Securing a first client in a new market is a significant milestone for any company. Breaking into new markets can be daunting, but with the right approach, it's possible to quickly be successful. Three key strategies to help you land your first client in a new market:
#1 Localize your product
When entering a new market, it's important to tailor your product to match the specific needs, preferences, and language of your target customers. This process, called localization, can be the difference between a successful and a failed launch.
Based on a survey of 8,709 global consumers, CSA Research found that 76% of online shoppers prefer to buy products with information in their native language; While 40% will never buy from websites in other languages. This highlights the importance of adapting your product to the local language and culture.
Localizing your product based on our past experience looks like:
Conduct a market research: To understand the unique needs and preferences of your target audience, it’s essential to conduct a thorough market research. This can include surveys, focus groups, and competitors’ analysis. Use the insights gained to tailor your product accordingly.
Cultural sensitivity: Be aware of cultural nuances and avoid using elements that may be offensive or inappropriate. It's essential to work with a local expert who understands those cultural differences. For example, in the U.S., the lottery uses green tones because the color is associated with the luck of the four-leaf clover while the Chinese lottery uses the color red because it represents luck.
Localize your marketing materials: Adapting your marketing materials to the local language and preferences and ensuring they resonate with your target audience is key. This may require the assistance of a professional translator or a native speaker who can ensure your message is conveyed accurately.
#2 Leverage local partnerships
Building strong local partnerships is another key factor when entering a new market. Local partners can provide valuable insights, help you navigate cultural nuances, and connect you with potential clients.
A few ways to leverage local partnerships:
Identify potential partners: Research potential partners within your target market. Look for companies with a complementary product or service, a shared target audience, or similar values. Make a list of potential partners and reach out to them.
Develop collaborative relationships: Once you've identified potential partners, you should establish a mutual understanding of how the partnership will benefit both parties. This could include co-marketing initiatives, joint ventures, or even referrals.
Cultivate trust: Building trust with your local partners is essential for long-term success. Be transparent, open to feedback, and willing to adapt to your partners’ needs.
#3 Deliver exceptional customer success
Your first client in a new market can serve as a powerful advocate for your product if you provide them with an outstanding experience.
A few strategic tips:
Onboarding: Provide a seamless onboarding process that sets your client up for success from day one. Offer support in the form of training, resources, or personalized guidance to ensure they can make the most of your product or service.
Communication: Keep an open line of communication with your client. Regularly check in to ensure they're satisfied and address any concerns or issues they may have.
Ongoing support: Offer ongoing support to your clients, even after the initial onboarding process. This could include regular updates and continuous improvements.
Keep in mind that the key to success lies in understanding the unique needs and preferences of your target audience, building strong relationships with local partners, and providing exceptional support to your customers. By following these tips and continually refining your approach based on feedback and market insights, you will be well on your way to long-term success in the new market.
We can help you with all of this process!
One of the first steps while expanding to a new market is undoubtedly a market research. "The aim of marketing is to know and understand the customer so well, the product or service sells itself." - Peter Drucker.
Even though studying the market you want to penetrate seems obvious, too many companies still skip this step or neglect it thinking they are saving time and money. We explain why this can be prejudicial to your business:
1. The targeted market study allows you to know if your brand will meet a demand.
First and foremost, you need to conduct an audit of your company by asking yourself the right questions: What are your strengths, your weaknesses, your products? What are your opportunities and threats?
In order to assess the viability of your product or service, you should study the characteristics of the demand in the target country: age range, gender, socio-professional category, interests and the evolution of the latter over time. You should be interested in their consumption mode as going international, you will meet a culture different from yours and this should not to be neglected.
Once the target has been defined, you should find the most efficient channel to reach out to them, but above all, you should know how to develop their loyalty.
Afterwards, you may have to modulate your offer. For example, McDonald’s has modified its offer in India, they offer vegetarian options on their menu, because most of the population neither eat beef nor pork. Beware, sometimes it's not the product itself that raises issues... but the product name. Make sure your name does not have a negative meaning in your target market. Facing the constraints of new markets encourages creativity, which is itself driven by the need to adapt. New products or services can thus be created from this "voluntary imbalance," and even serve to enhance the market in your country of origin.
