Thoughts on UK SMEs entering markets of the USA
From time-to-time, we come across business executives and consultants who say USA markets are:
- too difficult,
- too expensive, and
- too time-consuming
for UK SMEs.
Mostly these people have set about things in an ill-advised, or inexperienced, way and subsequently failed.
The USA is the world’s largest, single-country market and, as such, it can look daunting, but to paraphrase the Dali Lama, “If you think you are too small to make a difference, try sleeping with a mosquito.”
Running a business in the USA is different, not impossible – as 27 million USA companies prove.
The first time we set-up a company (way back in the 1990s) in the USA it seemed complicated and difficult. In time it became easy, but it is essential to continue to take as much care and pay as much attention to detail as is necessary.
If your gross profit per unit sale is $500, you might cover your Year One investment with eight sales – in a market up to ten times bigger than the UK.
If you can make $11 a day, you could cover your costs. If all you want is a US telephone number that rings on a UK line, you can get that for $1-a-day.
You can have a USA office, company and bank account up and running in about ten working days – less if you are in a hurry.
As for the amount of time you dedicate to the USA that will be in proportion to the return on your investment of resources.
Fit for the USA
To succeed in the USA, your offer must be appropriate to, and fit, for the markets of the USA and beyond.
Successful UK SMEs mostly fall into three categories. Those:
- Seeking to enter USA markets for the first time.
- Aspiring to build on existing sales success in the USA.
- Wishing to maintain a presence in the USA while reducing operating costs.
Most successful UK SMEs have a stated, or secret (it is their business), goal to achieve:
- a trade sale
- a merger, or acquisition
- third party investment to accelerate growth
- a public offering, or floatation.
Our experience includes mergers, acquisitions and transition management as well as the raising of private and public investment and a number of our clients have found this useful.
We have been privileged to observe the factors that have made UK SMEs successful in the USA, as well as learn from strategies and tactics that might be best avoided in future.
Only the UK SME knows about their resources – human as well as financial. One thing we note about successful exporters to the USA is they have a plan and a budget. The plan need not be volumes of small type pages, charts and spreadsheets and, indeed, sometimes it is just in the owner’s head. But there will be a plan and a budget against which performance may be measured.
When we established our company in 2007 we were fortunate in being able to take almost six months to research, plan, test and refine our product (service?) offering. Then we put into action what we learned from UK SMEs who had successfully, and not, entered USA markets.
We provided for contingencies beyond our sphere of influence. We didn’t predict the financial meltdown of the economy in 2008, but we survived it and managed to thrive through it.
Our sales plan was built around economically viable, but managed growth: a series of realistic client recruitment targets with services offered which were within our capability to deliver.
Most of our UK SME clients have realistic sales and time-scale expectations for the USA. The more successful appear to forecast sales in the USA at about the rate achieved in the UK once the “early adopters” (the “low-hanging fruit”) orders had been harvested.
A UK SME that exports is statistically more likely to survive than one that does not. Spread corporate risk by adding sales, profits and value to your company in the world’s largest, single-country market, the United States of America.
We are risk averse. We are proud of being owner-managed, self-funded, debt-free, profitable and growing – and we aim to keep things that way. We don’t want our clients to take unnecessary risks: exporting is a big enough risk. If we don’t believe in a prospective client’s business plan, we will tell the. We don’t want clients who last a few months and drift away disappointed.
- By outsourcing, it is possible to minimize capital investment in facilities, maintenance, utilities, equipment and staff.
- With a month-by-month office service agreement, you avoid long-term, inflexible contractual commitments.
Return on investment (RoI)
Say an average sale to a client, or reseller, is $10,000 and the gross profit margin is 40 per cent, the average gross profit per sale is $4,000.
Say the first year cost of establishing a company and running an office in the USA is $3,878 (company formation at $1295, plus office set-up at $199, plus twelve months at $199 per month).
If a UK SME makes just one sale (that would not otherwise have been achieved) in a year in a market between five and ten times larger than the UK… they would have crossed the return on investment threshold.
About this document
This document was first published in August 2012. It is an extract from “USA success for UK SMEs” copies of which are available without charge or obligation on request from [email protected].
This document is published by ExportAction, a UK SME working to help other UK SMEs add sales, profits and value to their companies by assisting them establish, develop and manage business in the world’s largest, single-country market, the USA.
The content of this document is the copyright of ExportAction Ltd and ExportAction, LLC. All trademarks are the properties of their respective owners and their use is acknowledged.
We have made reasonable efforts to make this document accurate and up-to-date, but ExportAction accepts no responsibility for any loss or damage caused to any person or business as result of any information in this document. The information in this document is subject to charge without notice.
This document is an information guide only and not a substitute for your own research or independent advice.
ExportAction does not offer or provide financial or legal advice and recommends taking appropriate professional advice before investing any business project or venture.
ExportAction was founded in 2007 with decades of experience of doing business in the USA. The company is owner-managed, self-financed, debt-free, profitable and growing.
ExportAction is now working with client companies in California, Florida, Georgia, Massachusetts, New Jersey, New York, North Carolina, Oregon, Pennsylvania, and Washington. We are able to provide services throughout the USA.
Please visit our web site at www.ExportAction.com or call our UK office on 0845 5280 567.
Topics: Getting Started