What you need to know ahead of launching your business stateside
Like aspiring actors heading for Hollywood or country singers flocking to Nashville, setting up an office in New York is the holy grail for many up-and-coming UK agencies. However, the size, complexity and competitiveness of the Big Apple, and the USA in general, makes it a tough market to bite into. Here are eight tips for Brits planning to launch Stateside.
1) Clarify the business case
“I want to be a part of it, New York, New York.” As Sinatra’s song brilliantly portrays, New York and the US have a buzz about them that few places can match. Because of this, businesses are often seduced into expanding there as a “vanity move.” But with half of all US new businesses failing in the first five years, moving stateside is high risk.
Market opportunity – the US is seven times bigger than the UK – and demand from clients are two solid reasons for expanding. However, even with these drivers, you still need to ask yourself how moving to the US fits into your overall business strategy. If the plan is to grow 15 percent every year, that’s possible to do by remaining in the UK. But if a company is more ambitious and has a vision to become the dominant player in the sector over five years and to have a global reach, moving to the US makes a lot of sense.
2) Expand from a position of strength
US expansion is very expensive, so companies need to make sure they have a robust, profitable and healthy business in the UK before they cross the pond. Workers in the US tend to demand a higher salary than their UK counterparts, particularly in the technology industry. A common mistake businesses make is to overlook this disparity and underestimate how much it costs to set up there. As a result, growth is slow because a business doesn’t have the capital to invest. With a clear strategy and growth plan in place, you will have a better idea of what resource and capital your company is likely to need. Be wary of launching in the US if there is some unresolved issue at home, such as cashflow or delivery. Because, chances are, you’ll export the same problems at a larger scale.
3) Will your UK proposition cut it Stateside?
What does your brand stand for, how do you describe and differentiate yourself? How well will this translate into a US context? The US business scene is much larger and more commercially sophisticated than it is in the UK, so businesses considering moving there have to know what they are getting into and where they will fit into the market. Going to the US and carrying out pre-launch research is an essential first step, given that your US-based competitors will already be up and running with full teams and third-party service providers. America is officially the world’s most competitive economy and businesses there take no prisoners. So, go prepared or go home!
4) Decide the right launch strategy
If you’re planning to launch your agency in the US, you have two main choices: acquire or partner with an existing US company operating in a similar space, or launch from scratch. Acquisitions and partnerships can help to lower the risk of entry as both options bring local knowledge and contacts. Acquiring a company with a slightly different skillset or proposition can provide a beachhead into a new area. Partnerships, meanwhile, can be a way of testing the waters and getting to know the local client-base before committing to a full-scale move. For firms wanting to launch a US business from scratch, finding the right person to lead it is critical – keep reading for advice on the best way to go about this.
5) Fine tune your funding
Whichever route to market you choose, you will need a clear idea of when your US business will break even. Until that happens, you should make sure you have sufficient funds to support your expansion. You might choose to fund your launch from your balance sheet and cash in the bank, or from bank debt; there’s also the option of raising money from venture capital or angel investors. The UK offers particularly exciting opportunities for companies looking to raise venture capital to support global expansion. The country currently receives 42 percent of all VC funding in Europe, ahead of next placed Germany at 15 percent and France at 11 percent.
6) Hire local leaders…
It’s tempting to parachute someone from your senior team in the UK to head up the US office, however, hiring locally to lead is often the best option. A good seasoned local practitioner will bring a level of on-the-ground knowledge and networking that might take a new arrival years to accrue. Use your contacts to find the smartest person in the market who shares your vision and make sure they have the brand support and sales engine behind them to make the business fly.
7) …But preserve company culture
Hiring local leaders doesn’t mean turning your back on company culture. Companies should always carry out due diligence on potential hires to ensure there is a cultural fit. Do they share the same values and work ethic, for example? With this in mind, there is a logic to porting in some UK team members who can help with consistency of product, brand, look and feel, common language used, systems and processes. If those things aren’t unified across the group, it undermines any ambition to be a unified global brand.
8) The Big Apple and beyond
New York will always be an obvious choice for a US base, because it is a huge ecosystem and a major economy in its own right. The New York area has roughly the same GDP as the entire country of Canada. But it takes time, it’s competitive and you’ve got to work hard on your offer. It isn’t always the right hub either. If your target is Spanish-speaking America, then Miami might be a smarter choice.
Keep in mind that servicing the entire US out of one city may not be feasible. You could end up needing an East and West coast base – with all of the additional cost implications.
A move Stateside is not for the faint-hearted, under-prepared or under-funded. But, for UK companies that follow a sound business strategy, take their time to research the market and shape their proposition accordingly, the land of the free can offer endless opportunities.
Miles Welch has seen what works and what doesn’t when it comes to succeeding stateside. If you are thinking of making a go of America, and want an overview of the opportunity, and the pitfalls to avoid then get in touch.