Why you aren't closing deals in Germany and 9 things to always remember.
Adrian Henke
Senior Sales Executive | 15+ Years in Value-Driven Selling & Relationship Building | Driving Growth Through Strategic Partnerships
Entering new territory with your business can be a challenging endeavor, especially when dealing with international differences. Understanding business etiquette at home can already be complex, and navigating cultural variations while doing business in Germany can feel like entering an entirely different world.
When expanding globally, there is a wealth of practical knowledge to absorb, including tax regulations, rebates, and name registration - all crucial for gaining a competitive advantage. Equally important is understanding cultural etiquette, as a positive first impression during meetings can significantly impact business deals.
To avoid any misunderstandings or miscommunications, it is essential to be aware of potential pitfalls. Being well-informed about different cultures is vital, as what is acceptable in one country may not be so in another. Dr. Milton Bennett's Model of Intercultural Sensitivity suggests that achieving "adaptation" and eventually "integration" with German culture is essential for success in the German market, both personally and professionally.
Cultural sensitivity is key to thriving internationally, but it's also crucial to comprehend how culture influences international business to present your company in the best possible way to new markets. Before entering a new territory, it is crucial to thoroughly understand the business landscape. Conducting detailed research on employment, regulations, taxes, laws, and other factors is indispensable to ensure your company is well-prepared for the new region.
Taking the time to delve into various elements, such as residence permits, GDPR compliance, intellectual property rights, and relevant organizations within your business sector, is necessary to make informed decisions. There is indeed much to consider, but thorough preparation and understanding of cultural nuances will lay the foundation for a successful business expansion into Germany.
Here are 9 essential considerations to keep in mind while conducting business in Germany!
Before venturing into the Federal Republic of Germany and the broader European market, it is crucial to have a comprehensive understanding of the country's dynamics.
Germany stands as an economic powerhouse at the heart of the EU, making it an attractive destination for expanding businesses. Positioned strategically for Western European markets, it serves as a prime export market, displaying resilience in the face of economic fluctuations and often experiencing an upward economic trend.
The country boasts a remarkable focus on industrial advancements, with key sectors encompassing automobiles, electronics, machine building, chemicals, electrical engineering, and food processing. Additionally, Germany hosts a variety of service industries, transport networks, and a thriving hotel and restaurant business. These service sectors contribute significantly, accounting for about 70% of the country's GDP. Notably, both renowned global brands like Siemens, BMW, VW, and Allianz, as well as the famed 'Mittelstand' of family-owned businesses, thrive harmoniously within the German business landscape.
To succeed in this competitive environment, it is vital to have a clear understanding of your competitive positioning. Questions such as "Where does my business fit within the German market?" or "Does my product or service hold a place in this landscape? Core or peripheral?" can offer valuable insights and guide your strategic decisions in the German market.
It's crucial to create awareness about your brand and offerings.
Your website serves as the primary touchpoint for customers, and considering Germans' preference for local products, I strongly advise having your website in German. However, mere translation won't suffice. It's worth investing in a fresh re-write in native German or employing professional transcreation to capture the nuances and tones of the local language accurately.
Transcreation differs from translation as it goes beyond word-for-word conversion, ensuring the message aligns with the target culture.
To inform potential customers of your German presence, advertising is essential. A comprehensive audience understanding and analysis of their media consumption habits will guide your advertising strategy. You can also explore tactical opportunities and creative ideas to stand out and thrive in the new market, maximizing your marketing budget and yielding optimal results.
While planning your media mix, consider the balance between spend, reach, and response before finalizing budgets to ensure the best return on investment (ROI).
One important aspect to consider is that German business culture leans heavily towards formality, so it's essential not to be disheartened if building personal relationships proves challenging - personal life and work are strictly separated.
Before and during your meeting, show respect for German values, such as punctuality, planning, organization, privacy, and perfectionism.
In German companies, authority is held in high regard, and navigating through a strict vertical hierarchy is necessary, as most decisions are made by those at the top.