2. Market research allows business angels to understand the potential of your expansion plan.
Briefly, investors want to see what your chances of success are before making the decision to invest in your project. A complete and well-conducted market study will allow you to gather in a single document the answers to all the questions of your potential investors: who are your target customers? Who are your competitors? Are you meeting the demand in this new market?
Put yourself in the position of future investors, you should reassure them about your project if you want to raise funds because remember, equity investors receive their share of each dividend paid by the company and can realize a capital gain when they resell their shares in the event of a sale or listing of the company.
However, there is no guarantee that the company will be able to pay dividends or that their shares will be worth more than their purchase price if they are resold. And, in the event of bankruptcy, they are the last ones getting nothing back.
7Mountains helps you from the market research to the fundraising step in order to succeed in your international expansion.
3. Market research prevents you from making mistakes that could be costly.
Three examples of large groups that did not conduct extensive market researches before expanding their business:
In 2008, Starbucks had to close more than 2/3 of their stores in Australia. It was simply too difficult for the brand to establish themselves in the country where the coffee culture was already established. Results: $143M in losses and 61 stores closed.
In 1999, Sephora, a company specialized in the distribution of perfume and cosmetics, decided to establish themselves in Japan. However, Japanese people hardly use perfume... Sephora closed their 7 stores 2 years later.
The British grocery chain Tesco, failed to win over the U.S. market. In fact, a few years earlier, the brand might have been successful, but Tesco's Fresh & Easy opened in 2007, on the edge of a recessionary cliff, as U.S. consumers' appetite for food spending went down. 5 years later, in 2012, Tesco announced it was giving up the U.S. market and closing its nearly 200 West Coast stores. The failure cost nearly $1.5B to the British chain.
See? Market research is essential when you want to conquer a new market.
Join 7Mountains on LinkedIn as we share 3 exclusive tips every week for a successful international expansion!
You want to take on a new market? Let us know via this form. All the best for your expansion!
By Lena Baudo – Marketing Mentor at 7Mountains
The first round of fundraising is run through private individuals like friends and family members (called "love money") or individual professional investors (business angels), who not only inject fresh money, but also often bring in their expertise and their network.
The company founders then proceed with a new, larger round of financing to expand the company in its initial market. This is called Series A, and is carried out with professional collective investors, the VCs (venture capitalists). VCs make a temporary investment (with a minimum 5-year horizon) and will receive a return when the company is finally sold (or floated on the stock market).
After discussions about the valuation (which determines the share in the capital held by the investor after entry), founders and VCs negotiate a document defining the terms and conditions of the entry into the capital, called term sheet. Its legal nature is clear: It is a starting point for negotiations, not a legally binding document (except concerning certain terms, such as the exclusivity granted to the signing investor).
The final understanding of the parties will be materialized by the subsequent conclusion of actual agreements: The subscription agreement, which sets the VC's actual commitment to invest in the company, and the shareholders' agreement, governing the relations between the founders and the investors after the fundraising. The actual transaction (issuance of shares and payment of the subscription price by the investors) is carried out some time (closing) after the subscription agreement has been signed. The shareholders' agreement will also be signed at closing.
The main terms of a Series A term sheet (the "Term Sheet"), which will be included in the subscription agreement and/or shareholders' agreement, can be distinguished according to their purpose:
- The terms about the issuance of the securities to be allotted to the investor (1)
- The terms relating the transfer of shares (2).
- The terms aiming to protect the investor from further dilution in the company in which they invest (the "Company") in the event of a new round of financing (3).
- The terms relating to the shares held by the directors in case of termination of their operational functions(4).
- The terms relating the governance of the Company (5).
1. The terms concerning the issuance of securities to the investor
The investor generally wishes to be allocated so-called preference shares (the "A Shares"). Under French Law, there are two categories of shares: (i) Ordinary shares to which are attached the traditional rights that the French Commercial Code attaches to shares (such as the right to profits, voting rights…and (ii) preference shares which grant special advantages (to be described in the articles of association).
In the latter case, shareholders grant special rights for only some of them, who will therefore hold a special class of shares, and not ordinary shares.
