Over the past several years working at Takehill B2B market entry practice, I have been asked these same questions so many times, that I decided to put together this updated checklist: how to improve your odds for successfully crossing the pond to US market? Here you go:
Fact vs. Assumptions. Before you start executing your US-market-entry plan, spend some serious time in separating your assumptions from facts. Do not assume that repeating your previously successful European model will automatically work in the USA. Because it will not. Speak with multiple US prospects and partners, travel to US or hire a local help.
Action #1: Dig up the FACTS from the US market to validate your business model assumptions. Yeah, it’s called market research.
Target customer/buyer profile. The way US organizations conduct business and the way they buy products are often different compared to EU counterparts.
Action #2: Go BEYOND your assumed US target audience, re-define your target buyers vs. users, and tailor your marketing message and story directly to US targets.
The problem-solution fit. With American clients the market environment, regulations, standards and local best practices may be just slightly different to EU, but it can make a big impact on the value proposition and your ability to attract customers.
Action #3: validate the problem/pain vs. solution and ROI specifically for the US customers
Differentiation. This is the #1 landmine that kills EU companies when entering America. The U.S. competition is 10x fiercer vs. EU and competitors’ marketing-spin is super aggressive vs. European fact-based messaging. American enterprise buyers also rather buy from American vendors, as long as the product is “good enough”.
Action #4: research the US competition & competing methods, define and quantify your unique advantage and promote it boldly.
Business Development Cycle. If there are no inbound leads coming in on day one when entering the US, it may take extended time to find first partners and customers. B2B outbound prospecting success rate is on average 5%, i.e. when you contact 20 target prospects, one of them may be interested. In the US B2B environment, it may take months rather than weeks to find someone with whom to start a serious dialogue.
Action #5: To expedite finding your first live contacts, hire a local US expert. Someone with a domain specific business lingo will maximize your street credibility.
Sales Cycle. When targeting enterprise clients with $100k…$1 Million solution, expect an average sales cycle from 6 to 12 months. This is: AFTER you have first found the prospect who is interested in speaking with you.
Action #6: prepare to be patient, with at least 12-month US market entry budget
Procurement. With US Fortune 1000 folks, nothing is simple. In closing a deal, you will often experience a complex procurement process, vendor certification, IT security audit, insurance review, several legal contract drafts, reference customer calls, and more. The contracting is typically required in the US standard legal language and format. Introducing your EU contract templates will just delay the deal, and you will end up with US legal agreements anyway.
Action #7: When in procurement/contracting stage, hire a US contract lawyer.
IRS. If you are selling from EU but have any operations in the USA, you may be surprised that at some point the US IRS goes after your EU HQ to collect tax money, claiming that you have been in business in the USA and are avoiding taxes!
Action #8: Before closing deals, hire a U.S. CPA to discuss taxing and company structure
Operations. When running the business in the USA, you need a US bank account, which requires either FBI-type background checks for all your EU team members, or a friendly US citizen co-signing the account. Local bookkeeping is required, and someone to file the tax return. And when you hire your first local employee, you need a service running the payroll and benefits programs.
Action #9: after getting the first PO and before hiring anyone, hire a U.S. accounting firm
There. I hope this is helpful. The process has lots of details, but it’s no rocket science. A simple, lean market-entry approach is always best for lower budgets and best agility.
You can and you will be successful, if you do the right things in the right order. And if you have doubts, call Takehill Partners to discuss. With over 20 years of experience, we can review your plans quickly and give you the sanity-check feedback during the first call.
A couple of business fundamentals to keep in mind during the market entry: The hardest go-to-market problem in B2C is - distribution. The hardest problem in B2B is - sales. A B2C consumer company often succeeds to grow rapidly because it has mortal locks on distribution. A B2B company may succeed because it delivers quantified and differentiated ROI, and has succeeded in closing its first marquee corporate customer - and THEN other enterprise customers take notice.
