LET’S GET STARTED
- 1 Why the US?
- 2 Raising Capital in the US
- 3 Criteria For Business Expansion Into a Foreign Market - Are You Ready?
- 4 Financial Considerations and Processes For Entering the US
- 5 Get a Financial Partner on the Ground
For many global startups, expanding business to the US is a long-term dream. If you’re just about to leap into the States - congratulations! However, there are a host of complications that come with this great opportunity. Whether you are a neighboring Canadian business expanding to the USA, or from further afield, it’s up to you to understand the finances that are required to make the expansion.
This piece will explain the considerations behind expanding to the US, raising capital in the US, and the criteria for business expansion in America. Expanding business to the USA can be an amazing opportunity - but if you’re not careful, it can put you in dire financial straits.
Why the US?
One of the most enticing things about the US market is its size. It marries the technological base of the most advanced countries with a large population. The US also has a large international reach. From your home country, the US can serve as a springboard into the rest of the world. And if you’re a Canadian or Mexican business expanding to the USA, the rest of North America is a natural place to move to.
The technological innovation in the US also provides a wealth of partner opportunities for those expanding business to the USA. This innovation isn’t just in Silicon Valley anymore - many tech hubs are emerging all across the US.
Raising Capital in the US
One fact that is often overlooked by companies expanding business to the USA is that your startup can raise capital from American investors. However, it’s not so easy as simply starting an investment cycle. You need to be fully aware of the American securities laws that are going to apply to any debt or equity offering made to you.
A lot of these laws have to do with the solicitation of investors, so it’s better to be cautious if you’re trying to raise capital before you are fully established. Another complicating factor is that while there are federal securities laws, there are also state laws to navigate. Your best bet is to get a financial advisor to run you through this part of expanding business in the USA.
Criteria For Business Expansion Into a Foreign Market - Are You Ready?
It’s an unfortunate reality of expanding business to the USA - not everyone is going to be able to cut it. The best way to save yourself from later heartbreak is to very carefully consider if your company meets the criteria for business expansion to the USA. There are a few things that you should consider before making the move
Is the Timing Right?
You don’t need to wait to dominate your home market before you expand your business in the USA - you may be losing valuable time. However, you also want to be assured that your company is stable in its home region. You will also want to take into account the time needed for all your due diligence.
Timing isn’t just about your company either. You sometimes need to look at the bigger picture. How is the market doing right now? How is the American market doing? What is the current demand for your product in America? All these are questions to consider before making the big move.
Are You a Good Market Fit?
Your entry into the US market won’t succeed unless there is demand for your product. You need to carefully analyze the competition there and judge if there is a niche for your product that can be filled. It’s also worth researching purchasing trends among the American consumer base.
Remember that even if your product was a success in your home market, it may not have the same intense appeal in the American market. You also want to make sure that you can develop the distribution to get your product to customers, and the marketing to make them aware of it.
Do You Understand the Cost?
Speaking of marketing, you’ll want to make sure you don’t underestimate the cost of it, or underestimate any of your costs, for that matter. Entering the US market can be more expensive than you expect, as various costs begin to add up. You need to consider what your particular business needs in America. Will you need to pay for a property? For America-based employees? What will you need for marketing and PR?
Financial Considerations and Processes For Entering the US
So you think you’re ready for the American market? When you’re ready to start, there are a few financial considerations and processes to handle before you can begin your American expansion. Once you feel you’ve met the criteria for business expansion, it’s time to take stock of the steps to take when expanding business to the USA.
Decide on Your New Assets
Are you going to open a subsidiary in the USA? Are you going to need to hire a Professional Employment Organization to get your team ready for the USA? Are there any independent contractors you will need to hire?
A subsidiary is always useful in a foreign country, as sometimes local laws can slow down an existing company starting operations. The subsidiary is its own company for taxation and laws, making taxes much easier. Professional Employment Organizations or other consultants can be a lifesaver if they fit into your budget.
Open an American Bank Account
Way too often this step is forgotten and then left for later, at which point it can become a major hassle. The sooner this account is opened, the better.
Understand Local and State Labor and Tax Laws
You’ll want a local financial consultant to walk you through the labor and tax laws in the area you’re planning to set up shop. There may be very different laws on how to pay your employees, and how to handle taxes, and it’s worth understanding them.
Arrange Employee Payments
Related to the above, you’ll soon have new members of your team based on American soil. You’ll want to find a payment method appropriate for them. This can be a little complicated, especially if they are working remotely (not uncommon these days) or are contractors. Also, remember - in America, there are payroll taxes!
Understand Tax Reporting
Understanding tax laws is one thing - but you’ll always want to understand the process of how to properly report them to the American government. You’ll also want to familiarize yourself with all of the relevant tax forms.
Get a Financial Partner on the Ground
The best piece of advice we can give - is to get advice! When you’re expanding business to the USA, your most valuable asset is going to be information. Proper consultants and partners based in America can help guide you through the proper processes, giving you their local experience. Contact us today to learn more about our CFO consulting services.