Several rights are generally attached to the A Shares, which only the investor is allotted, and not the other shareholders (a). There is also a guarantee for the investor of the amount of their investment, via a so-called ratchet mechanism (b).
a. The rights attached to the A Shares
The A shares generally has a right to a preferential or priority dividend, or to "political" rights (such as a right to enhanced information, included mutatis mutandis in the shareholders' agreement, in addition to the preference attached to the A Shares).
Two preferential rights are particularly discussed, insofar as they affect the exit of the investor, through which she liquidates her investment: The liquidation preference and, to a lesser degree, the conversion into ordinary shares.
(i) liquidation preference right: Through this right, the holders of A share to a higher proportion of the total price in the event of a change of control (i.e sale of more than 50 % of the voting rights) of the Company (or transactions similar to such a sale, such as, in particular, a merger or a global sale of the Company's assets).
In the event of a change of control of the Company (or a transaction treated as such by the Term Sheet), the sale price would be allocated among the shareholders as following:
- The investor would be allocated the greater of (i) the portion of the price he or she would have received if all of their shares had been converted into ordinary shares and (ii) the amount of their initial investment.
- The balance of the transfer price would be allocated among the common shareholders.
This way, the investor are guaranteed against a loss of the amount of their investment.
It may happen that the investor, in addition to the preferential repayment of their investment, also requests that the surplus of the transfer price be shared among all shareholders including the holders of A Shares. However, this type of preferential liquidation should not be recommended to the founders, as it is too favorable for a Series A investor.
(ii) Conversion of A Shares into ordinary shares: The conversion of A Shares into ordinary shares, presented as a right attached to the A Share, (with, consequently, disappearance of the particular rights attached to them) will generally take place in two cases:
- At the option of the holder, at their own discretion: Generally, in this case, for one A Share, one ordinary share will be allotted.
- upon occurrence of certain events (most often the listing of the company on the stock exchange): The conversion will be automatic, generally on the same 1:1 basis as in the case of conversion by option.
b. The issuance of other securities than shares in order to protect the investor against a decrease in valuation
Generally speaking, in order to protect the investor against a decrease in the valuation of the Company, the Term Sheet frequently provides for a so-called ratchet mechanism, via the allocation of warrants issued simultaneously with the A Shares (the "Ratchet BSA") which, like any other warrant, give the right to subscribe to a future issue of shares, by exercising them, if the conditions laid down by the parties are met.
The Ratchet BSA guarantee the initial investors against a financial dilution of their participation, resulting from a loss of value of their shares, consecutive to an overvaluation of the Company at the time of their entry into the capital.
In this case, the investor has the right to be allocated, via the exercise of the Ratchet BSA, a certain number of additional A Shares free of charge as soon as a new investor enters the Company at a lower valuation than the owner of the A Shares. The global value of his investment is maintained by the increase in the number of his A Shares, following the exercise of the Ratchet Warrants, and calculated according to the type of ratchet.
There are three types of ratchet:
- full ratchet: in this case, the price per share of the fundraising round will be aligned with that of the following round and the investor will receive several additional A Shares, as a consequence of the exercise of the BSA Ratchet, the number of which will be calculated in such a way that his investment, per share, is equal to the price of the share in the following round. This ratchet mechanism is the most favorable to the investor.
- weighted average ratchet: in this case, the initial investor's cost price per share will be adjusted so that it is equal to the average of the prices per share of rounds A and B weighted by the number of shares issued. Depending on whether a fully diluted basis is taken into account (after simulating the exercise of all financial instruments giving access to capital, such as stock options for example) or not, the weighted average ratchet will be broad-based or narrow-based.
Although less radical than the full ratchet, the narrow-based weighted average ratchet is more favorable to the investor than the broad-based weighted average ratchet. Indeed, in the denominator of the formula for calculating the number of new shares to be allotted by exercise of the Ratchet BSA, the total number of shares of the Company is generally included.
Consequently, if one takes into account the shares that would theoretically be issued upon exercise of stock options (broad-based), the denominator will be higher and therefore the average price of the shares lower, and the number of A Shares to be allocated by way of exercise of the Ratchet warrants to the initial investor lower.
