SaaS International Expansion: What to Consider
By Congli Huang
Why do companies go global? There are many reasons, but the opportunity for revenue growth remains the most compelling.
According to a recent study, the majority of SaaS companies plan to pursue international expansion within the next year. Their motivation is clear: companies that have ventured abroad report an average annual revenue growth of 13 percent. Some companies, like Netflix, generate more than 50 percent of their revenue from international markets.
While the financial incentive for expansion is clear, SaaS companies that stay local may ultimately face extinction. According to McKinsey, software companies that grow 20 percent annually face a 92 percent chance of closure in less than five years. Thus, SaaS companies have to achieve bigger and better growth compared to traditional companies.
Urgency and opportunity are fueling SaaS international expansion. With myriad cultural and financial factors at play, however, global growth depends on careful strategy and commitment.
In this article, we’ll define the four critical factors to consider for expansion, so you can make the most informed decision for your company.
4 Factors to Consider for SaaS International Expansion
All SaaS companies considering expansion should assess the following:
“Are we ready to expand globally?” In one sense, all SaaS companies are prepared to engage in borderless business. After all, modern cloud platforms make software accessible in virtually every corner of the globe.
However, just because a product is accessible internationally doesn’t necessarily mean it’s ready to expand. That readiness can be more accurately determined by answering and exploring these questions:
• Can our current business model be replicated abroad?
• Does our team have the cultural diversity to foster localization?
• Is there a global demand for our product?
The readiness to expand internationally depends on your company’s foundation at home. Make no mistake, that foundation must be secure long before looking overseas, as any systemic flaws will only be magnified through expansion.
To that end, culturally diverse perspectives are crucial for companies seeking to reach foreign markets. Overly homogenized firms may struggle to adapt to new cultures and demands abroad.
Above all, it’s imperative to determine the global “pull” for your product. If the demand is evident, you’ll know you’re solving a global problem and can approach expansion with confidence.
“What challenges do we have to overcome?” It’s no surprise that the opportunities presented by international expansion are met with equally significant costs. While the financial benefits certainly outweigh logistical setbacks, many challenges must be faced head on, including:
• Time zones: It’s easy to shrug off this issue by saying, “we’ll cross that bridge when we get to it.” In reality, however, companies need rigorously-defined systems in place to streamline and prioritize communication across multiple time zones.
• Language differences: Speaking the buyer’s language is paramount. Don’t let anything get lost in translation at any point in the buyer’s journey.
• Currency differences: More than 76 percent of buyers prefer to use their own currency, and sellers that enable multiple currencies typically grow faster than those who don’t.
• Tax liabilities: As a software company, you’ll owe sales tax wherever your customers are located (rather than where you’re based). Be prepared to register in all commercially active territories and charge the correct amount of tax on each sale.
International expansion truly requires a delicate blend of cultural integration and operational logistics.
“How should we expand?” The approach to your SaaS international expansion will depend on your original location.
For one thing, expansion doesn’t inherently mean doing business on the other side of the world. For example, if your SaaS company is in a segmented region like Latin America, expansion may simply mean doing business in a neighboring country.
Conversely, if you’re in a more unified region like North America, expansion will more likely imply an overseas venture.
Consider the following approaches as you scale your business:
• Adapt your product into another language: Before fully investing in an overseas site, consider first translating your product into a second language. While we’ll more fully explain the localization process below, this approach takes essential steps towards expansion without usurping your company’s attention and resources.
• Convert foreign leads from home: For the sake of example, let’s say your business receives a preponderance of leads from Asia. You might consider building a sales and marketing team to focus solely on converting those leads. If your domestic office can manage the new market remotely, you’ll have the best of both worlds. If demand increases, however, future steps might require installing a team on the ground in the new territory.
• Strike a regional partnership: Rather than shouldering the burden of a new market alone, consider partnering with a local business to establish your presence and gain regional credibility.
• Acquire a company in the region: If you’re in a position to buy, consider acquiring a local company to fully leverage their reputation, location, and familiarity with the culture.
• Establish a regional hub: When product demand increases, it may be time to invest in a regional headquarters and truly accelerate scalability.
While international expansion is an undeniably taxing endeavor, remember that countless companies of all sizes have already succeeded in it. Whichever approach you choose to take, prioritize consistent communication and advanced planning across all departments.
Note: If you’re a newer or developmental company with aims to go global, bake your international goals into the fabric of your firm at the ground level. By building your systems, processes, and culture with foreign markets in mind, you will more confidently cross borders when it comes time to expand.
What is localization? On a definitional level, it’s the “adaptation of a product or business to a specific market or country.”
Beyond translation alone, localization is the end-to-end adjustment of all content, images, design, and payment methods to fit the unique cultural demands and mores of a specific region. This process requires companies to study, comprehend, and embrace the culture to fully understand their perspective of your product.
The four tenets of localization are founded on language, sales, pricing, and payments:
• Language: While translating every aspect of your product and communications, true localization requires an investment in human resources that can effortlessly converse with customers in their native tongue. Whether you’re working from your home country or in the new region, this commitment requires a support staff deeply familiar with the local language and culture.
• Sales and marketing: A standard sales approach in one country may seem offensive in another. As you expand abroad, be prepared to revise your team’s sales tactics to truly align with the region.
The same standard applies for all outbound marketing and social media channels. All deliverables must not only be made available in the new language, but they must also be shaped to fit with the sensibility of the culture.
• Pricing: When it comes to pricing, localization requires more nuance than simply swapping currency symbols. Expanding SaaS companies must understand the markets in which they’re selling and craft competitive price points that appeal to that specific region.
• International payments: In order to successfully expand, all SaaS companies must have globally-optimized revenue delivery systems in place. While aiding consumers, an international payment infrastructure will also secure your bottom line. Too many companies suffer from payment failures because they don’t have the necessary mechanisms in place.
For example, a retailer that only accepts credit cards will run into a major problem in China, where the vast majority of shoppers prefer using digital wallets. Companies must facilitate global payments so consumers can provide funds however they please. Moreover, by giving consumers the ability to pay in their own currencies, it increases the likelihood that they will buy your product.
Ultimately, the process of localization ensures that consumers enjoy a seamless buying experience. To accomplish that, companies must adapt the product’s pricing, messaging, and sales tactics to fit with the culture while providing consumers with numerous ways to complete a purchase.
Localization helps consumers embrace products.
International payments help customers complete transactions.
Expanding companies need both to successfully scale their business.
Selling SaaS Internationally: Getting Started
There’s plenty to consider about selling SaaS internationally. While fortunate companies will have global markets come calling, most SaaS firms must be strategic about how they scale abroad.
To mitigate this increasingly competitive space, SaaS companies must cultivate a global mindset and a foundational commitment to understanding new cultures. In the words of philosopher Ludwig Wittgenstein, “The limits of my language mean the limits of my world.”
The companies that learn new languages, both metaphorical and literal, will best achieve their goals for international expansion.
>> Ready to learn more about SaaS international expansion? Click the banner to find out five reasons why companies go global:
>> And if China is a target market for expanding your international SaaS sales, be sure to
check out this free China cross-border eCommerce guide: