B2B SaaS Internationalization: Expanding your company globally, with Gernot Schwendtner

International expansion can unlock attractive opportunities for growth. However, they also bring several challenges such as market complexities, organizational reshaping, and budget needs. Therefore, is essential to have the right tools at hand when starting this process. Companies like weGrow focus on helping founders and businesses scale internationally by sharing the proper steps to achieve a successful global expansion and providing the right expansion talents.

In the 16th edition of our Leaders of Growth podcast, Gernot Schwendtner, co-founder of weGrow and internationalization specialist, discusses the particulars of internationalization of SaaS companies and the best tips for founders based on his knowledge of global markets. WeGrow has already helped over 100 founders achieve international growth and market expansion. Gernot is a founder at heart, and his company’s primary focus is to help other founders avoid common mistakes and lead a successful international expansion.

What are the most common internationalization mistakes to avoid? What aspects do they usually forget?

One of the most classic mistakes is bad timing. Timing is essential. If you’re too early and unprepared, your home market will suffer, and it might be the end for your company potentially. If you’re late to the party, you’ll need a lot of money to catch up.

The second mistake comes when choosing the markets. Often, this is completely overlooked, and companies choose markets for their size without researching to determine whether that market is the right fit for them.

The third one is how to do it. Many take on a simplified copy-paste approach where they copy a successful tactic in one market for a new market. You need to understand the local market and adjust your marketing strategy, sales, value proposition, etc. We often do experiments for that and talk with local people.

The fourth, and I think the most important, is that the whole organization setup is not considered early enough. Executives have to think about how to prepare an organization for an international scale. What kind of talents do you need to have on board? What kind of processes? What kind of mindset and culture do you need to build? Who should lead the expansion?

The last mistake is not having enough budget or buffer or spending too much on a market. Sometimes, it’s more convenient to shut down a market than to keep injecting capital. Many startups fall into the sunk cost fallacy here.

How can founders know if they are ready for international expansion?

One of the main checkpoints is the budget. If your budget for expansion in a big market is low, that won’t take you far, so it’s better to spend it elsewhere to help your home market. It’s also about where you are in your product-market fit scaling journey. One indicator is the number of people you have on payroll, and another is revenue. We often look at how close they are to $1M ARR in countries like the Netherlands and a bit more if you have a bigger home market. The third would be how much resources you can allocate to expansion and how much funding you raised. You will get stuck if you run into a market with insufficient money. For us, there’s a rule of thumb: “Twice the money, twice the time than you think.” It comes back to resources.

How do you go about picking a market for internationalization?

We call it the 3 Ps: plan, plan, and plan. I’m a founder, so everything goes too slowly for me. In my mind, I’m always way ahead. I understand the founder's drive to go fast, but the best thing to do is take this energy and use it to build up your processes before expanding. Planning and preparation are essential, and market research is crucial: market size, regulations, competition, and growth of the markets. You need to build a matrix with this information to know what you need to focus on first.

Then, you need to run a quick validation, an experiment on that market before deploying millions. That test gives you a more qualitative layer on top of the quantitative, and both together are condensed into a go-to-market plan. Those aspects are fundamental to keep in mind to prepare for what’s coming next.

If you want to know which questions you should ask yourself before growing, what steps to follow and how to achieve successful expansion, get a copy of the Internationalization Checklist here.

Do you see certain risks in going to the big three markets (France, Germany, and the UK)?

It all depends on your growth story and ambition. I know companies that go for the unusual suspect. Due to timing or budget, they go into markets out of the main focus.

Germany is key. It’s one of the most challenging markets to crack in Europe, next to France. Making it there can unlock other potential opportunities. Ultimately, you will need to crack one of those three markets, but it’s not always the case.

Credits: Porapak Apichodilok (Pexels)

Diving further into expanding into Germany, what are some of the tough things of that market people should be aware of?