2. Terms relating to the transfer of shares.
In a Series A round, the investor frequently requests three types of terms:
1- A right of first refusal terms: this term provides, in the event of a transfer of its shares by a shareholder to a third party, the right for the other shareholders to acquire them in priority at the same price and conditions as those offered by the third party. If the beneficiaries of the first refusal right do not exercise it, the shareholder in question regains the right to sell freely to the third party.
2- Tag along terms (full and proportional). In this case, one or more shareholders wishing to transfer control of the company to a third party undertake to acquire or to make acquired by this third party all the shares held by the investor, under the same conditions, in particular with regard to price (total or full drag along right).
Shareholders who transfer part of their shares to a third party, but not control, may undertake to acquire or have acquired by the said third party, the shares held by the investor, in the same proportions (proportional tag along).
3- An obligation to sell jointly (drag along): In this case, in the event of a proposal for the acquisition by a third party of substantially all of the capital (generally more than 95 percent) accepted by (i) one or more shareholders representing a reinforced majority of the capital (in practice two thirds or three quarters) and/or (ii) by a reinforced majority of the owners of A Shares, all shareholders will be pushed to sell their shares to the third party.
3. Terms aiming to protect the investor from further dilution in the Company in the event of a new round of financing.
As we have seen, the ratchet term guarantees the investor against a financial dilution of his holding, resulting from a loss of value of the shares held, following an overvaluation of the Company at the time of their subscription (see above).
The so-called "anti-dilution" or “pre-emptive rights” clause allows the investor to subscribe for new shares in the event of a new round of financing with another investor, and thus to maintain its stake at the same level.
Of course, when exercising the right conferred by this clause, the investor will have to pay for the new shares allocated to him at the same price as those subscribed by the new investor.
4. Terms relating to the shares held by the directors in case of termination of their operational functions.
When an executive, who also owns shares in the Company, leaves his operational functions, she theoretically keeps her shares. She has two positions: That of an executive, which she leaves, and that of a shareholder, which she cannot lose by the mere fact of ceasing to be an executive.
Therefore, in order to resolve this situation, the shareholders' agreements signed when an investor acquires a stake in the company contain so-called management claw-back clause, which provides for the repurchase of the executive's shares in the event of their departure from the company.
The price and/or number of shares to be repurchased will differ depending on the cause of the termination of operational functions.
If the executive resigns or is dismissed for gross misconduct (showing intent to harm), all of her shares may be bought back at a lower price than their real value, or even their nominal value (bad leaver clause). The purpose is to sanction the executive who harms the company by leaving. All other causes of departure from operational functions are called good leaver.
Management claw-back clauses are often accompanied by a so-called reverse vesting mechanism.
If during a certain period after closing, an officer of the Company resigns or commits misconduct (which will have to be restricted to cases of gross misconduct, in accordance with the practice in such matters), the shares (which, through a legal fiction called reverse vesting, he will be deemed to acquire each month after the expiration) will have to be sold at their nominal value (bad leaver clause).
Conversely, if the executive leaves the Company for any reasons other than those making a case of bad leaver, all or part of their shares may be bought back at a value calculated based on a method fixed by the shareholders' agreement (good leaver clause). The purpose here is not to sanction the executive, but simply to allow them to sell her shares at the fair financial conditions.
The investor generally requests that the shares held by an executive be repurchased at an price calculated on the basis of the market value of the shares held by the executive on the date of their departure, or sometimes at a price calculated on the basis of the valuation of the last round of financing prior to termination.
5. The terms relating to the governance of the Company.
These are the term providing enhanced information for the benefit of the investor (a) and the term governing the functioning of the collegial consultative body set up to guide the decisions of the directors (b).
This type of terms grants the investor the possibility to receive, in addition to the legal information to which any shareholder is entitled, a right to the communication of temporary accounting situations and/or periodic, monthly or quarterly financial and/or cash flow statements, financing tables and/or projected budgets; business plans or activity reports of the Company.
This can be materially burdensome for a young company, so the investor will be careful to remain reasonable, especially since the managers bring more value in their operational functions than in administrative reporting tasks.