So, with that metric in mind, if you are a B2B Tech company attempting the US market entry, the first thing you must focus on is: SALES. For you the question is NOT: “What’s the right U.S. incubator for us, where I could find office space and local mentors and network?” No, the right question is: “Am I, personally, as the company Founder or executive, after arriving in the USA, ready to start selling? Am I ready to start calling the U.S. enterprise buyers 100x times each week, to convince them that they have a problem and I have the best solution on earth? Mentors will not do that for you. Incubator organizers will not pick up the phone for you. It’s all about you, you have to do the sales.
What Type of Accelerator is Right?
A B2B tech company attempting the US market entry would ideally be further along in its business in its home country - beyond the MVP to preferably $500k…$1M ARR - before it starts planning for the international expansion. This is simply because if you have not already found the product-market-fit in your home country, it can be an expensive learning experience to attempt that first time in the USA.
Therefore, for the US market entry purposes, you would not like to apply to an accelerator that is organized around 90-day program to build MVP for the Demo Day. Instead, there are also some later/growth-stage accelerators, that would make more sense. Here’s one example: https://elementalexcelerator.com/latest/articles/means-growth-stage-accelerator
Accelerators are no Silver Bullets
At the same time, research studies do not seem to validate that startups would be more successful if they come out of an incubator: The Kauffman Foundation study few years back found that despite the hype around incubators about the help they give startups, they may not be doing any better at launching successful businesses than entrepreneurs outside of incubators. As Yas Motoyama, director of research and policy at Kauffman and his research assistant, Emily Fetsch, explains in this interview by Forbes.
I am a mentor and coach myself in multiple U.S. programs, at MIT Mentor Smart, Harvard Extension School, MassChallenge, 1776, etc. In these ecosystems we have several altruistic mentors. They genuinely want to help founders. Nevertheless, in the absence of a structured contracts or deliverables, their relationship with their mentees tends to either remain superficial or short-lived. It is also quite typical that U.S. accelerators do not allow mentors to accept equity or cash compensation. Which is OK in many ways, but it also reduces mentors’ willingness to take the risk in investing his social capital and making industry introductions – which is the exact type of help that you as the B2B executive would need.
Both Prospecting and Inbound Marketing do Matter
If finding the new prospects and selling is the #1 challenge in the B2B market entry, then you may ask: what happened to inbound marketing? Doesn’t that make it so much easier?
I am a huge fan of inbound marketing and would go even so far to say that without a proper inbound content strategy no company can today succeed for the long term. BUT, in the beginning, when nobody knows about your fantastic product or your company, there needs to be someone who goes out and gets market feedback from actual enterprise contacts, human beings – to understand what type of inbound content will work, and to fine tune your story and business model to fit the market. Because: every new market is different. And because deal-making and especially so in B2B, is about relationships.
Incubators promise a lot of resources to startups, like events, networking, assistance connecting startup founders to investors, help with presentations and many other services, but as Emily Fetsch notes: “The average incubator actually has less than two full-time staff and 25 businesses. That’s a lot of service to provide for two people. So, are they really providing all the services they say? It seems unlikely,” she says. And it is very unlikely that they close any sales for you.
What's the Alternative to Accelerators?
What does this all mean in terms of using U.S. Accelerators as the launch pad for the US market entry? It means that, unless you have a long experience already living in the USA and operating in the U.S. industry domain that is on your focus, you need to find an U.S. accelerator that:
(c) …. supports you in closing of the first customers as the #1 priority, and not just try rushing you to the Demo Day in the hopes of closing the U.S. venture funding (which, really, does not happen in the
B2B world without closing the first U.S. customer, anyway).
If you cannot find such accelerator that can support these needs, then skip it. Instead, hire a U.S. based experienced consultant with domain-specific experience. He is already networked in the right playing field, he can call the industry contacts, he will research the market for product-market-fit, and eventually he will close that first referenceable deal. Then, after that initial business model validation and success, now you can now move to the USA yourself, or hire the first U.S. employee, and start repeating and scaling the business.
