“I don’t want your free product!” – Why you can’t rely on “giving your product away for free” to get customers in the USA

As an international company wanting to achieve success in the USA it’s a very hard thing to land your first US customer. Typically US based clients do not really care about which customers you have in your home country, if you have no customers in the USA then it does not count. Welcome…

Realizing how hard it is a lot of international firms try to “give it away for free” to get that first customer. The executives and the sales team believe that this significantly will increase the likelyhood of achieving “lift off” and getting customers onboard. The goal then is to use the free customer as a reference to get other clients. 

Unfortunately this is not how reality works….free really is not “free” at all when considering the customer’s perspective.
Let’s assume their perspective for a moment and run through a high level calculation: 
1. Software product X sold by the international firm – cost: Free 
2. Implementations support delivered by international firm – cost: Free at best, more likely billed on a time and materials basis 
3. US customer’s time to implement the product – cost: Not free!
4. US customer’s internal change management requirements needed to be able to fully adopt the benefits from software solution – cost: Not free!
5. US customer’s training requirements, i.e. time for training: Not free!
6. US customer’s perceived stress related to “selling” this tool to internal stakeholders: Not free! 
7. US customer’s efforts to provide basic first level support for the tool since internal users will want an internal super user – cost: Not free!
8. US customer’s perceived risks of adopting a product from an unknown provider with NO HISTORY IN THE USA, perhaps not even a US presence or any form of IT support group here: Not free! 
9. The cost of “change” to all users and the organization: Not free! 
10. Costs related to lack of productivity among users adopting your solution: Not free!
11. Costs of having to involve possible high level executives or high paid internal experts to get your solution adopted: Not free!

There is a lot more nuance but the point is: If you sell technology products to other businesses then please keep in mind that any technology solution will come with significant risks and cost to the customers, a cost that may well overshadow the actual cost of your software solution.
The impact to the go to market approach is as such to focus your efforts on mitigating said risk factors while driving down the cost of the full scale implementation (customer’s internal costs as listed above and the cost of your solution).

In short: Invest in strengthening your case for the US market over a strategy of keeping infrastructure the same and “giving it away for free”. 
You execute this by understanding what the risks and costs look like for you customers, then finding ways to mitigate/lower them via initiatives such as establishing a US presence, getting US support staff (own or 3rd party such as channel partners), creating documentation for the US market, getting reference cases, etc. 

The importance of local presence when seeking success in the USA

There are lots of factors necessary to successfully engage, close and grow a customer based relationship with a US-company. Ofcourse your product must have the right elements of price to value, you must provide differentiation along an axis that your client cares about, your support must be up to par with the market, and numerous other factors. One element of successfully growing your US-business, one that is less discussed, is the element of local presence.

When speaking with clients we define local presence by distance from the target market:

  • In the neighborhood = in the same metro-area as the multi-national so as to be able to visit “immediately”. Being in the neighborhood of your client is always a benefit but can be particularly helpful if “community” engagement and dependencies, on-site support, strong elements of co-development, rapid and iterative cycles, or high logistics cost and supply chain dependencies exist. Added benefits of being in the metro-area allows you to engage at a certain level in the community and get to know the client and its multiple stakeholders; something that is a key ingredient if you want to grow the client.Consider for example the Wind-energy industry.
  • regional-presence = WIthin 3-5 hours driving distance so as to enable for frequent but pre-planned meetings. This is the degree of localization that most of our clients are advised to provide to their clients in the USA. Being in the same region where you can drive to the client is a big difference from requiring a longer plane flight; requiring a flight is a mental hurdle in the minds of most companies. Being in the same region allows you to pick up some of the local flair (example: knowing about college football in the South is a big plus as most executives in this region have some interest in this sport) and you’re never too far away to be able to execute a face to face meeting….which many times is the factor that makes or breaks the deal.
  • National presence: When speaking of achieving success in the USA it’s imperative to have at least this level of presence to your customers. First and foremost you’ll be able to communicate with the client and his team via phone, something that is greatly hindered if you’re 6-9 hours away (example: Denmark). In addition you may be required to have local presence to comply with customer purchasing requirements (many Fortune 500’s require to be doing business with a local legal entity for reasons that include risk management).

Summarizing the importance of local presence I’ll quote one of our Senior Relationships with one of the world’s largest companies, a firm headquartered down the road from us here in Atlanta:

“While we don’t mind getting on planes to meet with vendors, you should realize that we are busy people. We may find it hard to find the time. In addition we are “lazy” 😉 If you’re local you’ll definitely increase your odds of doing business with us.”; Senior Executive at Fortune 50 company in Atlanta

What value do VC’s bring to the table for startups wanting to achieve success in the USA?

