Often, technology companies in the US complete the same checklist of mistakes as they begin their expansion into Europe. These mistakes include a lacking investment, misunderstanding the European market, and poor sales generation tactics. Knowing the pace at which to begin hiring and where to find the salespeople who can get the job done is not as commonsense as some may expect. Likewise, neither is the process of creating a proper channel for sales and the directions that can be taken. The best advice we at Operatix have to offer is this: Use people who know the market and spend money to make money. The goals in an expansion are reaching revenue and creating an established extension of your current business. These can be achieved with proper investing, hiring, and experienced oversight. We are here to show you how.
Operatix has helped two big players in the IT Software market expand into Europe, with one raising $260 million in their IPO and the other being acquired by IBM for more than $400 million. Both companies came into the market with the right investment, maintained their bread and butter back in the US, and attacked the market continually to create a stable foundation to build on. During our time in business, we have discovered the competent minimum investment necessary for a business’ successful entry into Europe.
We have seen companies expanding successfully with a minimum of $1.5 million investment to cover a period of 2-3 years; without this level of funding, our best advice is to wait. Inversely, overconfidence through excessive funding can be just as harmful as underfunding. Balance is a must and working with a team in Europe who knows the ins-and-outs of investment allocation, however large or small, proves successful every time. This type of educated spending and effective hiring can be achieved with extensive experience in the market from an established team on the ground.
When helping one of our clients to expand, we advised them to take the slow-but-sure approach to hiring. Their first day on the ground saw a single salesperson in the field. Within six months they had 5 people in their team. A very reasonable pace for a company that could have easily afforded to move far quicker, but instead chose a slower, healthier route. It is important to realize that telling a potential salesperson “you’ll be on a team of 25 in six months” translates to “you’ll have a minuscule sales territory, few accounts to manage, and a lack of ample potential to earn”. Instead, slow the initial growth and find employees who become invested in your product. Employees who know the market, understand your vision and sell with the confidence that what they are offering will positively impact the end user.
From a channel perspective, the best approach to reaching out to the European market is the two-tiered approach. This approach requires working directly with a handful of resellers to create movement in the market; the cost of a reseller can cut just 20% into revenue acquired through their sales. Likewise, the two-tiered approach necessitates acquiring a distributor who does the necessary work in managing and controlling their own batch of resellers. While a distributor may charge 35% of the revenue acquired through their sales, the benefits from this additional 15% will prove instrumental in the process of building a strong foundation in the market. Remember: Spend money to make money.
Without proper incentivization, however, resellers are more likely to continue selling the products they know will produce for them. The work around, in this case, requires sacrifice. Using in-house salespeople, a company can reach out directly to the end user, prove their product, entice the reseller to their product by showing that the end user has already displayed interest, and hand the initial direct-to-consumer sales off to the reseller as a show of goodwill. With a quality distributor and a team of resellers under their belt, this company will be fully prepared to move forward with a stable business model in place. Now the only question remaining is: where will this venture begin?
Through tried and true experience, beginning operations in the UK have proven itself an invaluable decision. The UK shares a few things with the US that the rest of Europe does not. The foremost of these shared attributes being: the shared language, the strength of being an established trading hub of its region, and the power of the employer; with the greatly differing laws, letting go of an unproductive employee is a far more complicated task in the Netherlands than in the UK.
Another misconception in European expansion pertains to references. Business ideologies in the UK can vary greatly from those in the US. Businesses within the boundaries of the UK have a greater willingness to work alongside a company with local references. A strong relationship with a bank in the US does not carry the same weight with banks in the UK. As with references from the US to the UK, the worth of European references remains within each respective country’s borders. Additionally, discounted or free-of-charge product to win references can prove extremely valuable in the long run. Likewise, while sales will not be poor, expecting that European sales will quickly match those in the US will be met with disappointment. This is simply logistical proof that there are vast differences in the markets and that knowledge and understanding of these differences are necessary for success.
The goal of Operatix is to empower the time, effort, and money allocated by technology companies when expanding into Europe. We know the proper investment allocation, hiring practices, channels, operation hubs, and clientele etiquette necessary for a successful future. We have refused partnerships with close to 25% of our own potential clientele due to a lack of realistic views, too much aggression or pessimism, or not wanting to consider local differences; sometimes, all that is requisite for a company to move forward with Operatix is to wait. Within the last twelve months, we at Operatix have helped 12 businesses achieve their revenue goals by using our tried and proven practices. You can either go out on your own and do it or you can work with an expert. Expanding into Europe is very similar to home renovation. Making the investment to hire professionals and get it done properly the first time is worth it to avoid the frustration of limitless return trips to the hardware store. So, do you want to learn how to do business development or do you want to get to revenue? Because this is the real question. If you want to get to revenue, then the choice is an easy one. Speak with us for more information on where to begin. We look forward to seeing you grow.