And after all this if you , as the B2B tech company owner, still choose to go on and apply to get in the US accelerator: remember, it is all about Sales and about YOU finding that first deal. Everything else is secondary.
European tech CEOs often think that expanding business to foreign markets should mean first entering UK or Germany, or Sweden. The U.S., however, presents a more strategic opportunity, for the longer term and for the ultimate scale. It is, after all, the single largest B2B tech market in the world.
Unlike what old-time business managers lead us to believe, bringing your business to North America does not have to be a complicated and high-risk process. The good news is this: Today you CAN jump right to North American market to short cut your path to scale – if you do it right.
Here at Takehill, after observing multiple B2B Tech company market-entry attempts over the years, we have finally achieved clarity of mind on this topic, and can deliver this great announcement:
It only takes 3 critical factors to succeed in the U.S. market entry.
The number one misstep for European teams seems to be, that if they have already succeeded in their home country, they think that the same success formula also applies to USA. Unfortunately, for 9 times out of 10, this cookie cutter strategy will not work.
Instead, to successfully enter the US market, CEOs need to re-evaluate all the business fundamentals. Because the environment is different. Customer buying behavior is different. Competition, regulations, channel vs. direct, customer’s business processes – they all have little U.S. nuances that eventually may become the showstoppers.
With that, here are the TOP 3 time-tested, critical success factors for the U.S. market-entry. No different really from the list when starting a B2B business anywhere else - but that exactly is the point - these are the fundamentals to re-visit, after landing on the new continent and basically starting from square one. Yes, this may sound like the same-old-by-the-book, but seriously - miss these 3 fundamentals at your peril. This is how the successful B2B tech company looks like, when opening its U.S. office:
When landing in the USA first time as a B2B tech company, one of the key questions is: how do I find my first referenceable customer? Which is the question about – sales. It’s ALL about sales. How do we sell our products in this new territory?
At the same time the profession of B2B selling has been going through a dramatic change in the past ten years. To see the shift that is taking place, check out these TOP 10 sales insights, below. It’s not at all what it used to be.
1. 89 % of B2B buyers use the internet for their purchase (source: Navigating the new path to purchase – Millward Brown Digital)
- SO WHAT: Make your website look superbly professional vs. your peers
2. Half of all B2B purchases will be made directly online by 2018 (source: Forbes – Predicting The Future Of B2B E-Commerce)
- SO WHAT: Make the online purchases possible – in 2018
3. Today’s sales process takes 22 % longer than five years ago (source: Biznology – 37 facts on the future of Social Selling vs. Cold Calling)
- SO WHAT: Do not expect easy process and quick wins in B2B sales, or fast results in your US market entry. Assume B2B sales cycles are typically beyond 6 months, sometimes even 18, and in a very ideal case, maybe 3 months.
4. 50% of identified sales leads are not ready to buy (source: Gleanster)
- SO WHAT: Double check your lead qualification process.
5. 91% of the time, cold calling doesn’t work (source: Harvard Business Review)
- SO WHAT: yes indeed, and 9% time it works, IF there are no other options, like – hot leads. And do not confuse the old cold calling with the new outbound prospecting with cold-calling 2.0 tactics. Sometimes, in business, you just have to pick up the phone and call that stranger who is not expecting your call.
6. 8 attempts required today to reach a prospect with a cold call vs. 3.68 in 2007 (source: TeleNet and Ovation Sales Group)
- SO WHAT: If you have to do cold-calling, prepare to be very, very patient
7. 57% of the buying process is done before sales contact (source: Corporate Executive Board)
- SO WHAT: Make you website look superbly professional vs. your peers
8. Gartner predicts that by 2018, 40% of B2B digital commerce sites will use price optimization algorithms and configure, price, quote (CPQ) tools to calculate and deliver product pricing dynamically. (source: https://www.forbes.com/)
- SO WHAT: Make the online purchases possible – in 2018
9. 80% of non-routine sales occur only after at least five follow-ups. 8% of sales people (those who follow up to 5 times) are getting 80% of the sales. (source: https://www.marketingdonut.co.uk)
- SO WHAT: In sales, do not give up, your #1 responsibility is to follow-up until you get the final definite NO. There are several good reasons people are not responding to your first contact attempt. Try again.
