Entrepreneurs hoping to hit the big time in the States can’t expect success at home to do the talking. Growing Business spoke to companies that have learnt how to prove themselves on a larger stage.

When Susanna Simpson realised that 25% of the clients for her PR company, Limelight, had offices in New York, she knew she would need a presence there. While the US is the UK’s biggest trading partner, a status that
won’t change any time soon, you can’t just waltz in and tell them that you’re after a percentage of the money they already spend on products like yours.

“I built up in London with a big network, good clients and a personal reputation,” says Simpson. “Starting from scratch in New York, where I knew no one and no one knew me, would have been insane, so I decided to form an alliance with an established agency there.”

If Simpson hadn’t teamed up with someone she already knew (through a mutual client), she would have risked the reputation of her brand. “I now have access to a team of people who know New York and the US very well,” she says.

Ashley Ward, chairman of the European Leadership Programme, agrees. “I have succeeded best where I found a good US national who has a Rolodex, knows his way around, and understands how hard to push,” he says.

Ward’s organisation offers entrepreneurs a module called ‘Speak Fluent American!’ “The name’s a bit tongue in cheek, but what it means is you have to prove your commitment if you want to be taken seriously there,” he explains. “That might just mean a serviced office and a US phone number where people can connect to you. Americans don’t like dialling 011.”

Also, although Americans are generally among the most polite folk in the world, they are ‘now’ people and will respect you for being forceful.

Ways to go

Scott James, an American lawyer at Faegre & Benson’s London office, tells the UK companies he advises that they have three choices: temporal, third party and incorporation in the USA. There are variations and permutations, but you need to decide early on which will work for you.

The temporal way is to fly over, meet people, sell them stuff and then fly back. It may make you feel like a big shot, but it’s expensive and won’t build a solid customer base – US purchasers like their suppliers to be located in their country. You really need someone on the ground, in your customers’ time zone. One way is to appoint an agent or a distributor, but make sure you know all about them before you go ahead – due diligence can be difficult if they are not publicly listed. Alternatively, you could form a strategic alliance, or even set up a joint venture with an established partner with pre-existing contacts for longer term access to the US market.

Whichever route you choose, check your legal obligations. “People plan to make sales and forget about the interest these will attract from US federal and state tax authorities, not to mention HM Revenue & Customs,” says James. “It can affect your whole project – a good attorney should be able to avoid double taxation.”

Employment law

At some point you will want to set up your own subsidiary, incorporated in the USA, and actually get the guys with the Rolodexes onto your payroll. There lies true commitment, but whether parachuting in your own people or hiring locals, beware of US Immigration and Customs Enforcement (ICE). Since 2007, according to James, ICE has escalated its efforts to curtail illegal employment aggressively. Now it targets more small and medium-sized employers, such as restaurants, construction companies and manufacturing plants.

US employees have notoriously few rights and benefits, although there are tight federal rules against discrimination. But the authorities are nowhere near as inefficient and laissez faire as they are in the UK when it comes to foreign workers, and that includes managers. The visa waiver programme only lasts three months. “Getting a proper work visa may take time,” says James. “Employers need to be proactive and make immigration compliance a high priority – preferably before ICE knocks on the door.”

Keep to the code

Unfortunately, your need for legal advice doesn’t stop there. Foreign companies operating in the US need to stick to the letter of the law, from work permits for any UK nationals to intellectual property rights, creating a commercial presence, dealing with US agents and distributors and taking the necessary steps for reducing product liability. “It’s better to spend money up front than to get involved in litigation,” says James.

You also need to make sure all your patents and processes are properly registered. “If something can be copied
it will be,” observes Ashley Ward. James agrees, warning: “Having rights in the UK is no guarantee that they exist in the States.”

Still, the battle cry of the entrepreneur should be: “Just Do It”. “My advice on setting up in the US is, do it for the opportunity not your ego,” says Susanna Simpson. “I did it because of client demand, not out of a desire to have more clocks on the wall.”

