Let’s talk frankly for a second about Germany.
Yes, they should have been the World Cup favorites and gotten at least to the semis — heck, they won the whole thing in 2014 — and they didn’t get out of the group stage for the first time since, well, 1950 — when they weren’t allowed to be in the World Cup because of, well, World War II.
And look, yes — the trade conflict has dampened the German economy a little bit, true. But the Q2 economy actually picked up, even though recent growth was downgraded by the IMF.
We often work with American (or at least English-speaking) businesses trying to enter the German/DACH market. One question we get recently is: “Is now a good time?”
Short answer: yes.
Longer answer: keep reading.
The specifics of the German market
Some German / DACH market essentials you should be aware of:
- German market share usually carries with it Austria and Switzerland
- The DACH market is home to 100M+ German-speaking consumers
- Amazing logistics
- There’s been a consistent unemployment drop in Germany for much of the past few years (very different than other European economies, where unemployment is ticking up)
- Consistent, stable levels of growth
The impact of Brexit
When Article 50 was triggered to commence the Brexit process, a few things about business in the EU changed — and we’re still seeing the repercussions of these changes.
Pay careful attention to two things happening right now: first, as Business Insider discussed, Brexit is hurting London’s stance as a financial capital. Over the next 24 months, that will probably get worse before it gets better. And now consider this: German firms are moving money from the UK back to Germany right now. Germany was already the richest individual country in the EU (it had surpassed UK some years ago), and this is going to widen the gap.
The clear play here if you’re a U.S. or Canada-based company is considering an expansion to German markets in 2018 and beyond. The German sales market is huge, and you have a very stable test market for your product/service right next door in Austria. That’s a big win on its own; if you can find product-market fit in Austria, the shift to winning some sales battles in Germany isn’t a big jump.
The Austrian test market
One of the big advantages about expanding into DACH is that you have a perfect test market for the big fish — that being Germany — in Austria.
Austria has about 8-9M people — that’s less than New York City — so the competition is much smaller. It’s a German-speaking country. (A plus!) Roughly 80 percent of the major businesses are located in Vienna, so you can be efficient about time usage around business travel. Austrian customers tend to be well-accepted in German markets, and oftentimes sales models that work in Austria are repeatable in Germany as well. As a sales leader, one of your foremost goals should be developing a repeatable sales model. This allows your business to scale and, in general, a repeatable process leads to repeatable results.
Then there’s this, from the U.S. Department of State:
Austria offers many advantages for foreign investors, including political stability, skilled labor, high productivity and international competitiveness, rule of law, quality of life, and personal security. Austria further scores with high-quality health, telecommunications, and energy infrastructure. The administrative system is transparent. Labor-management relations are relatively harmonious in Austria, which has a low incidence of labor unrest.
About 330 U.S. firms, for example, have invested in Austrian companies in some capacity. As Export.gov even notes, “it’s an attractive test markets for companies with an eye towards expanding into neighboring Germany.”
Vienna is also a global business hub in part because of the educated nature of the workforce: There are about 150,000 public university students in Vienna and another 3,000 private university students; in the 2010 World Competitive Yearbook, Austria ranked fifth globally in terms of its workforce being able to meet the demands of the global economy. It actually outranked both U.S. and UK — and most of the workforce is located right within Vienna.
When you add it all up…
Especially in the wake of Brexit/semi-chaos in London, oftentimes your EU HQ shouldn’t be in London or even Zurich anymore. Germany (or even Vienna) seem like better bets.
This is all well and good, but … you still need a plan/strategy
Of course. Expanding into DACH can be lucrative, but it’s by no means easy. The culture is different, there are language barriers, the approach to work is different, lead generation is different (GDPR), and B2B even looks a little different than it does in North America (not massively different, but enough to confuse a tried-and-true American sales guy).
Feel free to contact us and talk a little more about why a DACH expansion could be the exact kind of growth you’re searching for.