European companies do well to do their homework thoroughly before expanding into the U.S. and once the decision is made, they need to show commitment, says Sophie Boutelegier of Expandify.
Sophie Boutelegier and I have more than one thing in common. We have both lived for four years in the United States now and we both originate from the same place, the Belgian city of Bruges. We also both counsel Belgian and other European companies that want to expand into the United States. Sophie’s expertise is different from mine however. Where I advise companies on the promotional P of their marketing mix (the owned, earned and paid media that they will need to employ to grow their business), Sophie focuses with Expandify on helping companies grow internationally in a fast and efficient way through among other things choosing a market-entry approach that makes sense to them.
We had a talk about what the typical challenges for European companies that want to expand in the U.S. look like, the resources that are available to European entrepreneurs in the U.S. and the mistakes that are most commonly made by companies that are looking to grow on this market.
Trying to grow on the cheap
Relying mainly on sales agents will bring little results.
Jo: So what are mistakes that you often see European entrepreneurs who enter the U.S. market make?
Sophie: I think a lot of Belgians but also other European entrepreneurs tend to be too cautious.
Too often, I see companies think that they will succeed with small incremental investments. In the worst case, they rely solely on a sales agent and hope that that will be the spearhead of their growth. This approach comes with the benefit that it costs very little. If you hire a sales agent who works on commission it might not cost you anything up front, but the upside potential is very limited of course. Why would that sales agent spend a lot of effort promoting your new product if he or she has an easier time selling other, already established products? Sales agents can be a perfect addition to your strategy but relying exclusively on them will bring little results.
Jo: So sales agents are not the be-all and end-all solution. What would you then recommend these companies do?
Sophie: I tell them they need to consider the different options that are available to accelerate growth. One possible route they can take is to establish a partnership with a local complementary businesses. Such partnership can offer them priceless insights in consumer needs in their market.
Jo: Are there any mistakes that Belgians will typically make more often than other Europeans in this regard?
Sophie: I often speak with Belgian entrepreneurs who have fantastic products or services lined up but who are too risk averse and frugal for their own good. In my experience, the Dutch will often be more confident and show more willingness to invest the necessary time and money.
Jo: The advantages of a partnership are also of a cultural kind, are they not? Europeans who enter the American market might be up for a big surprise when they discover the business culture. A partnership can help them avoid unnecessary faux pas.
Sophie: Oh, absolutely. Some European businesses really underestimate how different the American market can be from the European one. Both in B2B and in B2C, American customers have much higher demands of customer support and being able to return something at no expense for example.
Doing your homework before market entry
Jo: So what else do preparations for American entry need to look like?
Sophie: Well, before any decision on what the entry strategy needs to look like is taken, the basics need to be covered. First, you need to start from a solid foundation. You need to analyze your product readiness, your financial health and the strength of your team.
Secondly, you need to have researched the American market sufficiently well, so you understand whether your product or service needs to be changed in one way or another to work in this market. And when I say market, for many products and services, I mean markets — plural — of course. If you are planning to build houses in Chicago, you will definitely need other materials than if you are set for the California market.
Third, you need to have clear goals and focus. The U.S. is too big to conquer at once.
Landing on American shores
Being one to three hours closer to the European HQ is not a good reason to pick any location over another.
Jo: Let’s zoom in on what a perfect landing on American shores will look like. I presume you will always recommend that companies find a major industry hub where they can plug into an existing ecosystem.
Sophie: Every project is different but there exist indeed different hubs for different industries. For the fashion industry there is New York, for greentech Silicon Valley is the place to be, for biotech you have a cluster on the East coast, etc. Those are perfect places to start exploring and understanding the market [Sophie is herself based in Silicon Valley, Jo]. You know, I am always amazed to see Belgian companies decide to stay on the East Coast just because of the time zone difference. Being one to three hours closer to the European HQ is really not a good argument to choose any location over another.
Now, to stay with the example of the fashion company that would want to go to New York City first, once you have arrived there it might be that the competition is so intense that you don’t stand a chance to even make a tiny little dent. Or maybe you might gain some market share, but it will come at an expense that you can’t afford. If any of this is the case, just take all the market knowledge that you have gained in the hub to your next destination.
Making use of available resources
Jo: What local resources do you recommend Belgian and European businesses make use of?
Sophie: There are people who can counsel them with specialized knowledge, people like yourself and me, there are the local Chambers of Commerce who will be able to give then generic advice about the local market, there are the trade representatives where Flanders Investment and Trade does an excellent job, so there is a multitude of people and organizations available to help them out. One important point I want to add to all of this is that a visit to a lawyer’s office should definitely be on the list. Solid counsel on incorporation, taxation and many more things that come with starting a business will avoid costly mistakes.
European efficiency versus American entrepreneurship
Jo: What could the European countries learn from the United States when it comes to creating business friendly policies, and vice versa, what should Americans look to emulate from Europeans?
Sophie: The United States is one of the most business friendly countries in the world. It’s easy to start a business and entrepreneurship is widely admired. European governments stand to learn a lot from how this country facilitates and encourages entrepreneurship. Of course, the predicament of consumers or employees in the U.S. is a different matter since they receive much less protection than their European counterparts. I believe the system that would make most sense is one that is somewhere in the middle of those two.
To answer your question about where Europe leads, I would say that Europeans are often more efficient in their private and professional lives. An American shop that runs with four staff could function on one in Europe. And you have been here as long as I have, so I don’t have to explain to you how absurdly inefficient the antiquated banking system is in this country.
Jo: Why are Europeans more efficient? Because they have to be?
Sophie: That can definitely be a reason. The cost of labor is much higher in Europe, so for businesses to survive they need to be lean. Imagine what American companies could be capable of if they adopted German efficiency!
Everybody a born marketer
Jo: If you were to give one piece of advice that we did not discuss yet to anyone preparing to expand on the American market, what would it be?
Sophie: Focus on how you can create demand in this very competitive market where everyone is a born marketer. This level of competition is unseen on the European market. You will have to be smart about how you differentiate yourself. In certain sectors, it will pay to play the European card, in other sectors it will not. So, you absolutely need to have your positioning right.
Everybody a winner in the media
Jo: Do you agree with me that the media coverage in Belgium on the success of “our” start-ups on the American market is a bit one-sided? One would almost forget that most companies that aim to make it on the American market fail trying.
Sophie: The coverage is indeed one-sided. I see a lot of celebrity start-ups getting the lion’s share of the media attention, and that a small amount of airplay is given to SMEs and well established businesses such as Van Hool and Cartamundi that have been growing in the U.S. successfully for decades now. So yes, there is room for more diversity in the media coverage. And that diversity could and should be combined with hearing more often the entrepreneurs speak who have a cautionary story to share about their failures on this market.
Did you enjoy this interview with Sophie Boutelegier?
You might also like my interview with Angelos Angelou where he talks about why European start-up companies would do well to move to the United States as soon as their product or service is ready.