First Luggage, founded by Gideon Kasfiner, collects and delivers baggage and equipment door to door, saving people from having to lug it round airports and pay excess baggage. Last year, the business merged with its top three rivals in the US to become the world’s largest luggage-forwarding service. Kasfiner owns 60% of the newly enlarged group. “My business has to be global, and I didn’t believe I could succeed with just a satellite operation,” he says.

Kasfiner identified the five biggest players in the US, picking well-established targets with expertise in-house, a sound customer base and a good revenue stream.

“When I called them they were interested because we had a substantial international business in 180 countries and they hadn’t,” he recalls.

Half a per cent would never do for someone like Kasfiner. “Ultimately, we’re all doing it to make money and expand,” he says. His advice for fellow entrepreneurs? “Make sure you know the marketplace you are going into, and that the company you are merging with has the right potential for consolidation in terms of buying power, cost reduction and higher margins.”

Success stories

The US domestic airline market is as big as the rest of the world put together, which was why STG Aerospace, which makes emergency lighting for planes in Swaffham, Norfolk, set up in Miami in 1999. Since then it has established a strong export record, with nearly half its sales in the Americas being to customers such as Boeing, Air Canada, Jet Blue and Continental Express.

Chief executive Peter Stokes puts success down to careful planning. “We established an American subsidiary, staffed by local aviation professionals who understand the culture, the market and have good links with the certification authorities,” he explains. “Our product development is led by feedback from customers across the world. We run our global marketing programme from the UK, but this is reinforced by US activities, including a presence at major US aviation exhibitions.”

With suppliers and subcontractors in Europe, manufacturing in the UK and much of its sales in US dollars, STG, which recently won its third Queens Award for Enterprise, should benefit from the weakening pound.

But STG is not unique. You may think a UK engineer who wanted to buy a production facility in the US needed therapy. Far from it, says Ian Gordon, a director of AJT Equipment, a 100-year-old manufacturer of testing machines used in the oil and gas industries – and now president of AJT Equipment (USA).

AJT acquired Roberts Engineering in August last year with masterly timing, since the dollar costs were incurred with the pound high. Now, revenues coming in are worth more. “They are producing lots of oil and gas in the Gulf of Mexico, California and right up into Canada, and the same safety rules apply wherever you are,” says Gordon. “We can bring new products to that market, and acquiring Roberts gave us a presence in Savannah, a strategic location for the sector.”

Slaying giants

The IT industry is so unforgiving that it’s rather valiant for a UK company to ride into the US with a product that challenges PayPal. Moneybookers has an online payment service with more than 6.5 million customers in Europe, but for truly global credibility realised it would have to set up operations in New York.

“We needed a separate entity due to the very different regulatory requirements in the USA. And we realised that we ought to bring in people with local experience if we were to have a real impact in this highly competitive market,” says chief executive Martin Ott. It was worth it. Within weeks of opening in New York, the managing director of Moneybookers USA signed a partnership agreement with eBay to integrate the system on eBay.com.

Another IT success is 1e, which started up to write energy saving software in 1999 and quickly realised the US would be a core market. It hired London-based Canadian telesales people (who are easier to find in London than Americans), so their accents wouldn’t jar, and made a point of attending industry events in the US. The aim was to be perceived by its customers in the States as being American.

This arrangement was only a stop-gap. The build up to the US office started three years ago, says Nick Milne-Home, now president of 1e USA. “We hired pre-sales engineers and post-sales consultants – people well known in the trade – and serviced them from the UK until we were ready to move.” By then, the States had become 1e’s biggest market, so Nick quit his job as chief operating officer in London and moved to New York to head up the new business. A year later, he has achieved the things he set out to do: doubling sales in the US and ensuring 1e kept its integrity rather than becoming two rival companies.

Doing business in the land of the free is a tremendous buzz, but it has to be planned scrupulously. There’s still a lot of capital in just being British, but don’t squander that by substituting it for professionalism – learn to speak American.