Why do startups take VC money? The money aside, is there any other value add? In my experience the typical VC speaking to “why them” typically will state that they “add more value than just the check”. I’ve never taken outside capital so I don’t have a personal story to lean on.

I’ve heard many of my friends state that their VC’s really did not bring much to the table. Perhaps they didn’t get the right VC…perhaps they were right?

It’s safe to say that I’ve contemplated this for some time and so during an event tonight here at our offices I decided to ask a VC:

Can you provide me with some examples of how you specifically have added value to your portfolio companies?

The answer was interesting and made me think of some other conversations with entrepreneurs that I’ve had about their VC’s and said support.

Below are some examples of what kind of specific value I’ve heard VC’s adding in support of making their portfolio firms successful in the USA:

– Facilitation of key-hires: For example helping a portfolio firm find their CTO, 
– Providing the entrepreneur with valuable experience that is key to the strategy of his company: One story stands out: “You should lower your burn rate, take more time, extend your runway”. The VC, a serial entrepreneur, gave this advice to an Entrepreneur who was on a strong growth curve but where monetization was not yet in place. The entrepreneur told me this particular advice was very valuable; he was about to stack the team and go full force, something that may have caused him to “burn out and fade away” too soon, 
– Introductions to key potential customers: No doubt this one is a value added!
– Introductions to key industry experts that allowed the company to accelerate their learning. The impact of such learning can quickly be turned into “dollars saved” if considering the time it would have otherwise taken. 
– Providing the entrepreneur with support when putting the reporting documents, financial models and presentations together, 
– Helping the entrepreneur raise the next round. 
– Providing perspective from other companies and industries, perspectives that can be applied to this company, 
– Support with pricing 

We’re a toolset. We help with which ever is needed to grow the business; VC answer

My personal conclusion from my dialogue with the VC is that the list of value added elements are exactly the elements for which why our clients hire @katapultgroup. We bring expertise from having worked in over 100 industries, with over 350 companies (big and small), having started companies, having sold companies, having built software, having raised money…having gotten our hands deep into the operations and execution. We actually go the extra mile and close deals, hire and fire, file the paperwork…do what ever it takes to grow the business. This makes me grateful and happy. I realize how much value we bring to our clients, besides just closing deals. 

Tonight i’ve gained more respect for VC’s and what they do for their companies. Tonight it’s also clear to me that we are an alternative to VC’s; We can help you grow your business without you giving up 40% of the company. Next time someone mentions that they are looking for VC money I’ll offer up the idea of considering finding someone like @katapultgroup as an alternative. 

Review of last nights event welcoming AmCham-Brazil’s Entrepreneurship Mission to the USA

Last night @katapultgroup hosted AmCham-Brazil’s Entrepreneurship Mission to the USA. It was a phenomenal event! We welcomed the delegation of Brazilian technology enabled companies after they’d been through a day full of meetings at Georgia Tech / ATDC, Embraco and WEG, choosing to provide them an evening focused on fun, great networking and learning from people that are in the trenches of company building. The event was a great success, considering the feedback we received by both the delegation and the supporters from the community. Here is a short recap illustrating how we were able to generate such a positive outcome: 

