When Is Going Global the Right Move for Your Business?
Once entrepreneurs have grown a successful business, many begin to wonder whether they could replicate their success in other countries. At a time when more and more companies are expanding their reach and influence all over the world, the idea of global expansion seems more attainable than ever before.
But for all the potential rewards, entering a new geographic market requires careful planning and hard work. Even some of the world’s biggest companies have learned the hard way how much lasting damage a poorly thought-out expansion can do to their brand. Smaller companies with less name recognition may experience even higher barriers to entering a foreign market, with little guarantee that their message will resonate with customers even if their product is high quality.
Acquired Knowledge caught up with three Volaris Group leaders who run companies with an international footprint to find out how they ended up operating in multiple geographies, how that decision affected their businesses, and what advice they have for companies looking to take the plunge into the global market.
The Power of a Partner
Donogh Roche, former managing director at WebSell, said global expansion was baked into his company’s business model because of the way its software was constructed. WebSell specializes in integrated e-commerce solutions, serving businesses that rely on specific point-of-sale (POS) and enterprise resource planning (ERP) systems. Because the software was specifically constructed to interface with Microsoft's Retail Management System (RMS), WebSell was perfectly suited to tap into any market that Microsoft’s product entered.
"When we started the company, we only worked with Microsoft Retail Management System. That drove our marketing strategy because we had to go where Microsoft's customers were," Roche said.
Although WebSell is based in Ireland, Microsoft RMS had a notable presence in North America, particularly the United States and Canada. Since RMS also served predominantly English-speaking markets, language was never much of a barrier for WebSell’s integrations. And Ireland’s status as a well-known European headquarters for tech giants simplified various tax issues.
“It's quite common in Ireland to have international software companies base themselves here for tax reasons,” Roche said. “We followed a similar model to Microsoft in terms of having legal agreements for resellers, so there was quite a lot of research at the start and legal advice that we obtained from our state economic development agency, Enterprise Ireland, to come up with contracts that would work for U.S. customers and for Canadian customers.”
Because WebSell’s solutions were built specifically to support Microsoft RMS, the company was able to make sales through the Microsoft reseller channel, a much simpler path to break into than making direct sales with customers. Roche said the company had more than 20 U.S.-based customers before ever setting foot on U.S. soil, and soon expanded its offerings to Canada as well.
These days more than 70% of the company’s customer base is outside Ireland, but the company placed a renewed focus on direct sales since the early 2010s, when Microsoft made the sudden decision to stop supporting the RMS product. Luckily, WebSell had already been expanding its offerings to different platforms, including Volaris sister company Windward Systems, whenever existing customers switched away from RMS onto other platforms.
It was a little bit traumatic for us at the time, but quite a few customers who migrated from our Microsoft agents stayed on our platform. And in terms of Windward, that partnership accounts for between 5 to 10% of our revenue, which is great for a partnership that's only a year and a half old.
- Donogh Roche, former Managing Director, WebSell
Cultural Awareness and Regulatory Issues
When entering a new geography without a partner leading the way, a company has to weigh the costs of expansion and demonstrate an understanding of the culture of the new customers it’s hoping to serve. Garrett Schemmel, General Manager of Aislelabs, said his company fields regular inquiries from all over the world.
Aislelabs offers marketing solutions for spaces that offer free Wi-Fi to customers, including brick-and-mortar retailers and other locations with high foot traffic. The business has found global appeal in creating a marketing opportunity for its customers from an amenity that they are already giving away for free. An early focus on SEO optimization for the company’s website resulted in a steady stream of inquiries. “People everywhere in the world find us, and if you're in a developing country, you don't have a native version of what we do in that country,” Schemmel said.
But finding interested customers is only part of the story. The legal and tax implications of doing business in a new country can often outweigh any benefits, especially when the prospective clients are smaller businesses. Even in markets where returns on investment could support the cost of expansion – like areas of the Middle East where extreme heat has caused indoor malls to boom and created a large audience for Wi-Fi marketing services – local requirements for technology companies can be difficult to navigate.
