Part 4 of 5: “Just One Purchase Order”
One of the most common hopes that I hear expressed is ‘we just need a PO to get going’.
Companies that are looking for their first sale or contract to generate enough revenue to sustain expansion into a new country are more often than not doomed to fail.
High Risk Approach
A company’s international market entry ‘strategy’, based upon self-funding through cash flow from deals won, is an extremely risky approach with a low success rate. In the first place, the company has none of the networks, reputation or market knowledge to generate quick and easy sales.
Additionally, when a PO is signed, new challenges are created: that is to deliver the product/service to this first client, with quality service, in order to build some good press and ideally create referral business. If there is no investment for additional resources, and no plan in place to enable excellent and timely delivery, the company’s personnel will be all at once juggling with planning, delivering and managing this next critical phase, and in the meanwhile, systematic business development and pipeline building inevitably suffers.
Any Sale Will Not Do
Whilst such ‘boot strapping’ is possible when expanding to a new market, the need for generating income in the short term is so great that often ‘any sale will often do’ – rather than seeking the right sales with the right customers that will lead to long term relationships, an established position in the marketplace, and repeatable business.
In this scenario, the company often staggers from one signed PO to another, in a series of unpredictable short-term bursts, without ever building the right foundations to create sustainable and predictable revenues for establishing a proper business and growth.
Calculate Affordable Losses
When entering a new geography, the company should allow for some initial investment, or at least calculate the “affordable loss”. That is, they must be able to manage and limit the level of risk that must be made at each step of establishing the new business in the new market by understanding what they can afford to spend – and afford to loose.
It’s a Marathon, not a Sprint – Prepare!
Like all endurance endeavours, achieving your international market entry ambitions requires planning, preparation and time to make sure you are capable of seeing the task through – plus calculations of the minimum required investment and affordable losses. This will enable you to manage and mitigate the risks in order to make the right decisions.
Not doing any of this is a typical costly and naive mistake we see far too often: where market entry becomes a quick race to realise any POs in the short term, accompanied usually by unanticipated large losses, and resulting in a market exit.
Part 4 of ‘5 Typical Fails in International Expansion’ will be published next week.
For advice, planning and practical assistance with international expansion, contact info@tradehorizons.com.