Formality is a significant aspect not to be underestimated. Older employees may expect emails to begin with "Dear Mr. Surname," even if colleagues have worked together for decades. On the other hand, Germany's millennial generation tends to be more progressive, blurring the lines between work and leisure. They may begin an email with "Hey or Hi," reflecting their well-traveled experiences. To communicate effectively, be mindful of your audience and their age when crafting emails.
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To secure an appointment with the right person, having a third party introduce you can be more effective. Before reaching out, double-check the contact details by making a phone call. Then, send a confirmation email to gauge their interest in your product or services. Follow up with a phone call to arrange the meeting, being mindful to avoid lunchtime (12 pm - 2 pm) and Friday afternoons.
Arriving 10 minutes early to the meeting will create a positive impression. Punctuality is crucial, and if you anticipate being late, inform your contact in advance. Stick to the scheduled time for the meeting and have a strict agenda for the discussion points.
Keep in mind that meetings are generally not expected to last longer than one hour. Minimize small talk and focus on business matters.
Initiate the meeting with a brief and firm handshake, maintaining eye contact, and using a formal "Mr" or "Mrs" greeting. Be prepared with your business card and exchange them at the beginning of the meeting.
Considering Germans' formal approach to dress code, it's advisable to dress conservatively and understated for the meeting. Regardless of gender, a suit is appropriate attire. However, be aware of your industry's norms – creative companies may have a more relaxed dress code, so you can adjust your style accordingly.
Have you ever wondered who reads the fine print on packages or agreements? What may seem unnecessary and time-consuming to many is taken very seriously in Germany. It is crucial to discuss arrangements and their consequences in case of non-compliance with your business partner in advance.
It is common for Germans to anticipate well-researched and detailed responses to their inquiries. To avoid being under-prepared, ensure thorough preparation. Provide direct, specific answers supported by factual evidence, and be ready to present figures and charts as they will be expected.
The majority of business in Germany is carried out by small and medium-sized enterprises (SMEs), commonly referred to as the "Mittelstand" in Germany. Historically, much of the business took place locally, fostering close customer relationships.
A typical Mittelstand company employs between 10 to 500 workers and generates an annual turnover of €50 million or less. It is estimated that approximately 3.7 million Mittelstand companies exist in Germany, contributing to around 35 to 45 percent of the country's gross domestic product.
Mittelstand companies are primarily found in industries such as manufacturing, commerce, skilled trades, professions, and service sectors, including technology, construction, transport, retail, and the hotel and restaurant business.
To assess the English proficiency of German employees and managers as potential business partners, a study conducted by the Gesellschaft für Konsumforschung and Wall Street English revealed that 65.5% of employees reported having limited or no knowledge of English. However, it is essential to note that this figure serves as a general indication, as proficiency levels vary across industries and job roles. On average, managers tend to possess higher English language skills compared to employees.
When venturing into the German market, it is worth exploring the option of establishing a German entity to facilitate business dealings with local partners. It is important to note that German law treats both Germans and foreigners equally when forming companies, and there are no restrictions on repatriating profits.
There are various company establishment options, including limited liability companies, joint stock companies, and different partnership forms, each suited to different needs. Seeking expert guidance is recommended to determine the most suitable form for your requirements and to navigate the official process.
Keep in mind that Germany's relatively high marginal tax rates and complex tax laws may pose challenges. Engaging a proficient tax consultant is essential to ensure proper guidance and avoid critical errors.
Final decisions in Germany come with specific action steps that demand meticulous attention to every detail. Once a decision is made, it is unlikely to change, so be prepared for either a graceful rejection or a quiet congratulatory gesture.
After adapting to their culture and work methods, Germans prove to be fascinating and engaging individuals. They can form strong and trustworthy business relationships. Despite their dedication to work, they also enjoy socializing, often bonding over a beer or two outside the workplace.
Need more advice on how to conform to the German way of doing business? Just drop me a message.