Start Up Tips – Strategies for US Market Entry.
The US is Open for Business! There has been a definitive change in the US landscape over the past twelve months, now more than ever the US market has opened up to Foreign entities selling into the US marketplace. This shift in mindset presents a significant opportunity for Irish Start Ups looking to export. However it is no longer acceptable to fly in and fly out you must demonstrate what is unique and different about your offering and be prepared to invest both time and money in the opportunity. Outlined below are just some of the key strategies Start Ups can adopt for successful and cost effective US Market entry.
Too often companies become distracted with their product or service and forget to ask these key questions. Is there a viable market for my product? What does my US customer want? and most importantly what will they pay for?
The most cost effective and efficient way to get this answer is to host either an in market Focus Group of consumers or create an Advisory Panel of industry experts. This simple strategy can be setup and managed efficiently to illicit key information from customers. By preparing open ended, general questions to engage participants you will gather objective research that will provide both market analysis and a basis for your US sales.
Similar to IDA Ireland, each US state has an economic development board that want your business! These agencies are tasked with attracting new business to their State and offer a range of supports from free incubation space to job postings. You can find a link to these agencies on most State websites. When deciding where to locate, consider each of the fifty States as a separate opportunity and plan accordingly. Research where your customers are and plan your sales strategy around that intelligence with the understanding that your customers may be outside of the mainstream States so don’t limit yourself by familiarity.
Attending an industry trade show as a delegate before exhibiting should be part of your US strategy, no amount of desk research can eliminate the need to assess in person the competition and the opportunity. Visit competitor stands and attend seminars to learn more about market trends and innovation. Use this knowledge to build out your own suite of marketing materials and to build out your contact database for launch and sales.
A key challenge for companies is deciding on which International market to tackle, often companies will attempt to enter two or more markets at the same time. This is a huge risk and often a costly mistake. Companies should assess the cost of US market not only in financial terms but also from a Human resources standpoint. It is imperative that the company CEO is fully engaged in the expansion and that you have your strongest team members available to support your market entry, if developers or key management are busy managing another markets – it simply won’t work.
Doing business in the US can be expensive, being realistic about the costs of entering the US and having a clear understanding of your breakeven point will be key to your success. Invest the time in creating a US specific Business plan and pricing strategy. Engage a US accountant early in the process so you can maximise tax breaks and write offs.
Be prepared for your first sales to be loss leaders and ensure there is enough of a margin in the bank and that you have the support of a strong and knowledgeable board to weather the storm until profitability.
First sales are crucial to any business but too often companies entering the US market chase a sale at any cost. It is important to be selective and to ensure you have the bandwidth to service these first key reference sites. Be realistic and honest with these key accounts and manage their expectations. It is important to get US customers but it is more important to get relevant customers that can provide an applicable reference for your industry. There are no second chances in the US so be cognisant of your limitations and only accept contracts that you can fulfil.
If you plan on raising funds in the US it is imperative to have an Investor deck and strong business plan prepared in advance. The funding landscape has changed and investors are more tolerant of foreign companies, however only certain Angels, Venture Capitalist’s and Private Equity groups will invest in foreign companies so a strategic decision needs to be made early on as to what form a US company would look like. Engage legal counsel early in your market entry to equip yourself with knowledge and options.
Visibility is key to customers and investors alike and there is an expectation from both that you are present in the US. Some simple strategies that you can employ to build your US presence virtually include setting a US phone number and voicemail using Skype, creating a US landing page on your webpage and registering your company name and website as place holders.
While direct sales can be an important facet in executing a Beach Head Strategy and building a brand, it can also be very costly especially in the US where salaries for Senior Business Development Personnel are high ($100k plus). Always budget an additional 30% of base salary of any new hire to cover the costs of insurance and supports.
Distributors can be a cost effective and efficient way to target a wider US audience. However, often the lure of potentially large Sales can distract you from exclusive contracts and competing products. It is not unheard of for companies to get tangled up in complicated negotiations with large Distributors only to realise the Distributors goal was not to sign the new company but to delay market entry of same. So as the old saying goes if it sounds too good to be true, it probably is!
Finally, 85% of acquisitions fail because of culture and people. From the offset remember that in the US Relationships are king! Be patient and understand that it will take more than one encounter to build a business relationship and close a sale. Invest in your US Relationships and don’t under value introductions. Be timely in your responses and honest and ethical in your offering.
Here in Ireland we are fortunate to have Enterprise Ireland who offer a tremendous amount of soft supports to start ups. Enterprise Ireland have offices across the US with market Advisors covering most sectors. Engage with this valuable asset early in your exporting process to understand how they can assist and what research has already been done. There may be opportunities to attend trade events or participate in relevant programs, but if they don’t know you are looking at the US they can’t help.
Mary Rodgers is the CEO and Founder of Stateside Solutions a US market entry Consultancy that specifically deals with foreign entities entering or scaling in the US market. Stateside Solutions have offices in the US and Ireland for more information on the services offered can be found on their website www.statesidesolutions.com