The Assumption That Kills Most Market Entries

Haunted assumptions: the beliefs about a new market that look solid until you test them. A Halloween edition blog by Velox Consilium.

Pull up a chair. I want to tell you a ghost story, and this one is true.

You've decided it's time to enter a new market. A new country, a new city, a new customer segment. The numbers look good, the team is excited, and somewhere in the back of your head a quiet voice says, "It worked at home, so why wouldn't it work there?"

That voice is the ghost. It sounds reasonable, it's quite friendly, and it has been behind more failed market entries than almost anything else.

I'll call it "They'll want it there because they want it here."

It never announces itself. It hides inside a pricing sheet, a forecast, a hire, or a lease. And because it never gets said out loud, it never gets tested.

I went looking for real numbers, and I'll be upfront about what they are and aren't.

CB Insights analysed 101 startup post-mortems, the write-ups founders publish when their company goes under. The top reason, cited by 42% of them, was that there was no market need for the product. Running out of cash came second at 29%, the wrong team third at 23%, and superior competition fourth at 19%.

Read that again. The thing that most often killed these companies was building something the market didn't want enough. It wasn't bad luck or a bad economy, and it wasn't a lack of effort.

A fair warning: this is a small sample of tech startups, and founders wrote their own post-mortems, so treat it as a strong signal rather than a law of physics. But it matches what I see when leaders talk about expansion. The money runs out, and everyone blames the money. The reason it ran out is usually further back.

Let me give you the biggest example I know.

Target, the US retail giant, entered Canada in 2013. It opened 133 stores in just over a year. By January 2015, it was closing every one of them, with about 17,600 employees affected. The company expected roughly $5.4 billion in pretax losses from the exit, mostly from writing down the Canadian investment.

What went wrong? Reports point to a few things. Supply chain problems left stores poorly stocked. A Moody's analyst said opening stores while still building the supply chain proved insurmountable. And one business expert argued the company neglected to recreate the U.S. Target experience in Canada.

Notice what that adds up to. Target was big, experienced and well funded, and it still assumed that what worked at home would transfer. It moved fast, and it never checked each belief before betting heavily on it.

You don't need Target's budget to make Target's mistake. The smaller you are, the less room you have to survive it.

Here are the haunted assumptions I'd check first. See which one makes you shift in your seat.

1. "Our customers there have the same problem." Maybe. Or maybe they solve it differently, don't see it as urgent, or already have a solution they like. Have you heard it in their words?
2. "Our price will work." Costs, taxes, exchange rates and local competitors can change your price in ways your home market never showed you. Check what customers there actually pay for the alternative.
3. "Our sales approach will travel." The way people buy, who signs off, how long it takes and who they trust all vary. A pitch that closes in two meetings at home might take six months or never close somewhere else.
4. "We can sort out operations once the customers arrive." This is the Target ghost. Delivery, support, stock and payments need to work before the demand shows up, not after.
5. "Our brand speaks for itself." At home, people know you. There, you're a stranger. Reputation is the one thing you can't import.

1. How to put the ghosts to the test

   You don't need an exorcist. You need a torch. Before you commit your serious money, try this:

   • Write down every belief your plan rests on. Every "they'll" and "it should" is an assumption in disguise.
   • Mark which ones you've seen evidence for. Be honest. A friend's opinion or a hopeful forecast doesn't count.
   • Talk to ten potential customers there. Don't pitch. Ask how they handle the problem today, what it costs them, and what would make them switch.
   • Run a small pilot first. One client, one city, one product. Let the market correct you cheaply.
   • Set a stop-or-go line in advance. Decide now what the result means: "keep going" and "rethink", so hope doesn't make the decision later.
   • The good news

     Every haunted house is less scary with the lights on. Most of these assumptions are cheap to test and expensive to ignore. A few honest conversations and a small pilot can save you from the kind of loss that ends businesses.

     So here's my question for you, one to one. Which of those five ghosts is hiding in your plan right now?

     If you'd like help finding out, Velox Consilium works with founders and SME leaders to turn strategy into practical action and ambition into measurable results, including testing a market-entry plan before you bet on it. Reply to this post or get in touch, and let's turn the lights on together.