“One of our prospective customers requires that the server has to be on their premises, and they own it,” Schemmel said. “So we can’t control the cloud server, and that raises a ton of questions. If we launch a new feature, are they going to get it? When are they going to get it? How can our salespeople guarantee that without it being a really complex process?”
While a company like Aislelabs is often in the position of turning away expansion opportunities that don’t offer a sufficient return on investment, other businesses begin looking to other countries because they’ve saturated the market in their current territory. That’s a particularly risky prospect for companies who haven’t been adding new customers for an extended period. “Your organization might not know how to go and acquire net new logos anymore,” Schemmel said. “And it is so much harder to start from zero, because when you’re expanding into that new geography, you're essentially a new business in a new market.”
For companies who decide to pursue customers in a new market, Schemmel recommends doing the homework to learn everything possible about the culture of the people who live there. During one meeting with a prospective German customer, Schemmel recalled watching the audience lose interest in the presentation every time the salesperson referred to “Wi-Fi” instead of the preferred German term “WLAN.” Even a salesperson who knows their product and market inside and out can miss out on a sale by overlooking a key detail.
All it takes is your competitor having slightly more cultural awareness than you, and it gives them instant credibility that you lack. Social proofing matters a lot.
- Garrett Schemmel, General Manager of Aislelabs
Local Legal Expertise
Following an existing customer from your home market into another geography they already operate within is one of the safest ways to start going global. That’s how Volaris-owned DRAMS – which specializes in managing processes related to the maturation of spirits – took its business from Scotland into the U.S. and beyond.
When beverage giant Campari Group entered the scotch market after acquiring the Glen Grant distillery in 2006, the company turned to DRAMS for the software to keep the distillery running smoothly. When the Campari Group subsequently acquired the Wild Turkey Distillery in 2009, they looked to DRAMS again, leading the company into the bourbon space and U.S. market.
DRAMS CEO Brendan Flood said the compliance focus of the company’s software made it easy to adapt it to distilling bourbon, rum, and tequila. As news of DRAMS’ successes spread, more large distillers approached the company looking for solutions, opening new markets across the globe.
"When we move into a different market, the spirit management process is effectively the same, but the regulatory reports and customs reports are different," Flood said. “But because we're so focused on maintaining that detailed transaction audit, we can satisfy the customs reporting wherever it is.”
For the DRAMS team, tailoring the software to meet the needs of different spirit sectors resulted in a few weeks work for each use case. But while his programmers knew exactly how to help customers manage their spirit inventory, Flood said being able to lean on Volaris Group’s legal resources in different markets “took a lot of the pain, complication, risk and uncertainty out of the process for us.”
As a business of our size, you're not going to have a legal resource in Mexico that you can draw on to answer questions about what the compliance needs are there. So having the Volaris structure over us, having those resources available to lean on in terms of a rapid expansion into North America, those are incredibly useful things.
- Brendan Flood, CEO DRAMS
Weighing the Decision to Go Global
Before expanding into a new market, it's important to study the customers you're hoping to serve. Studying local demographics, consumer behavior and preferences can help avoid costly mistakes. Each market has its own unique cultural and social norms, so understanding and respecting these differences is essential to avoid cultural misunderstandings and missteps that could harm your brand both at home and abroad.
Entering a new market often means competing with established local and global players. Understanding your competition and identifying what sets your business apart is crucial for success. Those local businesses will have a leg up in navigating different legal systems, regulations, and compliance requirements, so it’s important to be aware of local laws, tax regulations, and requirements for permits and licenses.
Once you’ve decided to make the move, choosing the right market entry strategy is critical. Whether you’re building a new office from scratch or acquiring an existing business in your market to enter a new geography, the venture will require substantial financial resources. Securing funding, managing costs, and maintaining financial stability are significant challenges when trying to gain a foothold overseas.
When weighing the risks and rewards of an expansion, Volaris-owned businesses benefit from access to a global network of like-minded peers, proprietary benchmarking data from hundreds of international software companies, and the strong financial backing of Volaris parent company Constellation Software. Whether or not a global expansion is the answer to the inevitable ‘What’s next?’ question asked by successful business owners, the team at Volaris is always interested in having that discussion.