Saas International Expansion: How to Prepare Your SaaS Company For International Growth

As SaaS companies continue to grow, it becomes crucial to identify expansion opportunities and build scalable processes and strategies to support them. Some companies expand upmarket, selling to enterprises where they’d previously dealt with SMBs. Some move in the opposite direction, going downmarket. Others explore new verticals.

But why do SaaS companies want to go global? There are several reasons, but the opportunity to boost revenue growth remains the most compelling.

A recent study highlights that most SaaS companies plan to venture into international expansion in the next year.? They are motivated by the fact that companies that have moved abroad record average annual revenue growth of 13%. Some companies, such as Netflix, generate more than 50% of their revenue from international markets.

The financial incentive for SaaS expansion is clear: Companies that remain local may ultimately experience extinction. According to McKinsey, SaaS companies that grow 20% annually face a 92% risk of closure in less than five years. This means companies have to achieve better and bigger growth than traditional companies.

But with myriad cultural, political, and financial factors at play, there's no one correct approach to expanding internationally. Global growth depends on commitment and careful strategy.

Is Your SaaS Company Ready to Expand Globally?

The first critical point is whether your company is ready to go global.

Today, SaaS companies are based on modern cloud platforms that are easily accessible by users worldwide. So it might be misleading and tempting to assume that you are ready for the global market from day one.

And while it may be easier to build a global audience in the current digital climate, it doesn’t necessarily mean your product or brand is ready to expand internationally.

The popular rule of thumb is that when 25% or more of your company comes from international markets, it might be time to scale outside your country.

You can also use a global readiness checklist to understand if it's time for your SaaS to go global. Ask yourself these three questions:

1. ? ? ? Is your business solving a global problem? Is there a global need for your solution?

2. ? ? ? Is your Saas a product-led reproducible business in all markets?

3. ? ? ? Does your business need professional services or feet on the ground to complete the sales process?

While there are several other things to consider depending on the region in which you’re looking to expand and the territory you’ve already established a presence. Still, these three questions are an excellent starting point to help you understand if your company is ready to expand internationally or if it still needs proper foundations in your home region first.

Factors to Consider When Planning to Expand Internationally

International expansion can be an excellent opportunity for SaaS businesses. Research from Capterra shows that 4 out of every five software searches came from online users outside the US in 2017. Software search volume outside the US was also increasing at 12% per year compared to just 5% search volume inside the US.

However, global expansion doesn’t simply mean a physical change for your company. Offering your services to the international markets requires huge changes in how you operate.

So before venturing abroad, here are some essential areas you’ll need to consider and adapt to for new markets.

1. Expansion readiness

From a casual look, all SaaS companies are ready to engage in global, borderless operations. After all, various modern cloud platforms make it easy to access software in virtually every corner worldwide.

But just because a product or service is accessible internationally doesn’t necessarily translate to its readiness to expand. Readiness can be better determined by answering and analyzing these questions:

• Can your current business model be replicated internationally?
• Does your team have the cultural diversity to manage localization?
• Is your product in demand globally?

Whether or not your company is ready to expand depends on your foundation in your home region. The foundation must be solid and secure long before pursuing markets overseas, as any systematic mistakes will only be magnified through the expansion.

For this reason, culturally diverse perspectives are important for businesses seeking to reach international markets. Overly homogenized corporations may struggle to adjust to new cultures and demands overseas. And most importantly, it's imperative to realize the global pull for your product or service. If there's evident demand, you’ll be sure you are solving a global problem and can start expanding with confidence.

2. Expansion challenges

It's never surprising that the opportunities created by global expansion are faced with equally high costs. Although the financial benefits outweigh logistical obstacles, you must face many challenges, including:

• Language differences- You must speak the buyer's language. Don’t lose anything to translation during the buyer’s journey.
• Time zone difference- Companies need well-defined systems to streamline and prioritize operations across multiple time zones.
• Currency differences- More than 76% of buyers like to use their own currency, and sellers that allow multiple currencies typically scale faster than those who don’t.
• Tax liabilities and regional laws: Different regions will have varying expectations of the business operating within their borders. To avoid lawsuits and fines, you’ll have to know about these expectations before expanding to a new market. For example, telegram as a communication platform in Brazil has been banned mainly due to failure to abide by set rules. And without fail, you’ll have to adjust to different tax laws.

Global expansion works best with a delicate mix of cultural integration and business operational logistics.

3. Expansion approaches

The approach to your international expansion will significantly depend on your original location.

Note that expansion doesn’t inherently mean taking the business to the other side of the world. If your SaaS company is based in a segmented location like Latin America, you can simply expand your business in a neighboring country. But if you are in a more unified place like North America, the expansion will likely mean an overseas venture.

