Scenario: market research endeavor turns up immediate international sales prospects
We set up a series of meetings for Belinda to offer her company’s catalog of personal care products targeting spas and wellness centers in Mexico. She has done some research about the market but she’s a people person and likes to obtain information firsthand. Even though she isn’t totally in a position to start offering products, she wants to speak to some potential customers. We’ve seen this approach to market research work well, especially for catalyzing internal business cases for moving forward in export. We set up 10 meetings for her with hotels and spa chains in Mexico, as well as a couple of potential distributors just to get their perspectives.
Belinda doesn’t speak Spanish, nor does anyone at her company, so she has opted for an interpreter to join her meetings. Since they’re virtual meetings, simultaneous interpretation works a lot better than consecutive, so it’s especially beneficial to have a professional interpreter, not just a bilingual person. Interpreters typically charge by the day, up to 200 or 300 USD. We try to pack in as meetings as possible per day to minimize this cost, but due to companies rescheduling and other factors, the meetings end up taking place over 4 days, generating Belinda’s company about 800 USD in expenses just to hold virtual meetings. Granted this is cheaper than traveling to market, but it’s not chump change. Belinda did get a lot out of her market research, and she considers the expense more than justified, but now also 4 of the customers she spoke to are really interested in buying Belinda’s products and want follow-up meetings, which also require interpreters.
Small + Medium Companies Take a Cue on Scale
We talk a lot in our practice about calculating the costs of doing business overseas. Even in the most initial phases, which is typically generating sales to the new market made from your home country, the cost of reaching and delivering to those international customers is going to be higher than what it costs you to sell at home. This is because you’ve added not only distance, but also another legal system, another financial system, another language, and pues, another market, plus a whole lot more unknown variables.
When you’re beginning to sell in a new market, especially an international one, you’re not just expanding your business. You really need to be scaling it. If it costs more to sell in the new market, then your profit margin decreases. You’re in a sense losing money off your new sales, unless you’re generating greater economy of scale in the new market, or otherwise offsetting the higher cost of selling (such as by locating production there).
This hits harder for companies that operate at smaller scale, which is one of the reasons international business has historically been less accessible to small and medium companies than it is to larger ones. The larger ones are simply in a better position to afford the cost, and risks, of overseas business.
Back to our example of Belinda and the spa products, if she’s going to really pull off some sales, how many sessions with interpreters would she have before the cost ended up being the same as hiring someone who speaks Spanish to work at her company? What about instead dedicating that money to commission percentages, for a bilingual agent located in Mexico? Or a reseller discount? Especially since all of those options represent an investment in increasing her sales force for Mexico. Those folks can do a lot more for Belinda’s company than help with Spanish, and a lot of the support they offer in terms of sales, they’re potentially going to be better at it (for Mexico) than Belinda is herself.
Accessing a new market is not just about expanding sales. It’s part of a planned process, which should expand your business in a way that makes the most of the resources you’ll have to invest to manage risks and achieve sales.