For many companies, the United States (U.S.) is the ultimate goal and the market that can help them secure their future success, making it a priority at an early stage. The reasons for this range from the fact that it is the largest economy in the world, to the fact that it is more easily accessible than many companies believe. There are, however, some factors to consider before entering the U.S. market.
In order to provide insight into the U.S. market, we interviewed Henri Syvanen who has led several innovative consumer product companies into success. He has extensive experience in international business. Before settling in the United States in 1995, he traveled and worked around the world in export consulting and even in civil defense.
After settling in the U.S. he has seen first-hand businesses succeed and fail at their attempts at conquering the U.S. market. He is currently advising European companies that are interested expanding their business internationally.
In your opinion, what are factors to consider before entering the U.S. market?
I would say that there are three things that any company, whether coming from Europe or any other part the world, should have before starting to plan practical matters on entering the U.S. market. First and foremost, a board decision on the market entry strategy is the most important thing to have. Second, in my experience it has proven to be beneficial that the company has had success in the domestic market and ideally in some other markets similar to the one in the U.S. There are many opportunities here but there is also rather fierce competition so in order to save time and money, it is good to have tested the product or service in other markets first. And lastly, it is good to keep in mind that entering the U.S. market takes time, patience and funds. Ensuring sufficient funds for the first 2-3 years is highly recommended.
Let us talk a little about the practical matters on entering the U.S. market. What would you say are things to consider when choosing a location?
One of the primary decisions would be proximity to customers. Being able to pinpoint the location of your potential customers now or in the future is a big factor to consider. Another aspect in choosing a location is the cost of operating. Some states are more expensive than others and there can be rather big differences between them. A third thing to think about is how easy is it to get skillful employees to this location. As of now, some known hubs are financial in New York, high tech in San Francisco, entertainment and gaming in Los Angeles and biotech in San Diego.
What options are there to set up a company in the U.S.?
I would say that there are two viable options as a company type to set up, Limited Liability Company (LLC) or Corporation. In both, individuals are not financially liable for the company. Legal requirements and costs vary by state and entity type (LLC v Corporation). Another option is purchasing an existing company and entering the market through that. Lawyers can help when considering options and I would say having a lawyer is a must. Insurance brokers can help with the vital liability insurance that the company must have when entering the U.S. market. I would also highly recommend hiring at least a part-time CFO and an Accountant to do professional accounting from the start. It is vital to keep track of the funds.
Anything else you would like to add?
I would add that one should be ready for this market to be different. All companies have their own ways of doing business in the domestic market but adapting to the U.S. market is crucial. The mentality here is very different regarding, for example, customer service and product returns. It is also good to keep in mind that the big chains are truly powerful. They may offer substantial opportunities, but they also expect rapid results. Margins and sell-through rates are often non-negotiable and not ideal. Additionally, a lot has to be done independently in order to boost sales. Online sales is getting bigger and bigger and it might be good to look into selling products through a marketplace such as Amazon or Walmart to have a bigger reach than what a single website can offer. That being said, there are truly many opportunities in the U.S. market and I encourage all the companies who have what it takes to make it here to enter the market.
What would you say is the number one reason businesses fail when entering the US market?
I have often seen this happening when the product or service doesn’t fit the market or find their place in it. And the company isn’t ready to make changes in order to adapt to the U.S. market. Sometimes price has not been right, the company is not profitable or they run out of funds. I have also seen a case where the product was too early, the market was not mature enough. And in some cases, they have been too late. A lot depends on capturing the right moment. And sometimes it just comes down to luck - being at the right place at the right time.
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