It starts with being German and being perceived as German. Hire local people, communicate in German, have a local office and phone number, and be part of the ecosystem. This evokes trust. And at the end, it’s all about trust. This will accelerate your sales cycles too. Understanding their business culture is also key. You need quite senior people compared to other markets. Germany is more hierarchy-driven.

What is a good time to test a market?

It depends on the market. I would give any market at least 6 months. If we look at it at a high level, for a Dutch company, for example, you might gain fast traction in the Netherlands, but you won’t get that fast traction in Germany or France. In France, you need to have a long breath and deep pockets. Finding a good country manager can take longer than expected too.

What we often advise is called affordable loss. How much money can you allow to be burned in a market before you have to pull the plug? Another good way to prove a market is also at least two times your sales cycle.

What is your advice for building an internationalization playbook?

We love creating and improving the internationalization playbooks of companies. It’s a living document. We always start with the “expansion canvas”. It is similar to the business model canvas and it’s useful to capture all the learnings market by market and add everything that went wrong in previous markets.

Regarding the elements of the expansion canvas, the first topic to work around is the market: size, growth, culture, what is the need in the market, what are the competitors, what are the regulations that can help you or derail you.

The second topic is the go-to-market plan: product, local value proposition, marketing, sales, partnerships you need to build. And then, the operational and organizational setup: team structure and work dynamics. All of those things are important and vary from market to market.

The third topic is numbers: budget, KPIs, timelines, risk/opportunities, what should you be aware of, SWOT analysis.

Who should lead and work on the internationalization process?

C-level and founders need to be involved in the process from the beginning. That doesn’t mean they have to do everything. We often see these responsibilities later transferred to a Head of Internationalization, or Head who actually runs it. We usually help companies upskill their Heads of Internationalization. If the person is not senior enough it’s hard.

What should be the profile of a Head of Internationalization?

The Head of Internationalization should be naturally curious, open-minded, versatile when speaking with people, comfortable with different business cultures and personalities, and flexible. Also, they need to be able to work in a certain structure but without over-engineering it. This person should be a straight-shooter who gets things done.

How do you see the use of internationalization archetypes as a practitioner?

I like archetypes because they provide orientation and a rough set of steps to take. However, in the end, it always depends on your particular case. You can put everything into archetypes, but in the end, go-to-market strategies are different, and you need to see it from the market perspective. We always approach it from that angle.

When does it make sense to have a local department in the country?

You need to have a stage approach. In the beginning you can run a lot from your local headquarters. Don’t open an office and hire 5 people if you don’t have enough traction. Of course, it depends on the market needs. In France and Germany you need to be there. Make it as lean as possible, but with enough force that they can make decisions. Don’t overrule them and let them shape the market.

Credits: Monstera (Pexels)

What are your key learnings on internationalization?

I’ll share five. Firstly, you should always have one eye on the market and the other in the organization. if you don't build up the organization that supports the markets in their growth it would be really hard to succeed. Secondly, the team’s diversity makes a difference and makes your team stronger. Thirdly, be patient: it takes much longer than expected in some markets, so don’t run out of patience. Also, be able to identify when things are not going right. Sometimes, you need to pull the plug and have a contingency plan. Fourthly, everyone needs to be aligned: the founders, the core team, the investors.

The fifth one is something I learned recently about resilience. We had a theory that international active companies might be more resilient. We saw this happen during the first Covid lockdowns. During market disruptions, companies active in more than one market performed great and appeared way more resilient than those not internationalized. Why? Because they are diversifying the risk.

Do you have any content recommendations on the internationalization topic?

The first is a must-read that I absolutely love: The Culture Map by Erin Meyer. It’s a practical book about the different cultural dimensions and pitfalls. The second is our website, where you can find documents, posts, and tools. You can download everything for free because we believe in sharing that content with founders, so they don’t make the same mistakes as those who preceded them. Feel free to download and contact us.

To listen to the full interview, click here head over to the Leaders of Growth podcast.