7 Steps to Choosing the Right Market for Your Startup’s International Expansion

Global expansion is a goal for many startups, as it provides access to larger markets and a more diverse customer base. In fact, 60% of startups aim to grow globally within their first three years of operation; However, only 4.6% successfully switch to Scaleups.

Achieving scaleup improves your chances of success in international markets, but this is a challenge in itself. Only 2.5% of startups built in the activation phase ecosystem reach this milestone.

Choosing a market will determine whether your expansion is a success or a costly mistake. This is especially true in startups, where resources are often limited, and early failure can have lasting consequences. But how can you make sure you’re making the right decision? Here are seven important steps that can guide you in the process of choosing the most promising market for international expansion.

Related: How Small Businesses Come Together to Boost Local Economies

1. Check the market readiness of the product

How well informed is the market? Consider factors such as internet penetration, the maturity of your industry, and consumer buying habits that will help you gain a better understanding of the landscape. For example, if your business is e-commerce, look for markets where people have started ordering online.

Another strategy involves entering less developed markets that are unfamiliar to your industry and, therefore, less competitive. However, in this case, it’s a long-term game as you need to invest time in cultivating new habits among customers and guide newbies. Your business can also change strategies based on location: we currently work in both mature and emerging markets, each with different levels of commerce and e-gifting adoption.

2. Analyze the competitive landscape

When three or more competitors share a market, it is a highly competitive environment that will require significant investment to achieve meaningful results. However, if there is one competitor that has its own strong methods, you can try to secure the second position in the market by using your agility, modernity, and unique approach to customer engagement.

At this stage, it is important to assess the overall market size and its distribution among competitors in monetary terms. Key metrics include:

Adjustable market amount (TAM): This shows the total revenue available in the market. In our case, it shows the total sales of flowers across the country.

A viable market (SAM): For Flowwow, this shows the current statistics of online sales and revenue earned by our competitors.

Available market used (SOM): This metric estimates the share you can realistically capture, representing the portion of market revenue you can control.

3. Use scoring models

Once you have assessed the market readiness of the product and analyzed the competition, you will have identified several key countries that can be considered as high potential markets. Scoring models can be very helpful in selecting one or two of the best options.

For example, Amazon used a scoring model to assess key success factors when expanding into Asian markets. The focus has been on India and Japan, where the company has made significant investments in infrastructure, local partnerships, and changes to payment systems. In both countries, Amazon became one of the market leaders, conquering a complex and diverse environment.

4. Do some field research

Field research is one of the important steps in the business measurement process, which helps to understand the real situation in the target market. This approach uncovers real customer pain points, which may not be visible in traditional data. Customer development interviews provide a deeper understanding of cultural diversity, local practices, and the details of interacting with a product or service. If face-to-face meetings are not possible, conduct online interviews with customers (you can find them on LinkedIn or in communities of interest).

For example, our startup is a gift market that relies heavily on online payment methods. Through market research, we found that online payments are the favorite of customers, but the preferred methods can vary greatly. When entering a new market, we must integrate local payment systems, a process that requires legal and technical work and extensive research. If the preparations are not completed, the market will simply not be able to accept new orders.

Related: Why Research Is Key to Startup Growth and Customer Center

5. Test the loading speed of your website and application

In the era of high-speed Internet, user experience is critical to the success of e-commerce. Slow loading pages frustrate users, leading to higher bounce rates, reduced conversions, and a negative impact on brand awareness.

According to Amazon, a 100-millisecond delay in page load time can result in a 1% loss in sales, and another survey suggests that 53% of site visitors will leave a page if it takes more than three seconds to load. Conversely, satisfied customers can spend up to 140% more and will recommend companies to others when they feel valued.

6. Find product market equity

Start by creating a Minimum Viable Product (MVP) that directly addresses the core issues of your target audience. Launch this MVP and collect detailed feedback from users, analyzing their behavior and preferences. The key is to improve your product based on these insights, adjusting its features to better align with market needs. Regularly track performance indicators such as user satisfaction and engagement to ensure your product is solving a market problem. Keep iterating and improving until you reach a steady stream of sales from the local audience, indicating that you have achieved PMF.

A well-known example is Airbnb, which started during a conference in San Francisco when its founders rented out their space to solve the problem of housing shortage. By collecting user feedback, they adjust their offer, highlighting the value of a unique stay and ease of booking. This iterative process, combined with a focus on user needs, helped Airbnb grow into the global leader in short-term rentals today.

Related: Product Market Fit: How to Measure If Your Business is Filling a Need

7. Hire a country manager

Once you’ve achieved brand-market fit – that is, you’ve achieved a steady stream of sales to a local audience – consider hiring a country manager. They provide in-depth information about the local market, align the company’s strategy with the country’s cultural and regulatory specifications, and establish important business contacts, facilitating business development in the new market.

Choosing the right market for international expansion is a critical decision that can determine the success or failure of a startup’s global journey. Following these seven steps can greatly improve your chances of making strategic decisions. Choosing markets carefully and adapting to local needs and conditions will lay a solid foundation for continued international growth.