A scenario
What happens if we enter a new market
Cost starts on the day you decide. Customers arrive over half a year, at a discount to your normal win rate, because nobody there has heard of you. The question underneath is usually not whether the new market works. It is who is looking after the old one while you find out.
Run this on your own numbersAll scenarios
Ships as a starter scenario: one lever, enter_market, landing in month one, with a six month ramp and a brand penalty of 0.4.
Mechanics
What the model does with it
This lever is four numbers: a monthly cost, a ramp in months, a pool multiplier and a brand penalty. Everything below comes out of those four.
The cost line moves immediately and stays moved
The entry cost is added to the extra cost line in the month the lever fires. It defaults to 12 percent of one month of revenue and it does not stop inside the horizon. There is no exit in this lever: if you want to model pulling out in month seven, that is a second scenario with the cost taken back out.
The new pool is denominated in your current win rate
The pool multiplier is not the size of the new market. It is a multiple of the new customers a month you already win. At the default of 0.35, the new market at full ramp delivers 35 percent as many new logos a month as your existing market does today. That is a deliberate simplification and it is the first number to replace.
Ramp and brand penalty multiply against each other
The ramp is the months since entry over the ramp length, capped at one. The brand penalty multiplies what is left by one minus 0.4 times one minus the ramp. In the first month that is 0.35 times 0.167 times 0.667, which is about four percent of your normal monthly new logo count. By month six both terms reach one and you get the whole 35 percent.
The new customers are added to your existing segments
New logos from the entry are pooled with ordinary new business and spread across your existing segments by how many accounts each holds. They inherit that segment's elasticity, switching cost, contract behaviour and satisfaction. The model does not create a new segment for the new market, and that matters for everything that happens to them afterwards.
Capacity is served from the same people
Utilisation is total revenue over headcount times revenue a head can serve. New market revenue is revenue. Above 1.12 the strain counter starts, quality slides toward a target that includes it, satisfaction trails, and your existing customers pay for the expansion in service before anyone notices.
Quota moves but the number does not
Sales attainment is what got booked against quota times reps. Entry logos count toward booked. If you enter without adding reps, attainment rises and the sales lead stays quiet. If you enter and add reps at the same time, the denominator grows faster than the pipeline and the miss counter starts, which is a different scenario worth comparing against.
Cash decides whether you get to finish
Entry cost is in operating cost, so it lands in operating profit every month and in cash every month. Two or three consecutive negative months reach the investor. Below the runway threshold the finance lead takes out between 4 and 20 percent of headcount and 30 percent of marketing, which usually ends the entry by removing the capacity that was serving it.
The ecosystem
Which agents move, and why
Market entry is the scenario with the fewest agents genuinely engaged, which is itself the finding. Most of what makes an entry hard is competitive and local, and the model holds neither.
- Executives own the lever. The chief executive weights growth at 0.4, which is why this scenario is usually proposed, and solvency at 0.35, which is why it is usually stopped
- Customer segments absorb the new logos and apply their own behaviour to them, including their own churn
- Employees and departments feel it as utilisation, and departments weighted toward delivery at 0.75 feel it first
- The operations lead hires roughly five percent more heads after two strained months, if runway is above six and there is no freeze
- The investor has patience measured in months and a covenant floor measured in cash, and both are in the ledger
- Competitors do not react to your entry at all. No competitor in the new market exists unless you put one in the graph yourself
The four numbers
Everything this scenario turns on
Honestly
Where this is weakest
Of the twelve scenarios, this is the one where the model knows least about the thing you are asking about. It models the cost and the timing of an entry well. It does not model the market you are entering at all.
- There are no competitors in the new market. Nobody there defends their base, cuts price, or is already better than you
- The pool is expressed as a fraction of your current win rate, so it carries your current market's assumptions into a market where they may not hold
- New customers inherit your existing segments. A market that is more price sensitive or less contracted than your current one will not behave differently in the run
- The entry cost never ends inside the horizon and has no shape. Real entries are lumpy: a hire, then a certification, then a stand at a trade show
- Nothing models regulation, language, tariffs, currency, or a local partner, and for a physical product those are often the whole answer
- The brand penalty is one number. It does not distinguish between being unknown and being distrusted
The band, not the line
The same decision, ninety times
What people ask about this one
What should I set the pool multiplier to?
Start from a number you can defend: how many customers a month do you win today, and what fraction of that do you believe a new market gives you at steady state, given the same sales effort.
If the honest answer is that you have no idea, set it wide and let the band tell you whether the decision is robust. A scenario where the answer flips between a pool of 0.2 and a pool of 0.5 is a scenario that is not ready for a board.
Can I model entering and hiring at the same time?
Yes. Build a custom scenario with both levers and a month on each. That is the more realistic version, and it is also the version where the cash gets tight fastest, because hiring cost and entry cost both land before any of the revenue does.
Does the model tell me which market to enter?
No, and it should not pretend to. It tells you what an entry of a given size and speed does to this company, given what you believe about the new market. The believing is still yours. That is what the pool multiplier and the brand penalty are: your beliefs, written down where they can be argued with.
How do I model pulling out?
Copy the scenario and add a second lever that removes the cost at the month you would stop. The entry itself does not switch off, so the customers you won stay, which is optimistic. Read that scenario as the best case for an exit rather than the expected one.
Next
The questions this one leads to
Put a band around the entry before you fund it
A standard run is 400 simulations and takes about a tenth of a second, so the version of this question with your own numbers in it costs less time than the meeting about it.