10. The average marketing budget of a tech company is 4.3 % of its total revenue (www.bitkom.org/EN)
- SO WHAT: Marketing is not an expense, it's an investment. To make money, you have to spend money.
Who will execute your market entry?
Finding the first clients in the location where the company was originally founded, typically involved the standard business model validation process and customer development. Many founders leverage existing relationships to gain initial clients, that will turn into references and eventually into a scalable local business.
But when attempting to enter the U.S. market, companies often do not have the key relationships necessary to find strategic references that would kick off the repeatable business. Many companies think that commission-only sales reps are the answer. “Let’s hire a great sales guy and, as a compensation, pay him royalty from sales.” Great idea! No, sorry, that will not work in the U.S. If anyone in the U.S. agrees to engage in commission-only sales for high-tech B2B solutions, then the result will be no commitment, the initiative will be a waste of time, and your market entry will take forever.
To hire a full-time employee, on the other hand, is often too risky and expensive. Expensive because you need to hire an experienced professional with existing contact networks, and risky because you do not yet know if your product will be accepted and adopted in this new market.
Therefore, the most successful strategy at the outset, is to hire a local consultant, with matching experience and business development skills, accept a reasonable monthly retainer, which often is less than a half of a full-time person’s expenses, and use flexible termination rights.
Welcome! In this Takehill blog we will discuss:
- How to find your first new customers when entering new markets
- Why is prospecting still important, and how to do it right
All companies entering new markets must find ways to fill their pipeline with high quality leads. There are several ways to find customers, such as:
● Inbound sales + inbound marketing w/SEO and content strategy - driving traffic and MQL to SQL leads
● Networking - hoping to find buyers through your existing contacts and warm referrals
● Outbound prospecting - reaching out to people who do not know you, based on their target profile, with cold-calls, social media, and emails.
These all have a place in your overall sales operations mix. During your US market entry program, however, you typically would like to get the first customers closed as soon as possible to validate your product-market-fit in the new market. Generating inbound leads with interesting inbound content is great and certainly required as the long-term strategy, but it takes time if you do not have it running already. Networking and referrals may work, or not, depending on what you are selling and if your networks are a good match. Typically, they are not.
So, unless you already have high quality leads flowing in from the US market, to find your first wins you often must employ outbound prospecting tactics. I have heard it said countless times that “cold-calling is dead”. And it may be so, as the long-term strategy. But for the fastest results, prospecting is very much alive and necessary. There are online tools available to make it efficient e.g. Linkedin Sales Navigator etc. And there are a number of great books on this topic, such as this Predictable Prospecting, by M.Tyler and J.Donovan.
Must be noted though, that in the USA channel partners and sales consultants typically expect leads to come from marketing activities. They do NOT like prospecting! So if you are attempting the US market entry and are not generating qualified leads already, it requires you to first find that special rare person or team in the US who is interested and excited in prospecting new business without warm leads.
When hiring such local consultant or BD rep, you should expect to pay a monthly retainer fee and royalty from sales. With high-tech B2B solutions, it's practically impossible to find any experiences business person in the US who would work for you to do prospecting with royalty fees only.
A very good saying in sales is: planning is cheap, execution is expensive. That also applies to prospecting. With no planning , your new US BD rep will act as a blind chicken trying to find the grain. And while eventually it will find some grain, for faster and better results it is absolutely necessary to do some careful planning first, to shorten the sales cycle and help the local BD rep to succeed.