  • An outstanding turnout and more importantly, engagement by the Founders of some of Atlanta’s most exciting startups and accelerators. Learnings related to achieving Success In The USA: The delegation heard from “moon-shot” ventures such as NeuroLaunch when to consider Atlanta for your startup, particularly in the context of Boston (which is where NeuroLaunche’s Founder has graduated). Jordan, the NeuroLaunch Founder, mentioned the low cost of doing business, the great intersection of talent in IT/Medical/Engineering, the foundations for NeuroLaunch’s business, among other elements that make Atlanta great
  • Strong turnout by Big Corporate in Atlanta, including high engagement and feedback to the local startups and the delegation. Learning related to achieving Success In The USA: Doug from Coca-Cola 
  • Many new valuable connections were facilitated: @katapultgroup made sure to make mutually beneficial introductions amongst the attendees. In addition, it seemed as if a lot of great new acquaintances were made. Learnings related to achieving Success In The USA: Business is still a person-to-person business and achieving ultimate success in the USA requires you to be present and engaged. 
  • Pragmatic and tangible take away’s: The excellent panel provided very tangible and helpful learnings in the context of “What it takes to achieve success in the USA as a foreign based company”. Learnings related to achieving Success In The USA: 
  • Coverage by local press: @Trevor from @GlobalAtlanta was kind to cover the event and moreimportantly provide some visibility to the Brazilian delegation companies. Learnings related to achieving Success In The USA: If you’re an international firm with an interest in opening up shop in the USA then Atlanta is interested in hearing your story….you have to show up though. 
  • Support from the key government/non-private organizations: @katapultgroup had ensured that we’d kept the relevant stakeholders in the loop and Atlanta has generally come together on the program, mainly through coordination by @investatlanta. We were glad to see the important organizations attend the event in the evening, including: The Atlanta Mayors Office, Invest In Atlanta and Atlanta Metro Chamber of Commerce. Learnings related to achieving Success In The USA: The USA as a country, states, counties and cities are heavily reliant on international businesses and as such you should expect support in some shape or form. The best you can do is reach out, tell them about your company and your goals and ask them for help.
  • Outstanding support from the Brazilian community in Atlanta: 5 board members of the Brazilian Chamber of Commerce as well as the Vice-Consul showed up to participate and were able to provide additional nuance and insights to the delegation. @katapultgroup was happy to become acquainted with said leadership. Learnings related to achieving Success In The USA: Up your chances of engaging with your fellow countrymen and sharing with them what you have in mind so that they can tell you which things to possibly watch out for. Many times your colleagues can give you nuances that are hard to find by speaking to people of a different culture, such items include: Healthcare coverage related, Leadership and motivation in the context of your company, communication nuances such as the example of writing a holiday card correctly and without offending anyone, and more.
  • Good ROI for the sponsors: @hawcpa and @pronestor were the sponsors of the night. Both got significant exposure and were given chances to address questions related to helping the delegation in which they had expertise. Learnings related to achieving Success In The USA: Whenever you involve a third party in your activity, make sure it’s clear what’s in it for them. Generally, when nurturing and growing relationships, make sure you go the extra mile to provide value. 
  • Good fun and relaxation: After a long day of meetings the delegation seemed to really appreciate the casual and fun atmosphere. Learnings related to achieving Success In The USA: If you don’t have fun it’s not worth it. Think of entering and growing your US business as a marathon, not a sprint. 

Usually @katapultgroup is not particularly fond of delegations as we don’t believe they add much tangible value. This successful event however has made us reconsider whether we will do more such events in the future. 

What does it cost to run your US operation? A real-life expense template based on having helped over 50 international companies in the USA

Because we get the question: “What does it cost to do business in the USA?” we’ve decided to publish a template budget for year 1 of your US operation. This template budget can be found under resources here.

Since we’ve worked with a large variety of firms, we believe the budget represents a good baseline for any type firm, i.e. you should be able to use it as a baseline for budgeting and forecasting. Please note that the biggest variables in the budget are represented by your staffing needs and your emphasis on growing inbound demand through digital marketing and events.

The team behind @katapultgroup has helped over 50 small and midsize technology enabled companies with establishing and growing their operations in the USA. From this experience, we’ve learned a few tricks as to the best and most economical way of setting up your US subsidiary and running it in a capital efficient manner. Please feel free to reach out to us to discuss.

Below is a copy paste version of the budget if you’d like to simply review it:

FINAL Expense estimate for small and midsize companies wanting to establish themselves in the USA - Success In The USA .xlsx

Expense typeMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12Annualized
Variable expenses
Business development and marketing investments1001001001002002002002002002002002002000
Travel and entertainment with clients/partners in N.A.100100100150010010010010020001000100010007200
Travel to home office4000 4000400012000
Visit by CEO of home office40004000
Leads data8008008008008008008008008008008008800
LinkedIn professional account808080808080808080808080960
LinkedIn ads2502502502505005002000
Cost of international phone calls to South-America, Skype subscriptions, similar252525505050505050505050525
Events cost (not trade shows)5005005005002000
Fixed expenses0
Salaries:0
VP North America100001000010000100001000010000100001000010000100001000010000120000
Inside sales associate 3000300030003000300030003000300030003000300033000
bonus for inside sales 1000100010001500150015002000200011500
Marketing and support / Client success manager 3500350035003500350017500
Office rent for 3 people with internet included12001200120012001200120012001200120012001200120014400
1 cell phone line with necessary add-ons1001001001001001001001001001001001001200
Virtual phone system for other team members and including your company's main-number505070707070707070707070800
Other office expenses such as paper, clips, coffee, snacks, other2002002002002002002002002002002002002400
Team events and culture building100 100150250 2504001250
Insurance coverages1500 5002000
0
Expenses that are in-frequent/optional0
Support for PR0
DIY PR support software and related 2002002002002001000
Trade show attendance 30003000
Website localization 2500025000
Localization including translation of marketing and sales materials 0
Various Legal services 10001000
Ongoing Book keeping 3003003003003003003003003003003003300
Blogging 4004004004001600
Social media 0
Google adwords10001000100010001000100010001000100010001000100012000
LinkedIn page creation and management 0
Facebook page creation and management 0
Twitter page creation and engagement 0
Graphic design support 800100010002800
Registration with the city 125125
Incorporation of the company1100 1100
Visa for VP North America and his family5000 5000
Trade mark registration 0
Filing of patents 0
Legal review of company's standard sales contracts2000 2000
Legal review of customer's contract (based on Fortune 100 customer) 800800
Setup of books by book keeper500 500
Quarterly reviews by accountant 0
Sales tax study and recommendations 0
Transfer pricing study 0
Accounting: Annual filing 50005000
Employee handbook 1000 1000
US contracts creation 0
Outsourced sales and growth support 0
Total279551705520975193002260019050208502830053350281002510030125312760
FINAL Expense estimate for small and midsize companies wanting to establish themselves in the USA - Success In The USA .xlsx

