The Lifecycle of Business Expansion in the Baltics: Key Stages and Common Pitfalls - guest column
Business expansion is a defining phase in a company’s lifecycle, but success in one market doesn’t guarantee the same results in others. In the context of the Baltics, with their unique economic environment and opportunities, expansion demands navigating specific regional challenges, risks, and requirements at every stage.
By understanding key milestones and tailoring strategies to local markets like Estonia, Latvia, and Lithuania, businesses can avoid common pitfalls and maximize growth opportunities.
Expansion is never easy. It demands thorough research, financial planning, strategic execution, and localized marketing strategies. Understanding regional dynamics is critical to success in the Baltics.
With over 29 projects at SEAL Group, Tabriz Mamarakhimov shares his insights and experience, having witnessed businesses thrive—and stumble—at various stages of expansion. This article outlines these stages, highlights challenges, and offers actionable insights to support your journey in the Baltic region.
Key Stages of Expansion
Stage 1: Local Success
Every successful expansion begins with a strong foundation. Local success is the springboard for growth. In the Baltics, businesses can leverage the region’s supportive entrepreneurial ecosystem. Lithuania, for instance, ranks fourth in the Global Entrepreneurship Monitor’s Entrepreneurship Index and 11th among 190 economies in the World Bank’s annual Doing Business report. These rankings reflect a favorable regulatory environment and ease of starting and operating a business.
A key example of local success is TransferWise (now Wise), founded by Taavet Hinrikus and Kristo Käärmann in Estonia. Initially, they focused on solving the problem of expensive international money transfers.
By leveraging Estonia's supportive regulatory environment, including its digital identity system, the company grew rapidly and eventually became a global player in the fintech space. Their success story highlights the power of capitalizing on local opportunities before expanding internationally.
As we see in SEAL Group, achieving local success in Baltic countries involves consistent sales growth, positive customer feedback, and strong market share. This signals readiness for further expansion while showcasing the region as a fertile ground for innovation and business.
Stage 2: Preparing for scale
Scaling a business in the Baltics requires careful planning and market-specific insights. One common challenge is navigating diverse regulatory environments. Each Baltic country has its nuances, from tax policies to labor laws. For example, Estonia’s e-Residency program offers unique opportunities for digital entrepreneurs, while Latvia’s strategic location makes it an ideal logistics hub.
Girteka Logistics, founded in Lithuania by Mindaugas Raila, expanded its operations into Latvia to access the broader EU market and encountered regulatory hurdles related to cross-border taxation.
By partnering with local consultancy firms like BDO Latvia, they streamlined compliance processes and took advantage of government subsidies designed to promote trade within the EU. This strategy enabled their smooth scaling in the region.
From this example, we see that relying on local experts and consultants is the key.
Stage 3: A balance between resources and ambitions
As businesses prepare to expand, they must evaluate their financial, human, and technological resources. The Baltic markets, though small in size, are highly competitive.
Calculating the Total Addressable Market (TAM) and penetration rates is essential to assess opportunities realistically. For instance, B2C penetration rates might range between 2% and 6%, while B2B penetration can be as high as 40% in certain sectors.
One great example of a company navigating this stage is Revolut, a fintech company that originated in the UK but expanded into Lithuania to take advantage of its skilled talent pool and favorable regulatory environment for financial startups.
Revolut partnered with local universities like Vilnius University to train graduates and recruit talent for their customer service and IT teams. This partnership allowed Revolut to scale quickly in the region without overextending its financial resources.
To thrive, businesses should collaborate with local institutions, tap into regional talent pools, and leverage government incentives.
Stage 4: International expansion
Expanding beyond the Baltics into international markets requires cultural adaptability and strategic partnerships. Harvard Business Review found that approximately 70% of international projects fail due to cultural unawareness. In the Baltic context, businesses often excel when they emphasize local engagement.
Collaborating with influencers, conducting market research, and engaging with regional governments are proven strategies.
Vinted, the Lithuanian online secondhand clothing marketplace offers a prime example of international expansion. Initially focused on Lithuania, Vinted later expanded into neighboring countries such as Poland and beyond, to markets like France and Germany.
Their expansion was greatly aided by partnering with local influencers and tailoring their marketing campaigns to align with the local cultures of their target audiences. Within months, they saw a 25% increase in user acquisition in their new markets.
Leveraging Lithuania’s reputation as a fintech hub or Estonia’s digital innovation can boost credibility and open doors in broader European markets.
Additionally, tailoring products, pricing, and marketing to resonate with local and international consumers ensures smoother market entry.
My last thoughts
The key to success lies in careful planning, strategic execution, and adapting your approach to each stage of growth. The Baltic countries offer unique opportunities for businesses ready to innovate and grow. With the right strategies, the Baltics can serve as an ideal springboard for broader global success.
Author: Tabriz Mamarakhimov, COO of SEAL Group