The following approaches can help you scale your business:

• Covert international leads from home: If your business receives many leads from Asia, you might consider creating a marketing and sales team to focus mainly on converting those leads. You'll get value from both worlds if you can manage the new market from your domestic office. But if demand increases, future steps might need you to install a team on the ground in the new region.
• Adapt your product or service into a different language: Before investing entirely in an international site, consider translating your product or service into a second language.?
• Acquire a local company in the region: If you can buy, consider owning a company in the region to fully leverage their location, reputation, and familiarity with the local culture. Workday is a good example; in 2008, it acquired Cape Clear to establish its EMEA HQ.
• Build a regional partnership: Instead of dealing with the burden of a new market on your own, try partnering with a local company to establish your presence and develop regional credibility.
• Establish a regional headquarter: When demand for your products increases, you may have to invest in a regional hub and accelerate scalability. For example, Salesforce was built in 1999, and in April 2001, the company announced its expansion into the global market with new regional headquarters in Tokyo and Dublin.

International expansion is certainly a taxing endeavor but remember that countless businesses have already succeeded in it. No matter your approach, prioritize advanced planning and consistent communication across all departments.

4. Localization

Localization can be defined as the “adaptation of a product or business to a specific market or country.”??

Localization is considered the end-to-end adjustment of all design, content, images, and payment methods to match the unique cultural demands of a specific region.? This step requires companies to comprehend, study and embrace a region’s culture to appreciate their perspective on a product or service.

When expanding overseas, it's important to consider your localization aspect in four key areas:

• Language: True localization requires you to invest in human resources that can easily communicate with customers in their native tongue. Hire a support staff familiar with the local culture and language and ensure that marketing material, support documentation, invoices, emails, and other customer communications are translated to that new language.
• Sales and marketing:? A standard approach to sales and marketing in one country may seem uninspiring and offensive in another. So you need to localize your marketing and sales activities to align your sales approach to the attitudes and culture of the region.
• Pricing: Pricing means more than simply changing currency symbols. Localization requires expanding companies to understand the markets in which they are selling and create competitive price points that attract buyers from that specific region.
• International payments: Successful expansion demands that all SaaS companies must build globally- optimized revenue delivery systems. Many companies suffer from payment flaws since they don’t have the necessary mechanisms to use. For example, a seller who only accepts credit cards will have a major problem in China, where numerous shoppers prefer digital wallets. You must facilitate international payments so consumers can pay however they please. Moreover, giving your consumers the ability to pay in their preferred currency increases the chances that they will your product. International payment infrastructure will aid consumers while also securing your bottom line.

Ultimately, localization helps companies ensure that users enjoy a seamless buying experience. Localization helps consumers adopt products.

Advantages of Expanding Within Your Home Region First

There are several benefits to expanding in-region first before venturing into new global regions:

Cultural alignment

If your business is in a more cohesive territory, geographical proximity can be the best tool to build cultural alignment within your new market and with your international team.

Reduced time zone challenges

With the in-region expansion, there’ll likely be less variance in time zones than if you jumped straight to global expansion. If this is your initial step to international expansion, doing so closer to home may be more manageable from a logistical standpoint than taking a bigger leap overseas.

Price sensitivity

According to Paddle’s SaaS Commerce Trends: 2020 Report, 27% of companies realized that determining the right plans or pricing is the most challenging aspect of expanding globally. There may be less variance in price sensitivity between neighboring countries than from one region to another.

Local laws and regulations

You may already have an idea or a good understanding of the local laws and regulations that might affect the day-to-day operation of your business compared with if you expand into a completely new region. For example, the delay of the launch of the WhatsApp Community in Brazil ahead of the presidential elections must be something widely known in the neighboring regions.

Advantages of Global Expansion From the Beginning

HubSpot is a classic example of a global-first expansion strategy. They started in 2006 with their first office in Cambridge, Massachusetts. They then announced the opening of their EMEA HQ in 2013 in Dublin, Ireland followed by their new APAC HQ in Sydney, Australia, in 2014. Today, HubSpot has 3700 employees spread across 11 global offices. “More than 710 0f their 8,600 users are outside the US and Canada, representing 56 countries.” HubSpot now has four offices in EMEA, three in the USA, three in APAC, and one in Latin America – a truly international business.

Like in-region expansion, going global and expanding overseas offers its own advantages:

Access to new markets

A global expansion increases the segment of your total addressable market that you can reach with your service or product.

Opportunity to offer global support

While expanding from your home region helps you operate without too much disruption due to a few differences like time zones, going global allows you to provide global customer support coverage with more time.

Reputation and brand building

According to commerce trends, SaaS businesses that have expanded globally are considered more mature. International expansion is a big opportunity and investment, so, within your home region, the news that your company has opened global offices can offer your brand and reputation a boost.

Final Thoughts

There’s plenty of information and factors to consider when selling your SaaS internationally. While global traction can be achieved organically from the early stages of your business life, most firms must be strategic about scaling into global markets.

To mitigate this extremely competitive space, companies must cultivate a foundational commitment and global mindset to understanding new attitudes and cultures.

It's also important to keep in mind that your international expansion will vary depending on which region you’re starting from. Scaling from the USA is different from scaling out of Ireland. The USA has a huge market readily available in its backyard, while Ireland has to think globally from the first day. Your company has its own unique growth path.

There’s a lot of opportunity with international growth, but you can only unlock its value if your entire company is aligned and committed to making an effort and doing it right. The trick is to over-invest in international expansion, understanding that it will pay off over time.