Selling SaaS internationally: When global becomes local
The beauty of growing a SaaS company in this day and age is that you can win customers from pretty much anywhere without even leaving your bedroom. And it’s not just that saas companies can serve users from anywhere.
If people can buy access to your product straight from your website, then you already are serving users from everywhere.
And that’s regardless of who you’re actually trying to attract with your go-to-market strategy. Take a closer look at your own traffic breakdown if you don't believe us. You’re sure to be surprised by how global the interest in your product is.
Now, being global from day one creates a tonne of opportunities for software companies. Just imagine how quickly you could grow revenue in those markets if you were actually trying to; serving international customers in their local languages, in local currencies, and at localized price points. But being this global also creates risk.
Those who haven’t carved out a deliberate revenue delivery strategy are particularly vulnerable to those risks. There are two areas in which that’s the case.
The first is compliance.
The software industry is becoming increasingly regulated, and these regulations are not standardized. This means you need to play by different rules in different places.
The biggest compliance risk is sales tax.
In SaaS, you owe sales tax depending on where your customers are located, not where you, the seller, are based. Say you’re a scrappy Danish startup seeing traction from customers in India or Russia. You owe tax on any and every sale. They have no thresholds. This means you need to register there and charge the right amount of tax when necessary. In Russia, that’s on every transaction. In India, you have to pay sales tax if you’re selling to individuals or consumers. This means you’ll need to stay on top of who exactly your customers are, as well as where they are.
But that’s nothing compared to selling in the US, which has over 11,000 tax jurisdictions with different rules on if, what, when, and how software companies owe sales tax.
It’s complex stuff to stay on top of, but if you get it wrong the consequences will be huge. We have a dedicated tax team who spent over eight months trying to navigate the registration process in the UAE, and we still got caught with a 300% sales tax penalty.
Let’s turn to the second area of risk.
Unless you have a globally optimized revenue delivery infrastructure, your bottom line will be suffering. One of the key reasons for this is high payment failure rates.
A payment failure is when you try to charge a customer and don’t succeed, typically because one of the banks involved flags the transaction as potentially fraudulent. That happens a lot with international payments, as the banks don’t know each other so well.
Another hit to your bottom line comes from the fees taken for your international payments:
- First, you pay the transaction fee to your payment processor.
- Then there’s a potential cross-border fee - typically 1-2% of the transaction value.
- Finally, if there are different currencies at play, you could be stung with a foreign exchange fee - typically 1-3%.
Okay, so we know software companies have an addressable market that is global from day one, and we’ve established some of the risks you face because of that. How do we seize the opportunities while mitigating these risks?
Here are five ways your revenue delivery strategy and infrastructure can give you that competitive advantage:
1. Speak the same language as your customer - especially when you’re taking their money
This is the most critical time in the buyer journey, and you’ll want to make that purchase process feel as frictionless to the buyer as possible. Do so by speaking their language.
2. Let people pay in their local currencies
Our data shows that the sellers who don’t enable multiple currencies grow 26% slower than those who do
3. Let people pay in ways they’re used to
In Germany, around 50% of sales under $50 are paid for through digital wallets. In the US, cheques are still super common.
4. Reduce payment failures by requesting funds in the same currency as the customer’s bank
In some regions like Japan, we’ve seen up to a 9% increase in payment acceptance charging in a local currency.
5. Set up local or regional banking
Setting up banking accounts in areas where your customers are will further boost payment acceptance and also minimize FX fees. Or you could just sell through a provider that already has that global banking infrastructure. Right?
All-in-all, whether you’ve thought about it or not, your customer base is global.
If you do just one thing after reading this, go check what % of your sales and traffic are coming from outside your home market, and consider how you could improve the experience for these potential customers.