According to a new survey from Gartner, the technological research and consulting firm, 30% of first-time geographic expansions for software providers are still unprofitable two years after launch.

Gartner surveyed over 300 software and Software-as-a-Service (SaaS) providers across North America, the European, Middle Eastern, and African region (EMEA), as well as the Asia/Pacific region in summer 2024 to uncover its findings.

It also discovered that there are several mitigating actions that tech CEOs should take to address pitfalls—something which Scottish founders can likewise harness to better navigate the tricky process of geographic expansion.

Gartner’s 7 Action Points For Navigating Geographic Expansion

The first action point that differs top-performing tech startups in this regard with trailing organisations is expanding at the right time—and with enough financial backing. Top performers are 1.6x more likely to launch their first geographic expansion when they reach or exceed Series B funding.

The second is to prioritise buyer intent over market data analysis when validating expansion opportunities. According to Gartner’s research, top performers are actually 1.3x more likely to conduct qualitative interviews with prospective customers.

Leveraging relationships with local partners to overcome insufficient reputation and poor market awareness is also key, with successful tech startups being 1.5x more likely to expand internationally after being approached by interested local partners.

The fourth action is to upgrade HR capabilities and tools to better manage international teams. Gartner advocates for this after finding that top-performing tech startups are 2.3x more likely to enhance their HR function to manage compensation, payroll, and employment regulations across multiple countries.

Adapting operational systems to meet local market payment preferences and regulatory requirements is also suggested. Comparatively, firms who more successfully navigate geographic expansion are 1.4x more likely to upgrade technology infrastructure such as servers, network, or data localisation.

Another action point is to adapt sales, marketing strategies, and execution to improve customer acquisition. Top performers are 1.3x more likely to change legacy sales processes, marketing campaigns, or presentation materials to align with local cultural norms, buying behaviour, and preferences, Gartner found.

Finally, the seventh action is to keep after-sales support at home but to localise its processes, with top-performing tech startups being 1.8x more likely to keep the new market’s customer service/support at HQ, and 1.3x more likely to adapt customer service/support processes to meet local expectations.

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Expert Commentary From A VP Analyst

Igor Marchal, who serves as vice president analyst at the research and consulting firm, commented that “The first geographic expansion of a tech startup is, by definition, also its riskiest.”

“Emerging providers with limited resources are tempted to replicate their proven home market’s marketing campaigns, content, messages and sales techniques because it is more expedient, more economical or simply because they see no compelling reason to change them.”

Marchal continued: “Yet expanding into a new geography requires as much preliminary research and internal due diligence as that of launching a new business.”

“Successful tech CEOs engage and navigate their first expansion with optimal timing, having properly localized their product, processes and go-to-market playbook to meet local buyer preferences. They often leverage local partners to overcome their insufficient reputation and poor local market awareness.”