 

 

The Startup Chasm – the most difficult journey for international companies entering the USA.

Small and medium-sized international businesses who want to enter and grow in the USA will need to pass the “Startup Chasm” – the most difficult journey for international companies wanting to enter the USA and achieve success.

I define the Startup Chasm (inspired by Geoffrey Moore’s Chasm theory) by the critical first period you have to go through after evaluating the market and having said GO to entering the USA, but before you have a significant customer base and a steady and ongoing business in the United States. Looking in the rearview mirror the Startup Chasm is easy to recognize and rationalize however looking ahead and into the Chasm, the Chasm most often is appearing as small, insignificant and very temporary. A small hole in the ground that will be easy to surpass.

Most small and medium-sized international enterprises are sadly unaware of the depth of the Startup Chasm and the resource requirements for successfully making it through. This lack of respect and know how of the Startup Chasm is, in my experience the primary reason for international businesses to fail in the US market.

If you want to survive in the US-market, you need to be highly aware of the Startup Chasm, the resources and team work it takes to overcome it and the time before the Chasm is behind you. Most companies that fail in the USA fail for some reason related to being unable to make it through the Startup Chasm. 

The Execute to Impact Model – A simple tool to decide between US-market initiatives

Lightweight tools are critical to your success in the USA

Plans are useless, but planning is indispensable; Eisenhower

 

As a small business with an operation in the USA it is fairly important to use lightweight tools that don’t take too much time to use, are easy to understand and bring enough clarity to the situation for your company to find it useful. The tools should be able to easily incorporate into the reporting processes already in place while, once again, not bring added overhead.

Added overhead is what can start to derail the company in its progress simply for the fact that there are more small tasks than one can ever imagine, most of them important but not drivers for sales and growth. These items are invisible to the HQ location and therefore pose enormous risk to the US operation. Anything that is an urgent task to the US operation, but is invisible to the HQ poses a risk as it takes away resources, to In another blog post on @SuccessInTheUSA we will discuss what these items consist of and how to manage them so they do not overtake the resources of your company. 

When planning initiatives to drive sales and growth in the US-market, we have been using a super simple framework called The Execute to Impact model. See illustration below:

The Execute to Impact Model for choosing which initiatives to pursue

The Execute to Impact Model is a simple, easy to understand and easy to communicate tool that you can use when deciding between which projects/clients/initiatives to go after in the US-market. 

Here at Katapult Group we use it regularly, whipping up the model on the whiteboard then placing the initiatives within the Execute to Impact model supporting the placement of each initiative with discussion related to the two defining parameters: Potential Impact vs. Ability to Execute. 

The beauty of the model is its simplicity and flexibility. It is very easy to engage in constructive dialogue around each initiative, whether you have the ability to execute (resources, competencies, time, money, support from HQ, relationships, etc.) as well as quickly defines which initiatives have a bearing in reality, i.e. which initiatives you know and can quantify to create value for your company. The model can be further refined to encompass specific parameters, such as size of the circles for the resources required, color of circles based on the type of effort, and other. 

Lastly, the Execute to Impact Model encourages having at least one initiative that stretches the organiation. Google calls these initiatives Moonshots, the initiatives that have a minimum potential impact of 10X to the organization.  

The Execute to Impact Model is a simple and easy to use planning and prioritization tool for small and large international companies wanting to achieve success in the USA. 

Let us know if you would like further information on how to use the Execute to Impact Model. We are very curious to hear your feedback and if you have found it useful. 

Refund and return policies for software products in the USA

@KatapultGroup buys lots of software solutions from various vendors. We leverage technology to make a difference for our clients in helping them grow and purchasing innovative software solutions is therefore something that we do frequently. We are used to a process of:
1. Signing up to trial the software, typically for 2-4 weeks
2. Becoming an actual paying customer and paying for the software, typically as a monthly subscription
3. Possibly ending the use of the solution at some point in time after we started using it. 

