International expansion should be a strategic choice, not an opportunistic one.
Does your startup or scale-up have ambitions to make it abroad and conquer the world?
Taking your company overseas is not something you do overnight. Before a growth company starts exporting or internationalizing, there are several important steps and considerations that need to be taken.
As startups and scale-ups begin to grow, they also need to navigate the increasing complexity within their company. In my opinion, fast-growing companies should first invest in scalable operations, processes, and infrastructure, preferably without losing the speed and agility of their agile organization.
Exporting products or services can be a complex process, requiring proper planning, preparation, and execution. Developing a solid (IT) infrastructure and scalable operations can make a world of difference when planning, managing, and scaling the different aspects of your export or internationalization activities.
Internationalization should be a strategic choice, not an opportunistic one. Ensure that you have a solid business foundation before embarking on expansion.
This includes having a clear vision, mission, and strategy (what your company stands for, where you want to go as a company, and how), a strong corporate culture (defining values and translating them into desirable behavior), a stable organizational structure (a strong and competent team with the right expertise and skills), well-functioning internal processes and operations that are scalable (e.g., supply chain and production capacity to meet increased demand), and the right technology and systems to increase efficiency and productivity (CRM, ERP, etc.).
However, many companies still take an opportunistic approach and often choose a new market because, for example, they happen to already have a customer there.
It is not guaranteed that such a country offers the most opportunities. Before embarking on expansion, it is essential to conduct a thorough holistic market analysis and validation to identify potential target markets. Research the demand for your product or service in the intended target markets, local economic market dynamics, competition, the best go-to-market model, regulations, and whether any product adaptation is necessary to meet local needs.
Also, be sure to assess practical aspects such as (payment) infrastructure, logistical accessibility, cultural differences, fiscal attractiveness, etc. before allocating resources to a particular country. Investigate the legal and regulatory requirements for exporting to target markets.
Ensure compliance with language requirements, technical standards, packaging, customs regulations, taxes, permits, certifications, and other legal requirements. There is a lot to consider, but proper preparation will help you determine the most promising export markets.
Expansion costs money. Financial stability is key because having sufficient financial resources is crucial to enable expansion. This includes having enough working capital, obtaining financing if necessary, and managing cash flow.
A solid financial plan and budgeting for your export activities are essential. Consider the costs of product adaptation, marketing, distribution, transportation, import duties, setting up a local legal entity if needed, and other expenses related to export.
Additionally, in a new market, you want to validate whether you can build traction again. And once that point is reached, you want to be able to accelerate. Finding sufficient funding is a major challenge for many growth companies!
However, research also shows that growth companies with external investors are better managed and often more advanced in terms of internationalization, innovation, and talent management. Besides investors, you can also inquire about any support programs or subsidies available from government agencies to promote export activities. These programs can provide financial support, export advice, and access to networks.
Be patient! Building traction in a new market takes time. Don't rely too much on quick wins when internationalizing. In your home market, it probably also took a few years before people started talking about you and became familiar with your products or services.
Therefore, it is crucial to develop a marketing and promotion strategy to bring your products or services to the market. Adapt your marketing materials to the respective target markets (one-size-fits-all doesn't work here!) and identify the most effective go-to-market models and communication channels to reach your target audience.
This can include online marketing, trade shows, collaborations with local partners, and other marketing activities. Build a network of contacts and partners in the target market. Participate in trade fairs, events, and industry organizations to meet potential customers, distributors, and other key players in the market.
Also, provide good customer service and after-sales support to your international customers. Support them with inquiries, complaints, warranty claims, and ensure efficient communication to gain and retain your customers' trust from day one.
Last but not least: Invest significantly in finding the right people. Many companies see finding and retaining good employees and talent as their number one challenge for further growth.
However, startups, scale-ups, and growth companies often have limited HR professionalization (for various reasons), so they may not recruit internationally or only engage recruitment agencies or headhunters to a limited extent to attract the right talents.
Not to mention being unfamiliar with local regulations or having a (local) onboarding process for new foreign employees. Research shows that growth companies with external funding are more advanced in their HR policies, but they also indicate that they would greatly benefit from further developing a professional HR policy.
Growth companies are often led by entrepreneurs who have less experience in people management. They are visionary, passionate entrepreneurs who excel in developing a new product or technology and are adept at building a company from scratch.
They mainly focus on their solution, product/market fit, adding new features or accessories, and negotiating with customers and suppliers while managing a dozen other things. In the initial phase, when working with a small team, this is an advantage and even a necessity.
However, as your company grows, more (infra)structure and processes need to be in place, and you must be able to delegate, organize, and coordinate. At that point, a significant portion of the business leader's time should be devoted to people management, communication, and scaling operations.
Scaling a company is largely a "people business." If you don't have your people on board, and if all individuals don't have their noses pointed in the same direction and don't know what is expected of them and how to achieve it, you won't succeed.
You may have the best product or technology, or the most innovative patent, but without the right motivated people, you won't get anywhere. Successful companies thrive where people flourish. Finding good people in Belgium is already challenging, and it becomes even more complicated across borders.
For example, how do you recognize talent in a country like the US, where everyone can present themselves extremely well, and you are unfamiliar with most education or different employment contract forms?
Your first local team members are decisive for the local culture, which can be crucial for your (expansion) success. Each market is different: cultural differences come into play, new competitors emerge, regulations vary, speaking the local language is sometimes crucial, etc.
It is crucial to bring the right local people on board. Internationalization often hinges on hiring the right profiles. Working with local people who know their market inside out is often a proven critical success factor!
Finally, I would like to share some high-level figures regarding the main export markets where our Flemish companies are most active*:
The countries of the European Union (EU) traditionally remain the most important export market for the Flemish Region: the EU27 countries accounted for 64% of Flemish exports in 2022.
The 3 neighboring countries Germany, France and the Netherlands account for 45% of Flemish exports. For countries outside the EU, the UK had a 6% share of Flemish exports in 2022.
The US and Canada accounted for 7% in 2022. The weight of other regions such as the BRIC in Flemish exports decreased (4% in 2022 compared to 8% in 2012).
Exporting products or services can be a complex process, but with the right planning, preparation, and execution, you can capitalize on the opportunities and benefits of international markets.
It can also be useful to seek advice from trade advisory agencies or government institutions specialized in export support and surround yourself with competent experts.
Internationalization inevitably comes with growing pains. With our years of experience, expertise, and international network, we at CrossInt strive to guide growth companies through this process as effectively as possible.
If you would like to have a consultation to discuss your internationalization or export plans, feel free to contact Bart Verreydt, Senior Partner at CrossInt.