differently with the benefit of hindsight. Here’s some things that we have learned along the way that may help you structure your international expansion for growth and success.
1. Ensure your home country can support the expansion
Before investing time and resources in new markets make sure your home base and headquarters are running effectively. There’s no point placing additional stress on a business that is already in trouble.
Your support team should be operating like a well-oiled machine, the development team knows where they are heading and your local sales team is functioning effectively. When combined with a solid understanding of your business and your market, you will have a model that you can replicate in a new market.
This also means that you will have the time and energy to invest in those new markets. The more you split yourself into smaller markets, the more resources you need to succeed – this is something many businesses underestimate. Before you start dividing your resources, you want to ensure that your base can keep going and that you have the capacity to service that market.
From a scale perspective, a business doesn’t need to be huge to expand internationally, but you do need to have the resources to allocate to the expansion. To grow your business you need to be able to give your new markets the attention and love they deserve.
The amount of support you will require and the resources that you will need to apply to the expansion will depend on your go-to-market strategy. A direct strategy will require more money and resources than an indirect model that is serviced through partners. But even an indirect strategy can consume a lot of resources if your product has a significant service component as you will need to provide support and talk to implementation partners regularly.
It also makes sense to consider how many new markets you want to enter at once. A conservative approach is often wise, particularly if you’re small. If you believe the US is your market, then just focus on the US. Don’t try and do the US, UK, Japan, China, Latin America all at the same time. Focus on one market a time, get that up and running, and then do the next one. That way you can get wins on the board and build a process for opening each new overseas office.
2. Grow your presence offshore first
While it’s tempting to rush into a new market, it’s best to build a presence in those markets you want to enter before setting foot on soil. Yellowfin has leveraged this strategy in several expansions successfully – in the US we had a number of customers before we put people on the ground, the UK was initially built by doing late night deals over the phone, and in Japan we built our presence at first with a distribution partner.
These all gave us a solid presence and proved that we were viable in that market without investing a lot dollars straight up. As each market is different, this also helped us understand the market before we jumped in head first. While we had initial success in the US with little effort, this experience didn’t translate to Japan or other markets. In Japan, we developed key relationships with Austrade and our distributor that gave us time to learn the market and build relationships.
If you go into a new market completely greenfield you will spend a lot of money building your brand and sales leads. We were cash flow positive in Europe before we even had a single person on ground because we nurtured relationships over the phone. When we did put people on ground we weren’t completely new to potential customers – we some presence and branding in the market. In this day and age, it’s possible to achieve this by leveraging the Internet, phone (and lots of frequent flyer points).
3. Start small but strategic
Once you have gained traction and built some presence in the market, you can bring in a sales team. This way your sales team won’t be wasting their time cold calling and, if you plan it well, you can be cash flow positive quite quickly.
When you do enter, start small and strategically. For a software business, you only need two people on-ground initially – a great sales lead and a strong pre-sales person. Pre-sales is important because they know your product inside-out, are able to demonstrate and sell it.
Often salespeople say they can demonstrate a product as well as sell, but they’re rarely the right person to talk and demonstrate details to the technical buyer of your product. Together, this team of two can get out there, start doing deals and grow your business.
It’s also important to position your office in a location where you will get the maximum bang for your buck. If you’re going to the UK, don’t set-up in a small town in the middle of nowhere – position yourself in the heart of business. In the US, it’s a bit different as 90% of your customers won’t be near your office regardless of where you locate. It’s important to be close to a hub so your team can get on a plane, and you’ll need to budget for them to travel the country.
4. Choose the right person to lead the business
Once your sales team has started to grow your business, the biggest challenge is finding the person that you can really partner with in your new region and run that office. This is often not your first salesperson. You need someone who is motivated to build your business like it’s their own. They shouldn’t be motivated by commissions. They should care about building a successful team and a business that can grow to 20 or 40 people.
To build a strong regional presence you need a special kind of drive, motivation and the ability to think regionally. If you are not 100% confident in an individual’s ability to grow your office – don’t hire them. Don’t take shortcuts when hiring regional leaders because these people are the building blocks to your success. If you put the wrong person in the role the mistakes they make can compound quickly.
We made this mistake when we opened an early US office, and had to shut it down six months later – that’s nothing to be proud about. While we had worked with the individuals for a while, we hadn’t actually tested their capacity to build a business. We knew they could sell, but this is very different to building a regional office.
If I did it again I’d take charge of the situation and spend more time on the ground validating the people who would be running the office to ensure they had the business building skills we needed.
When you start building an office, you also need to ensure your office environment is self-supporting. A team of five people is enough to develop cohesive interaction, collaboration and make an office viable. The biggest issue, of course, is finding the right five people.
5. Get on the plane
Once you have found the right person it’s full steam ahead. Get on a plane and spend a lot of time in the market as this will help your team be successful. If you’ve been selective about the regions that you enter, then you will have the time and resources to develop them properly.
By strategically planning your expansion and allowing your presence to grow before you put boots on the ground you can build a viable footprint without spending a fortune. This then sets you up to expand and develop a regional presence that will be your foundation for global success.