When it comes to ending the use of the technology or when trials convert into paying subscriptions we sometimes forget to cancel in time. We’ve had several instances when we’ve asked to get refunded previously paid bills. The typical response from American owned software vendors are to provide a full refund of unused subscriptions, even backdating a few cycles. This “money back guarantee – no questions asked” is something that we, and I would venture to say, most american companies are used to. I believe that Retail has been leading this customer centric refund and return policy, the extreme being companies such as Nordstrom whom will take back items even if they are several years old (see here: https://www.dropbox.com/s/t1dj3ps3r0emjm1/Screenshot%202015-02-13%2009.57.07.png?dl=0  While this is not a stated policy it is the practical implementation by Nordstrom’s staff)

We experience that our clients, many of them European owned software vendors have much stricter return and refund policies, oftentimes far less customer friendly than their US competitors. 

We strongly believe that to be successful in the USA you need to do your best to be on par with the things that matter to US customers. Refund and return policies are one of them. 

As an international software company you would do well to examine your refund and return policies to do your best to be on par with the market. 

Demo FAILS that international technology enabled companies make

@KatapultGroup helps technology enabled companies accelerate growth by leveraging technology and relationships. We typically engage very closely with our portfolio firms and take on a role as Interim General Manager & Outsourced Sales Operation for our international clients. As part of selling software we do a lot of web-based demos. We also facilitate a ton!

Demoing your product is one absolutely essential part of selling your software solution to American companies and while they sound easy to do they often are not done in a manner that is up to par with the US-competition. The impact of a badly executed demo is loss of a potential customer, likely a customer you’ve spent a good deal of resources and time to attract and move through your sales funnel. Here are a few of the mistakes we’ve made early on and  mistakes we continously see our clients making when doing web-based demos to potential US-customers:

  • Not having a proper preparation procedure and thereby wasting the first 15 minutes of the meeting. FAIL!
  • Assuming that US-customers have a Skype account. FAIL!
  • Using a demo environment that is unstable, of poor quality (lag in screensharing, poor audio, etc), oftentimes driven by the goal of saving money. BIG FAIL!
  • Failing to test the demo environment in advance. FAIL!
  • Failing to provide US based dial-in phone numbers. FAIL!
  • Missing a demo call due to time zone differences. FAIL!
  • Speaking too fast for anyone to understand what you are saying…particularly on bad VoIP connnections. FAIL!
  • Speaking too much, particularly about all the things that your US-customers don’t care about. FAIL!
  • Not asking enough questions. FAIL!
  • Not knowing the name of the US-customer and the meeting attendees and blatantly revealing this lack of preparation. FAIL!
  • Not showing up prepared. FAIL!
  • Showing up late. FAIL!
  • Demoing features just to show off instead of honing in on what is important to your US-customer. FAIL!
  • Failing to properly introduce yourself. FAIL!
  • Not having a proper follow up procedure. FAIL!
  • Thinking you’ve got 60 minutes to do the demo when all you’ve really got is 20 minutes. FAIL!
  • Showing up with a standard template demo that is not specifically aimed at the requirements of your US-customer. FAIL!
  • Spending your time doing a demo when the US-customer should have been disqualified in the sales process. FAIL!…this FAIL belongs to the pre-sales team!
  • Not being prepared with relevant information as it relates to customer success stories and benefits of using your solution. FAIL!
  • Not being prepared with the most basic support, implementation and general technical questions. FAIL!
  • Not being able to articulate what typically happens after the customer buys, i.e. how to implement and train your customer to be able to benefit from your software product. FAIL!
  • Letting your technical team do the demo. BIG FAIL!
  • Being the only one doing the demo and not having a colleague join you. FAIL, particularly if pitching to Enterprise customers!

There are a ton of mistakes that are made during the demo phase and being aware of how to avoid them is one of the most critical parts of becoming successful with your software product in the USA.

What is your Sales Manager really doing back there???

Welcome to doing business in the USA!

The United Stated of America. This is place where time never stops, when everyone is 24/7, where expectations are high….Are you ready for it?

If you sell technology your lonely wolf, the person that “runs your US Operation” will also have to be:
– The Account Manager
– Your 1st level supporter
– Your book keeper
– Your Junior Legal Councel
– The marketing department
– Your shipping and handling department
– Your Risk Management department to handle insurance coverage needs with your enterprise customers

His or her most important role is to be your Sales Manager. Please make it possible!

The blog for international companies wanting to achieve success in the American market