During the planning phase, among other things, the most important steps are:
Eventually, through your prospecting work, with a great value prop, with some smart planning, well-defined targets and after hard work, you will find your early adopters and first success stories. The emphasis here is on “hard work”, as per industry statistics, typical B2B prospecting program will only yield 5% response rate from the outreach (vs. 14% closing rate for inbound leads).
But wait. Even if you do all your prospecting planning and execution by-the-book, you can still fail in finding customers. This is how: When you reach out to a person you do not know, and offer him a new solution to his problem, what is the first thing he will do after your call/email? He will thank you for your information, yes, and immediately after that, he will Google your company, browse through your website, and compare your business to competitors. Or, if you claim you are creating a new category so that there are “no direct competitors” (yeah), the prospective buyer will look at your website and decide if your business profile and value proposition is meeting his industry’s credibility standard. And there, if your website looks mediocre, or don't have any interesting or convincing content, you just lost a deal - without even yet knowing it.
The good news is that you can avoid this problem. You do that by creating a well-designed, awesome website with great user interface and attractive content, including white papers, blogs, videos, infographics and great visuals. And “awesome”, not in terms of what you yourself may think, but awesome as compared to any other similar U.S. company in your market. You can also improve your odds immensely by having a virtual U.S. address and telephone number on your website. It will cost you only $100 per month. Then, after your cold call or email, when the prospect checks you out online, he may get excited and call back, and there - the dialogue begins.
Takehill guidance: for US market entry, well-planned systematic prospecting work is often required to get the first customers and success stories off the ground. But it will only work if your website looks the part, in the context of your target U.S. market.
Welcome! In this Takehill blog post we will discuss:
- About the challenge in entering the US B2B market
- About the importance of differentiation, what is enough: 10% vs. 10x ?
With all positive notes about the US market size and opportunity, nobody should claim that entering the USA is easy. By applying the right methodology, it can be affordable, predictable, and the risk of failure may be lower than in many other markets - but no, it’s never easy.
The other side of the coin is that many US industrial tech sectors are more conservative (or “very pragmatic”) than what we find in Europe, and while the opportunity for scale is there, the adoption of any new technology can be tricky. This means, for example, that if an American business owner already has a “good enough” solution for his problem, then why bother to look for something new? “If it ain't broke, don't fix it” – thinking is often more extreme in the United States, where business volumes and risks are higher than in other smaller markets. Therefore, to be successful in selling a new technology solution to a factory manager in the USA, it is imperative to be able to verbalize, and quantify: how exactly are you eliminating a significant pain, or enable a significant gain?
But let’s assume that you have a compelling and clear value proposition in your country. Then the question becomes: how does your solution compare with other alternatives on the US market?
First, all else being equal, from any U.S. B2B buyer's view point, the fact that your headquarters is behind a 5-10-hour time difference is considered as an additional risk. Even if your country of origin is ranked high in producing innovative high-quality high-tech products, for any practical market entry purposes “made in Germany” or “made in Finland” is not going to give you any advantage. You can be sure that if there is a “good enough” solution in New York, sold by Bob and Jane from their Acme-USA, Inc., then that will be the source for the winning product. To overcome this challenge, the only way is to find such a compelling and unique differentiation that it really moves the needle for the customer.
When you are coming from a foreign business culture and a faraway country, your story about your differentiation as “easier to use” or 10% faster, will not win the business of U.S. enterprise buyers. The differentiation that you claim, with validated performance and competitive advantage, should be significant enough to outweigh the risk that you are an unknown new entrant among existing domestic U.S. suppliers.
Takehill guidance: focus on creating a marketing story that does not just explain your technology details, but instead makes you a far better choice, with advantages and benefits that are closer to 10x than 10%.
There, hope you find this all helpful. Your comments will be very much appreciated.
Until the next time!
