Three B2B sales channels for penetrating US & foreign markets
Written by Dillon Stanger, B.Eng. CEO and Cofounder of Pillar Sales & Antonio Galan, Ph. D. Director of R&D and Procurement of Pillar Sales.
Summary
This article presents an overview of sales and go-to-market and sales strategy decisions founders should make when considering penetrating foreign markets.
From a sales strategy perspective, the most important consideration when penetrating a new geography is the determining the form of that sales department. Though there are multiple configurations for that sales arm, to be discussed will be three options:
1. Executing sales functions from the local sales office or headquarters.
2. Creating a sales department in the host country
3. Outsourcing sales to a local agency
Keywords
US market; foreign market penetration; foreign sales organisations; outsourced sales; international trade; international business; culture in enterprise sales
Definitions
Before diving in, let's define a few terms:
Local country - The location of your company’s sales organization and/or headquarters.
Host or foreign country - The territory that you are considering selling your goods or services to.
Three B2B sales channels for penetrating foreign markets
Sales department structure: Located in local HQ
Requirements
Hiring or sourcing sales resources with understanding of the foreign market and knowledge of the foreign language.
Guidance from the commerce entities of the foreign economy.
Customized sales, marketing campaign and strategy.
Time Zone flexibility (e.g., overtime, shifts, odd hours)
International communication tools.
Pros
Pros
Least expense and lowest risk.
Additional scope can be added to reps that are familiar with the foreign market or speak the foreign tongue.
Cons
Hard to source a translator who had the technical and copywriting experience in the foreign tongue
Hard to navigate foreign bureaucracy when not present in the host country
Hard to understand the buyer from a cultural perspective when not present in the good country
Hard to engage in outside sales activities when butter is in another country
Highest executionary risk.
Sales department structure: Located in foreign country
Requirements
Distribution channels and distribution agreements.
Customized sales, marketing campaign and strategy.
Time Zone flexibility (e.g., overtime, shifts, odd hours)
International communication tools.
Operating licenses.
Pros
Sales resources are knowledgeable about the local market.
Easier to execute outside sales activities since it is easier to meet the buyer.
Less execution risk.
Cons
Hard to benchmark sales resources in another market off of KPIs of the local sales branch.
Greatest expense: legal and bureaucratic costs, office, internal human capital costs
Supported by an outsourced sales agency
Requirements
Retainer and/or commission.
Time Zone Flexibility for contract resolutions and after sales activities.
Pros
Depending on differential between human capital costs in the local country and the foreign country, the costs of onboarding a outsourced sales agency can actually be less expensive than insourcing sales.
The agency understands the local regulations and laws
Also understands local market and buyer.
Often has access to a natural network in the industry of interest and can source larger deals.
Cons
Often depends entirely on natural network to sell product.
Harder to keep an outsourced sales agency accountable since taking legal action against foreign companies adds additional complexity.
*See below for a few more notes about outsourced sales
Note about outsourced sales:
It is often harder to monitor and manage outsourced sales agencies as often, the client's management staff is not present in the outsourced sales org (especially when the client’s headquarters are stationed in another country). There exist outsourced sales agencies that permit a client’s staff member to work on premises for monitoring and management purposes. Strong Service Level Agreements (SLAs) and proper communication channels codified between client and service partner ensure delivery just as would exist between an insourced sales organization and the other departments.
Agencies which are compensated on a commission-only, distribution, or buy-sell model, such as manufacturing reps, channel partners, and distribution channels often are, they often support multiple contracts concurrently which results in prioritizing ones that generate the most revenue for the rep agency. On a performance-only model, a sales organization shoulders the entire risk of sales execution which comprises of building pipeline, and closing deals.
Depending on the duration of the sales cycle, pipeline generation can take at least a month, a quarter, or even 6 months before opportunities start to convert. To reduce that risk, many sales organizations spread the the pipeline building process of new products (or “lines” in industry terms) over many months in what is known as the “pioneering process.” Think environmental succession and pioneering organism from biology class. This process can take 12-36 months. The point is, can you wait that long for opportunities to convert? There are agencies that offer a dedicated team to service a client where prioritization is less of an issue.
About the Authors:
Dillon Stanger, B.Eng., is CEO and Cofounder of Pillar Sales which is a full-cycle sales outsourcing company which assists startups penetrating US and other foreign markets. Pillar leverages a data-driven sales methodology with an international channel partner network to generate quick wins and close large deals. The Pillar Process is designed for startups needing a scalable sales solution and Pillar's turn-key delivery is engineered for technical clients maximizing attention on building product not selling it.
dillon.stanger@pillarsales.com
Antonio Galan, Ph. D., is the Director of R&D and Procurement of Pillar Sales. Antonio has over 15 years experience in fundraising, R&D, and procurement. Antonio had raised +$10mm USD for various projects through federal and nonprofit sources, has managed multi-million dollar R&D budgets, and has saved organizations millions of dollars in procurement costs especially through LCCS (low-cost-country sourcing). Antonio has a keen ability to identify gaps in product development and ways to patch and polish incomplete R&D projects.
LEGAL DISCLAIMER:
Selling internationally is a very complex and economy-specific process that requires an understanding of international and local business laws. The authors of this article, Pillar Sales LLC, Pillar Sales LLC’s employees, VCforU, VCforU’s employees take no responsibility for any actions taken based on recommendations or the content of this article. Recommendations in this article do not constitute a legal advice nor legal counsel. Consult legal professionals for all of your related business needs.