Five-steps to making your mark in the USA
As any growing business will tell you, when it comes to international expansion, the US market presents an undeniably exciting and lucrative opportunity. Regardless of your sector, with over 330 million potential customers, it’s easy to see why so many ambitious businesses see this market as key to long-term success.
To put this into context:
Your first foray into the US market may be daunting, but the Rebank team are on-hand to help. We’ve put together a five-step plan for SMEs looking to make their mark in the USA.
If you already operate in the UK or Europe, you’d be forgiven for assuming existing marketing campaigns and strategies will be relevant in the US. It’s probably a similar type of audience, right?
Wrong! Knowing your target audience and tailoring localised communications and campaigns specifically for them is marketing 101. If you want to gain traction, be it through direct email campaigns, PR, or online and social advertising, you’ll need to adapt your current marketing approach and strategy.
Researching and recruiting a local marketing expert or agency, who can offer best practice advice and also practical implementation, will be invaluable. Depending on budget, a sensible investment in market research will also offer the opportunity to analyse and segment your audience for the best results.
You will, of course, need to think about how to charge for products and services, and how customers will pay you. Your transatlantic customer base will certainly want to see prices in US Dollars, so create pricing plans which cater to your new US-based buyers.
Small payments can be made with the usual payment platforms such as Paypal or Stripe. However, if you’re selling to businesses, or supplying higher value goods or services and receiving payment by bank transfer, you’ll need to provide customers with US banking details.
Luckily, we recently blogged about how to open your first company bank account in the US? Click here to find out more.
Let’s face it, none of us particularly enjoys the topic of tax, but it is vital to understand the US tax landscape if you are looking to trade in the region. If you thought your current tax arrangements were complicated, the States has 11,000 different tax jurisdictions, plus tax rates differ between States, counties and cities. These various entities also have different rules on what is taxable and the definitions. Confused yet?
Even if you are trading without established company or subsidiary status, you’ll have tax liabilities. Firstly, the US government applies a concept called ‘nexus’ so you’ll have to register for, and start charging customers, a sales tax, over a given threshold. Platforms such as Paddle or Avalara can help with this process.
Once you are trading in the US and if you make a large portion of your overall revenue there, it is definitely worth considering setting up a company. This not only makes tax matters more straightforward; it will also reduce the chance of the IRS auditing your companies overseas. A US-based accountant to file State and federal tax returns is a must at this stage.
Even with all of the above perfected, there will come a time when it makes sense to set up a standalone subsidiary in the USA.
For example, a European SaaS provider should consider forming a US subsidiary for two reasons:
All that’s left is deciding where to set up shop. In other words, which State will your company or subsidiary be registered in?
If you already have an office, site or staff members in America, this might be the obvious location. Otherwise, and if you are embarking on a cold start in the region, Delaware has dedicated business law courts and most US investors or lawyers will have experience in its legal system making the process easier for new businesses looking to put down roots.
Once you’re established, attracting and retaining the best talent is essential.
Hiring locally will benefit the company and sales efforts in the long term. Having colleagues who understand the sales environment, the nuances of objection handling and, perhaps, already have contacts in the US market, will be a huge plus for your business.
That said, don’t discount the vast pool of talent now available to you in a virtual world. Although more senior and strategic roles may require the option of both in-person and virtual contact with senior management, many companies have reaped the benefits of tapping into skills around the globe. Check out our recent blog on remote hiring.
As you grow your US presence, and colleagues continue living there on behalf of the company for a longer period of time, you can utilise Permanent Establishment as a way of having a taxable presence outside your company’s main country of residence.
And remember, you didn’t start your business in order to run the payroll or HR systems. Investing in a Professional Employer Organisation (PEO) which provides employee management services like payroll processing, employee benefits management and recruitment will remove the administrative headache at the same time as creating a working environment which fosters staff engagement and retention.
Now more than ever, digital is enabling international expansion, removing barriers to entry and levelling the playing field for smaller businesses to compete with their larger competitors.