Expanding internationally is a tried and tested growth lever for SaaS businesses. And it’s easy to see why:
- You can get global reach without really trying. By its very nature, SaaS makes it possible to access new markets without dedicated sales and marketing resources.
- International businesses grow more quickly. Companies with over 50% annual growth see 31-32% of revenue from international business. By contrast, slow-growth (less than 25% annual growth) companies see 20% revenue from international business. (Source: OPEXEngine)
While it may be easier for SaaS to go global, it’s not without its challenges. SaaS businesses looking to expand internationally need to do so with strategy and intention to avoid missing out on huge revenue potential from untapped markets – or succumbing to the obstacles of selling globally like so many businesses do.
In this article, we help set your company up for global success as we take you through the process of deciding when and where to expand into new markets and what to be aware of along the way.
When is the right time?
Not long ago, scaling outside of your home country was recommended if 25% or more of your business came from international markets. Now, while this is still a relevant benchmark, software and SaaS businesses are more heavily regulated, banking is more complex, and customer expectations are higher than ever — making the question of when to expand internationally more complex.
Here are some things to think about:
Any move into new markets should be in support of your business’ overall mission and vision. Your starting point should be to ask yourself whether or not your business’ mission extends across borders.
For example, tools like asana that help connect remote teams have a clear business case for selling globally and connecting international teams. If you’re solving a niche or more local problem it might not be the right time for you to take your product into a new region.
2. Market demand
You might be gaining traction in multiple countries but you can’t (and shouldn’t) try to tackle ten new markets at once. Research new regions and look at your existing data to determine where you have the best market fit, and which market will have the best return on investment (ROI).
- Where you’ve seen the most traction
Look at where your traffic and new customers are coming from. You might find that there’s an audience who already sees the value of your product, waiting for it to become more accessible.
- The competitor landscape
If the problem you solve is felt in a major market, like Europe or the US, and there isn’t a solution like yours available, it could be a good time to establish your brand and solution.
- Where your product and business has cultural alignment
Your product is likely already more accessible in some markets. In others, you might need to make significant changes to localize your offering.
Ultimately, you need to decide where it’s worth spending your effort, time, and money (particularly if you plan on setting up local entities).
3. Market landscape
As you evaluate new markets, factor in the requirements for selling there. Do you need to have a local entity or local representatives? How long does the registration process take? And when you're registered, what other regulations do you need to be aware of?
Setting up locally is resource heavy because you’re bound by regulations, so understanding where you have to be local and where you need to be local is key.
4. Business readiness
It might make sense for your business to expand internationally but is it actually ready? When establishing your business in new markets you’ll need resources and processes to manage your team, support your customers, and scale your business effectively. With a lot of focus on making new markets successful, you need to make sure that this won’t take away from, or negatively impact, other parts of your business.
Your go-to-market strategy plays a part here too. If you’re a product-led business, your processes are potentially more repeatable and therefore scalable across markets. If you need boots on the ground to manage your sales-led approach, it will take longer to get up and running and your processes will likely need to be more bespoke to each region.
What to be aware of
Once you’ve decided when and where to expand, it’s time to look more practically at how you’ll do it. There’s a lot to it, and we see a lot of the same things harming businesses and getting in the way of growth. Here are some things to be aware of:
Local hiring regulations
How you choose to register your business will impact the way in which you’re able to hire. In some countries, businesses can register exclusively as a hiring entity. In others, you’ll need either a local business entity or an employer of record.
In a recent interview, Peter Nesbitt COO at TeamPay commented on the increase in the number of companies using Professional Employer Organizations (PEOs), sometimes known as Employer of Record services like Remote.com and Papaya Global. Here, the PEO holds the liability at the legal entity level – helping SaaS businesses to stay compliant without huge investments in-house.
In addition to how you hire, you’ll need to factor in how you’ll pay your global employees and the compensation you offer. Compensation expectations differ across markets, this goes for salary as well as benefits including pensions and healthcare.
Payment processing and currency management
We’ve all been on a website and left the checkout because you can’t pay in your local currency or they don’t support your preferred way to pay. Attracting customers from new markets is great but it’s pointless if you lose them at this crucial step. In order to convert prospects and collect payments efficiently you need to be able to receive cross-border payments, in different currencies, and from different payment methods.
There’s a lot to consider, starting with how you build out your payment infrastructure and then how you optimize payment processes for maximum conversion and high payment acceptance.
For more on how this works in practice, and your options for taking international payments — read our guide to selling globally for finance, legal, and operations teams.
Sales tax compliance
Sales tax is now applicable to the sale of digital goods, software, and SaaS in over 40 countries. When selling internationally, you need resources to manage your sales tax liability to avoid problems with the authorities, this process includes:
- Understanding where you’re liable and registering with authorities accordingly.
- Monitoring changes in local and international tax rules.
- Accurately calculating how much tax is due in each location or region.
- Filing and remitting your payments in accordance with the local tax authority’s schedule.
Selling SaaS globally handbook
International expansion isn’t easy and it impacts almost every department across your business. Avoid missing out on revenue potential in new markets, check out our Selling SaaS Globally handbook.