Welcome! In this blog post we discuss:
When I see a foreign B2B technology company entering the United States, a Tolstoy quote comes to mind: "Happy families are all alike; every unhappy family is unhappy in its own way." This could be turned into an observation about the US Market entry: “Successful companies look all alike; every unsuccessful company has failed in its own way.”
It is true that many companies fail in attempting to enter the hyper-competitive US market. The positive view, however, is this: U.S. market entry is actually not a very complex process, and when it’s done right, it opens the #1 largest market opportunity without costing an arm and leg. And while those companies’ failure may have been caused by a whole variety of problems, the list of fundamental “market entry errors” is relatively short.
Based on our team’s 20+ year experience in U.S. market-entry execution, I hope this blog will provide some helpful observations and lessons learned on today’s topic: how to become a happy(ier) business by entering the USA?
Although the United States contains only 4% of the world’s population, it accounts for nearly 25 % of global economic output. For most B2B technology firms, USA represents more than 50% of the business potential. As discussed in this European Commission 2016 research study, access to a large market, AND access to growth capital, clearly have emerged as the main drivers for most of European high-tech companies relocating to the US.
Can you build a $100 million B2B technology company without entering the USA? Of course, you can. It is simply that the probability of success for a maximum scale in the USA is higher than anywhere else. For a competitive B2B technology solution, USA presents a homogeneous market where any new industry best-practice is adopted rapidly nationwide. A successful U.S. business owner, as your prospective customer for a B2B technology, is hyper competitive by nature. If there is a new, better way to run the business, he will adopt it immediately (assuming the benefits outweigh the cost) because if he doesn’t, he knows that tomorrow his company will have lost its competitiveness.
According to EC Joint Research Centre’s (JRC’s) latest 2017 report, the US is the leader in Information and Communication (ICT) investments and business expenditure on research and development, spending €64 billion in 2014, followed by China (€33 billion) and the EU (€29 billion). The new technology adoption and investment in technology by US business buyers is clearly exceeding their counterparts.
Another factor making US market entry an attractive option is that U.S. business culture and language is often already familiar to the average European business professional. Management’s learning curve in building successful strategy is therefore relatively short compared to many European or Asian countries, where the cultural and language barriers (20+ languages in Europe, 50+ in Asia) may introduce friction to the market entry, making it slower and far more expensive than in the USA.
An ideal profile for a fast scale-up in the USA
Can any successful European B2B technology business enter the USA? In theory, yes. But if the question is “what is the optimal profile of a B2B company for the fastest scale in the USA,” then we have to offer an additional criterion.
In short, for those readers familiar with the Lean Startup methodology, here is nothing so much new to you. What makes the company scale fast in general, holds very much true also in the US market entry. This is : B2B business models built around well-productized solutions, with modular components, and the least amount of coding or configuration required at the customer installation, become more repeatable (cookie-cutter at best) in the market adoption process, and are therefore the obvious winners in fast scaling.
At the other extreme, business models that are delivering generic engineering services and project work, where every sales transaction is different, struggle to gain adoption at the market entry. To enter USA with these business models will require “boots on the ground” from day one. It is not easy to build a large-scale engineering project business in the USA over Skype. And those engineering and development services that CAN be scaled remotely, such as Software Development, have already become extremely competitive global markets, where the low cost & high-skilled engineering labor from India and China is often difficult to beat.
Takehill guidance - the fastest-to-scale company profile when entering USA: a company with a repeatable product or solution, that has a clearly defined differentiation, quantifiable customer value (ROI), and has demonstrated past performance beyond $1 million in annual sales.
There, hope you find this all helpful. Your comments will be very much appreciated.
Until the next time!
Antti Korhonen is the Founder of Takehill Partners LLC, a Boston based consulting firm. He has helped several European companies entering the US market, and as CEO has built two successful B2B Technology companies with global operations between Silicon Valley, Washington DC, Boston and Helsinki. He lives in Concord, MA, and after spending 12 years in USA he is a dual citizen of USA and Finland.