By Roman Eloshvili
Depending on which statistics you believe, there are more than 150 million startups in the world today, and about 50 million new ones launched each year. But the harsh reality is that about 90% of them fail without getting very far. One of the top reasons is premature scaling. That includes expanding into new markets before you — and your business — are ready.
I’ve been there. As a founder of a company headquartered in Estonia, we’ve successfully expanded into Armenia and Spain. But it didn’t happen overnight, and it definitely did not happen by accident and sheer luck.
In this article, I would like to share some of the lessons we’ve learned along the way, as well as what I believe every founder should think about before chasing after international growth.
Not every startup needs to expand
Let’s clear up one thing straight away, geographical expansion is not a must for business success. There are many ways to grow revenue: Broadening your product line, improving client retention, increasing pricing — the point is, you have options. Branching out to new regions is just one of them.
But if you are determined to explore new borders, the timing is going to be crucial. Just because you, as a founder, may be excited and ready to charge in doesn’t mean your business is. In fact, I’ve seen many founders (myself included) who got caught up in the early wins and pushed for expansion too soon. Investor expectations can also play a part here, spurring you onward to achieve that profitability they wish to see.
But the biggest obstacle you have to overcome before scaling comes down to whether or not you have the right people and strong enough processes to endure through this transformation. Trying to build on a twitchy foundation just risks bringing the whole structure down.
How do you know you’re ready?
From my experience, there are several green flags to look for.
First, you must have a successfully proven product-market fit in your current market.
Second, as I already mentioned, your processes must be stable and automated, enough so that you can afford to reallocate parts of your team toward expansion without hurting your core business.
Lastly, you need to have a financial buffer. Entering new markets is always more expensive and slower than you expect, so it’s always better to have extra money set aside for this kind of experimentation. Don’t gamble with what you can’t afford to lose.
If you don’t have all of these boxes checked, it might be better to wait and prepare further, instead of jumping the gun.
Practical tips for expanding into new markets
On the other hand, if you do feel ready, here are some tips that helped my company make that transition successfully.
Hire people with local experience: It may sound obvious, but local insights are too vital to ignore. Bring in consultants who understand both the business environment and the cultural nuances. That knowledge can affect everything, from pricing strategies to preferred payment methods, and how you communicate with the local audience.
Don’t assume your product will work the same way: Just because something works back home doesn’t mean it’ll do the same elsewhere. Talk to local users, conduct tests early on to check the demand, and be ready to tweak your value proposition.
Don’t stretch your team too thin: Only expand if you have enough personnel to assign a dedicated team to cover the new market. If expansion becomes everyone’s side job, it will fail.
Do a market viability check: Expansion is a long-term play. Make sure to plan accordingly for it. Is the market size big enough? Will the returns justify the cost of entry? Are there local players too big for you to compete with? What about regulations? Compliance can become a nightmare if you’re not prepared.
All of these things you need to consider. Expanding into new markets can absolutely be a growth accelerator — but only if you do it thoughtfully. Don’t let your enthusiasm push you faster than your company can follow.
Roman Eloshvili is a founder and CEO of XData Group, a B2B software development company. As a serial entrepreneur he developed a keen eye for trends and opportunities in internet banking. He embarked on his journey in finance more than 20 years ago and as XData Group is on a mission to revolutionize the banking landscape.
Illustration: Dom Guzman
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