2. The term governing the operation of the collegiate body
In order to be represented on the statutory collegial body (the "Board") that assists the executive (but without any other power than advisory), the investor usually asks to appoint a candidate (the "Investor Board Member").
The investor also suggests certain limited decisions (such as, for example, approval of the annual budget, incurring unbudgeted expenses, formation of a subsidiary, acquisition of another company…) to be approved by the Board, acting by majority vote (including the favorable vote of the Investor Board Member).
In practice, this allows the investor Board Member, and therefore indirectly the Investor, to block the adoption of these decisions. Reminding here the Board is only an advisory body responsible for guiding the decisions of the Chairman, who in a simplified joint stock company (the most common legal form of startups in France) has the sole power to bind the company, but if they were to override the Board's veto, they would incur liability.
In order to allow some flexibility , it is appropriate to define precisely the decisions requiring the approval of the Investor Board Member and in particular to provide for thresholds in certain cases (e.g. the obligation to obtain the approval of the Investor Board Member in the event of the sale of an asset exceeding a certain amount, but not in all cases).
Many inexperienced founders are tempted to sign the Term Sheet as provided by the investors, without discussing the terms. This may put them in an uncomfortable position when the final subscription agreement is negotiated. The investors are looking to secure the highest capital gain and, under these conditions, will provide for the most advantageous exit conditions, reducing those of the founders. Of course, the Term Sheet is not binding. Nevertheless, it is sometimes difficult to go back on the agreed terms. It is therefore necessary to ensure that the terms of the Term Sheet comply with the standards practiced in Series A financing.
By Dr. Renee Kaddouch, Ph.D. - Legal Sherpa at 7Mountains.
Who has never heard of that popular algorithm, the one that determines if your publication will be spread over to a maximum of people or if it will be drowned among many other posts? There are no less than 2 million posts published on LinkedIn every day, 830 million members and over 58 million registered companies. How to reach your targets in that ocean of publications? 4 points to consider having the algorithm work to your advantage:
#1 Start by optimizing your profile:
A good profile starts with a picture that looks like you, it may seem obvious, but it is essential that we can recognize you. Too often, profiles kept photos dating from more than 5 years... Also, prefer a portrait with a good resolution. How about the banner, what do you put on it? A person visiting your profile should be able to understand what you do, or the services you offer, so adding a text to your banner, the slogan, or the logo of your company for example is highly suggested.
The visual aspect is validated. Let's go to the content. You have 120 characters to fill in the "professional title" field which is located under your name. Make sure that it is as precise and clear as possible. Depending on the targets you want to reach, it may be wise to write it in English. The next step is your summary: 2,000 characters are at your disposal, don't hesitate to fill that field in with the right keywords that will allow people to find you.
Finish the process by completing your experiences, achievements, and your contact information... Add five relevant skills, this will allow you to receive up to 31 times more messages from other members. In short, your profile needs to be 100% complete to be effective and give the LinkedIn algorithm the essential information for your referencing.
#2 Interact with other users
Let’s remember that LinkedIn is a sharing social network. And the algorithm takes this into account. In fact, being visible on LinkedIn also involves comments, likes, and shares of other posts. Let's talk about "reach," it is the number of people you can reach with your publication. What does this have to do with our second point?
On LinkedIn, if a like brings +2% of reach to the author of the publication, it brings +3% to the person who has liked. You benefit from liking the publications of other creators. Comments also allow you to gain visibility, on one hand, because you will appear in the news feed of your network as follows "*Name* commented on this publication," you have a possibility to attract people's attention. On the other hand, commenting on other people's posts allows you to create links, these people will probably comment on your posts in return, and the LinkedIn algorithm will tend to spread your posts to those users because of your previous exchanges.
The saying "you have to give before you get," makes all sense here and summarizes perfectly this second part.
#3 Create high-value content
Each time you post on LinkedIn, the algorithm classifies your content in one of three categories: Spam, Low quality, Clear. Once the category is determined, the test begins with your audience. How do you create content that interests your audience? Start by knowing your audience, you can make surveys for example to see the topics that interest them the most. Also, measure the performance of your posts, this will give you an indicator according to your most liked/commented content.
