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.
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.