How To Budget When Launching A Startup In New Markets

How To Budget When Launching A Startup In New Markets

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57% of Google?s revenue comes from markets outside the US. Apple and many other tech giants have the same story. In fact, Google recently committed to investing $10 billion into India over the next five years.?

While expanding into new markets seems like the enticing, such a move can be tricky -especially when your business?s budgeting is all wrong. Of course, your startup costs will differ from market to market based on the kind of industry, country, competition, supply chain, among others. But here?s a primer on the critical factors for entering new markets in a capital-efficient way.

Keep Tabs on Exchange Rates

To do well in the global economy, you need to keep an eye on interest rates. That?s because the slightest change in the value of a currency can affect your international transactions. Find out what the exchange rate is for each country you?re looking entering and factor the figure into all your budget projections.

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Know the Factors that Affect Your Budget

Clear Goals and Targets

Be clear about what you want to prove in the new market. This move will help you set the right strategy and priorities. For instance, a social app will focus on increasing sign-ups and retaining users. An e-commerce business, on the other hand, will set out to prove unit economics. A clear set of goals helps you know where to direct your runway of cash.

An Agile Team

According to the Harvard Business Review, assembling a local team is a critical step in taking a new market by storm. Start by hiring a smart country manager. The perfect candidate should be experienced, connected, and well-versed in running an organization. The country manager can then coordinate hires in vital areas such as accounting, marketing, and sales.?

Location and Compliance

Opt for business-friendly cities that have the resources, amenities and an ecosystem for your business to grow. For instance, if your business is in the finance industry and you are looking to expand to China, Shanghai will be a better option than Beijing. The city has a thriving venture capitalist community and is home to the Shanghai stock exchange. Little wonder top companies Citibank have regional headquarters there. Additionally, you need to review the taxes and legal requirements in every city.?

Draw Up a Budget

At this stage, you have already mapped out your plan and identified points of funding. Put together a detailed budget that reflects your due diligence. Determine personnel costs in the new market as well as all other expenses. It?s also essential to account for the extra time that may be required for the business to get fully established in the new market. In all you do, make sure you optimize your personnel and resources – a strategy Robert Moffat calls the minimum viable subsidiary.

Pilot the budget in the first city. If there is significant progress, double down on your efforts and scale to other countries and markets. While you have a set budget and time frame, leave enough wiggle room to accommodate unforeseen challenges. Otherwise, your existing business will be adversely affected if things don?t work out in new markets.?

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Post written by?Laurent Gibb

Laurent has spent the best part of 20 years working with European, US and Israeli startups across a range of sectors, helping them scale and reach stable repeatable growth. He has been fortunate to see two startups IPO, one acquisition, a couple pivots, a few get to hypergrowth… and also one or two who didn’t make it… You can find him on LinkedIn and on Twitter.

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