5 essentials for expansion into the US

America is still the world’s largest single and richest market. But some of Britain’s biggest brands have crashed and burned trying to expand into the US. Matthew Lee Sawyer explains how to avoid their mistakes

There are many good reasons for UK companies to expand to the United States. It has the world’s largest economy at $26 trillion. California alone, with a GDP of $2.7 trillion, is bigger than the whole United Kingdom.

It also has the most stable economy, which has held steady at 25 per cent of the global economy for the past four decades.

And America has the largest pool of wealthy consumers and business customers.

>See also: Expansion through franchising

In addition, it’s federal and local governments are pro-business and eager for foreign companies to locate in their states and cities.

However, doing business in the United States can be difficult and costly. YPlan — named UK’s fastest-growing tech company in 2015 — tried unsuccessfully to enter the US market, and it was forced to retreat and sell the company at a huge loss. Tesco exited the U.S. grocery market in 2012 with a reported loss of over $1 billion.

5 essentials for expansion into the US

Here I have tried to encapsulate five essentials for any fast-growth UK business thinking of US expansion across the pond into America.

#1 – Fully commit to US expansion

Companies must invest the necessary capital, resources, and time to succeed in the United States. Board directors need to view this investment as a five or ten-year commitment, because of its exponential upside potential. Companies need to send top executives to America to demonstrate their commitment to American customers, suppliers and partners. And these executives must have the determination and commitment to overcome the inevitable challenges and obstacles that will arise.

For early-stage companies, it means sending a founder to establish their US business operation. Bruce Buchanan, founder and CEO of ROKT, transplanted his company and his family to New York from Sydney. He said, “If you take a market seriously, you have to be in it. The work requires absolute commitment.” His ten-year-old company was recently valued at nearly $2 billion.

>See also: 5 steps to prepare your company for scaling

#2 – Set clear goals and measurable objectives

It’s essential to establish clear goals for your business in the United States. Goals that are both aspirational and achievable. Clear goals that will guide your company’s critical business decisions on complex issues. Goals that will attract, motivate, and inspire employees.

Bruce Buchanan’s goal for ROKT was to be the leading ecommerce optimisation software in the world. He recognised that US expansion was important, because of America’s size and abundance of ecommerce players.

In addition to clear goals, companies need measurable objectives with defined timelines. This is important to both guide activities and to monitor and refine tactics. For example, a drop in sales leads would trigger an adjustment in marketing investment and tactics.

#3 – Focus and target efforts

The United States is huge with approximately four million square miles and more than 330 million people. Each of its 50 states has different laws and regulations. The country is incredibly diverse in climates, ethnicities, and lifestyles. Customs and business practices in New York City, for example, are dramatically different than in Texas or Florida. Therefore, it’s essential to concentrate your US activities into specific markets before expanding across the country. The decision of which location to enter (your beachhead market) is critical. Tesco failed largely because it chose to enter two of the most competitive, over-stored markets in Southern California and Arizona.

In addition to choosing the physical location, you’ll need to select which product category, channels of sale (i.e., online vs. in-store), and stage of the value chain to introduce to the US market. Another Tesco mistake is that it introduced a limited-item grocery store format that didn’t match the needs and desires of US shoppers.

#4 – Build a strong local network

You’ll need qualified advisers and experienced partners who can help you navigate the US market and ways of doing business.

Certainly, it is important to retain legal and accounting experts to navigate the complex US legal, immigration, and tax systems.

Local marketing and research experts are needed to gather intelligence on the local consumer tastes and your competition. Local advisors and partners can connect you with the necessary suppliers and other needed resources.

Bruce Buchanan said, “The early days are rough. It’s hard to get traction and credibility. You don’t have a network, you don’t have access to people that can help.”

#5 – Expect some hurdles

Many international companies have tried to enter US markets only to give up in a few years, having lost significant money, time and reputation. Most start-ups fail after a few years, too.

One reason is that international businesspeople and entrepreneurs underestimate the difficulty, cost, and length of time required to enter and grow in the US market. The competition can be fierce, and customers are often fickle as they face many choices. In addition, there is the challenging of living and staying in the US, because of the high cost of housing and living expenses.

Matthias Farwick, CEO of Txture, an Austrian technology company which is trying to enter the US. with a cloud transformation platform said, “It’s difficult to grasp the gravity of these challenges until you’ve experienced them. After I lived it, now I know.”

It’s worth the effort

In my book, I have presented the stories of more than 15 international businesses which tried to enter and scale in US markets. Some were successful, others not so successful. Despite the challenges and difficulties, nearly all of the business executives told me that bringing their business to the U.S. was worth the effort. Entrepreneurs unanimously said the United States was the best place to start their business. In addition to the huge potential for profits through expansion into the big and lucrative US market, there was the opportunity to achieve a rewarding and satisfying life for them and their families.

Mathew Lee Sawyer is an American business strategy consultant and adjunct professor at Columbia University. His new book Make It In America was published by Wiley in January 2022

Further reading

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