Avoid being too scattered, write about your area of expertise, and specialize. This way, you will be able to give advice on a specific subject. There is obviously no miracle solution, some people create interesting content but don't have much impact, this can vary depending on the day of the week, the time of your post, the connected audience... The most important thing is to get started and do your own tests. Remember to note the time of publication and the day so that you can compare the impact of each of your posts.
#4 Take LinkedIn algorithm’s specifics into account
A few more tips on how the algorithm works, feel free to use them all!
- Among the reactions, comments are the most significant. In fact, a comment generated within 24 hours of publication brings 4x more reach than a like, and 7x more reach if posted within the first two hours. However, be careful to respond to your comments or it will be canceled out.
- In 2020, LinkedIn introduced the Dwell Time, which measures the time a user spends on your post. This allows you to consider the ones who read your post but do not interact.
- Measure your SSI score (social selling index), this one measures your performance in the network. The higher it is, the more your posts’ reach increases.
If you want to learn more and set up your digital strategy on social networks, please contact us. Let's develop your business together!
Hoping this article will help you to see it more clearly.
By: Manon Maisonhaute, Digital Marketing Sherpa at 7Mountains
If you are looking to expand your business internationally, you may make mistakes.Accept them, don't be afraid to move forward as it's all about change.
However, some common mistakes can be avoided if you are well-informed. Thanks to our team of experts who have successfully expanded their own business(es) internationally we have identified the following 3 mistakes:
#1 Starting your expansion with business development before assessing the market
How many companies are tempted to make that bet? According to our experience, many are and we learnt from the experience that it is not the right solution. Of course, business development plays an important role in a business expansion, and in the right order.
The market research helps to assess your entry potential in your target market. This entry potential is defined based on different factors such as the size of the market, the purchasing characteristics of the consumers, their needs, your competitors, the entry barriers... It's a thorough analysis that will first confirm if your expansion decision on this market is judicious and realistic, or on the contrary, data will invalidate that choice.
Once this analysis has been completed and validated, information about your target personas will be clearer; Who are the consumers/users who will be interested in your product? Which communication channels do they use? This is a key step that takes place before initiating sales actions as selling a product by not targeting the right people is a bit like looking for a needle in a haystack. You risk wasting time and money.
Finally, adapting your offer to your target market will be crucial. Each market has its own rules and customs, there is no guarantee that your offer, although successful in your local market, will be replicable as is in another market.
[Read more about market research in this previous article.]
#2 Underestimating your need for financing
Expanding your business internationally is a costly endeavor. It is important to be able to identify those costs and plan the budget thoroughly. In some markets (such as the U.S.), the costs are often much higher than those you are used to anticipating in your domestic market. Defining an export budget requires you to take into account multiple expenses:
In the beginning, you may need: a market study, external strategic advice, help for your fundraising. Prospecting, marketing, legal and financial support.
You will also need to estimate the cost of recruiting international talents, setting up your company, training employees, business development and community animation...
Given the average time to raise funds, which is between 6 to 9 months, it is important to forecast your expenses over a period of 24 months. Otherwise, you could run out of cash and find yourself in need of funding very quickly. Of course, this does not mean asking for as much as possible, as you need to be able to explain to your investors how your expenses will be divided up by presenting them with your financial forecast.
An international expansion is a long-term project and it is very complicated to assess the necessary budget by yourself, so our experts help you with this process.
#3 Not having an advisory board
An advisory board is a group of people chosen to give impartial advice to a company based on their experience. It should not be mistaken for a board of directors. The advisory board interacts freely with the executive without any hierarchical link, and the latter is not under any obligation to follow the board's recommendations.
The importance of this committee in your development is linked to collaborative thinking and the experience and ideas sharing that emerge from it. In fact, it's interesting to choose members with different experiences and backgrounds than yours. They will be a valuable source of reflection and stimulation. They are also impartial and will help you take a step back from the situation.
Advisory committees help avoid common mistakes and make the most of a company's resources. With the right advice, you'll go further and faster.
Are you ready for an international expansion? Test your readiness.