European countries are awaiting major elections, Brexit looms heavily and the nuance of the special relationship enjoyed between the UK and the USA is yet to be affirmed in the light of recent presidential election. As a result, business owners are doubtless mindful of the fact that taking business abroad right now is a little uncertain.
But that doesn’t mean businesses should postpone any plans for expansion. In fact, times of uncertainty often present the most opportunity, with the savviest and most well-prepared business owners enjoying the greatest rewards for taking a calculated risk.
So, here’s a breakdown of the kind of opportunities businesses have the potential to enjoy by expanding to the US if they’re prepared to do their research and follow through on their commitment to grow beyond the shores of the UK.
Tap into a lucrative market
Opportunity: There’s no doubt about it; the USA has one of the strongest markets in the world to offer foreign businesses. Its luxury market is currently number one in the world (with China hot on its heels, admittedly), and it is already the top importer of British goods too. In fact, if Brexit negotiations turn out to favour trade deals outside of Europe, businesses might be well advised to get a head start in tapping into the US market before everyone else follows suit.
Moreover, due to the fact that the pound is currently weak against the dollar, now could be the right time to test the water in the US; goods and services coming from the UK have never been cheaper for customers buying them in dollars, resulting in plenty of American customers looking to buy from British companies that can afford to do business.
Beware: The US is not one single market, and businesses looking to expand shouldn’t make the mistake of approaching it as such. Instead, vast geographical and cultural differences across the country make it a heterogeneous patchwork quilt of markets to be carefully researched and targeted.
How to maximise this opportunity: Businesses must conduct careful market research to find out precisely what their relevant market is doing from state to state, and how to position themselves within it. For example, California’s economy alone is the fifth-largest economy in the world, highlighting the fact that the USA comprises a number of markets, some of which are more lucrative than others.
Make the most of taxation rates
Opportunity: It’s no secret that profits made by businesses in the US pay a higher rate of corporation tax than those here in the UK, generally at a rate of 39 per cent (35 per cent at the federal level, totalling roughly 39 per cent once state taxes are accounted for). However, President Trump has discussed lowering this significantly, telling senior executives of some of America’s largest companies that he’s ‘trying to get it down to anywhere from 15 to 20 per cent’. Of course, low taxation isn’t yet an opportunity for UK businesses as tax rates remain high, but it’s worth keeping an eye on how this particular opportunity progresses – businesses all around the world will undoubtedly be watching this closely.
Beware: Taxation isn’t a straightforward issue for UK businesses to navigate in the US. Tax levels vary from state to state, and while some states charge low rates of income tax (such as Delaware, Nevada and Wyoming), businesses will also need to factor in the cost of federal taxes, filing fees and other charges that are separate from income tax to be paid. Businesses must also consider how they legally structure their US entity, as this impacts on the amount of tax to be paid in the US and the UK. Businesses would be best advised not to rush in; they may be able to benefit from favourable rates of taxation, but only if they successfully navigate this factor of expansion and calculate taxation accurately.
How to maximise this opportunity: Businesses should conduct appropriate research to calculate the amount of tax and administrative fees they’ll pay depending on their corporate structure, and should consider paying for consultation with an international tax advisor too. Advisors fees are expensive, but it could well be a good investment if a business is serious about expanding to the USA.
Gain access to world-class talent
Opportunity: As well as offering UK businesses access to the likes of graduates from Harvard, Stanford and MIT, it’s America’s attitude towards work that really presents an opportunity for UK businesses. At-will employment, a hunger to climb the ladder and a willingness to go the extra mile combine to make US workers some of the best on the planet for any business hoping to grow.
Beware: Hiring as a foreign entity is hard work. Businesses will need to find the right candidate for a role, which is a challenge for UK based business without insider knowledge of the market, industry or geography of the state they’re setting up in. Businesses will also need to have established a subsidiary to legally hire US employees, which is invariably a costly and time-consuming endeavour. And, US salaries are often higher than those in the UK, and US employees may expect to see benefits packages that UK businesses may not yet be acquainted with.
How to maximise this opportunity: Businesses should consider using a third party agency they can trust. ‘Finding and attracting the right employees to staff a new US venture is critical to success,’ says Rob Johnson, co-founder of Foothold America. ‘Appointing someone who is not quite right, either because they’re not sufficiently experienced, not well qualified or have the wrong personality, increases the probability of failure.
‘Understandably, many companies try to keep costs down when entering in the US by doing the recruitment themselves,’ he continues. ‘We urge such companies to select candidates carefully and do substantial due diligence on the candidates. The labour market is currently tight, and attracting talent may require professional support from a specialist recruitment or executive search firm. Given the high stakes, this should be a good investment. Our advice: hire carefully, and get it right first time!’
Capitalise on the chance to sell ‘Britishness’
Opportunity: The UK shares a history, a language, and to some extent, a culture with the USA. However, some things are fundamentally different, and it’s the ‘Britishness’ of particular business offerings that present a fantastic opportunity for those who can capitalise on it. For example, Jack Wills has played on its British heritage to ease its way into the US market.
Beware: This only has a chance of working if a business’s product is quintessentially British. If it’s not that, businesses would be ill-advised to simply offer the same version of their product when expanding – we may speak the same language, but there are fundamental differences between customers that businesses must account for. Don’t make the mistake of ‘introducing’ your UK brand to the American market – evolve it instead.
How to maximise this opportunity: Businesses must objectively analyse their product and decide whether or not it’s ‘quintessentially British’, or whether they’re better off adapting it for the US. Businesses must ‘get on the ground’ and conduct market research to see which quintessential British products and services have been received by the US and why.
Despite uncertainty regarding the future of the European Union and the UK’s exact relationship with the USA, it appears there are plenty of opportunities for UK based businesses considering expanding to America. If nothing else, success in the States tends to lead to success in other markets around the world following the accolade of ‘cracking America’; expanding to the US is not a venture to pass up without second thought.