Expanding Into the U.S. - What European CEOs Should Know
This guide is a must-read for European CEOs looking to break into the American market.
As the global economy becomes more and more interconnected, it’s natural that many European companies would want to expand into the United States. After all, the U.S. is the largest consumer market globally, but it’s also a market that operates very differently from Europe in some critical respects.
For starters, here are some basics:
- The U.S. is home to more than 800 million consumers, whereas the entire European Union contains only 500 million.
- In 2016, the U.S. had a gross domestic product of about $19 trillion.
- There are more ways to make money in America than in Europe.
With careful planning, you can expand successfully into the United States
CEO Coaching International President Sean Magennis hosted a webcast with five coaches from CEO Coaching International, who are also outstanding people in business:
- Pascal Brochier, a former managing director at Gillette and president at Vivendi Universal Games.
- Erno de Bruijn, a global industrial business leader who held several executive leadership roles throughout his 20+ years at LATICRETE International.
- Rafael Paniagua, the former president and CEO of industrial giant ABB in Brazil.
- Juergen Rochert, former Mercedes-Benz Financial Services CEO and global leader in the automotive retail and wholesale industry.
- Mateo Romano, a turnaround specialist and former Mattel Global Vice President.
Read on for highlights from the conversation, and watch a replay of the entire webcast here: https://ceocoachinginternational.com/event/us-expansion/
Each of the panelists had valuable insights for European CEOs looking to dominate the American market.
The American market is very different from the European model of business
The American market is quite different from the European model of business. For example, corporate culture in the United States is more focused on profit and loss. This can affect how you manage your company and your employees when it comes to your ability to expand and grow. You also have to be aware of regulations that may be different in the United States than in Europe.
There is a tendency for companies based in the U.S. to be more flexible when it comes to regulations than those operating in Europe. “The U.S. is a huge market. It’s a huge opportunity from the size perspective and from the innovation perspective. So if you can compete in the U.S., where most of the innovation is dirt, you can compete in all of them,” says Rafael.
Hire an American first to help you navigate the U.S. market
It’s worth hiring an American first – or partnering with an advisor who has extensive experience helping foreign companies set up operations in the U.S. and build compliant teams there.
Know that there are cultural differences. The more sensitive you are and know about these differences, the more successful you will be in the long run. Find a company that helps you with your brand image and how to adapt it to fit into the American culture.
“People are so friendly. You’ll be connected. You find people; people go out of their way to connect people with other people without even expecting anything,” says Juergen.
Knowing what questions to ask is one of the biggest challenges for non-U.S. companies entering this market. There is no magic wand that will tell you which questions you need answering but knowing yourself (what your skills and experience are), being honest about your business plans (which markets you want to penetrate), and having a good sense of what is going on in the global economy and business environment at any given point in time can help get things started on a solid footing for success in this vast country where each state has its own identity, culture, legal system, sources of financing, and so on.
You must also hire employees according to local labor laws. In the U.S., these include:
- Health insurance (ACA)
- Retirement benefits (401K)
- Paid time off (PTO)
- Disability benefits (SDI) and maternity leave (FMLA)
These are just a few of the dozens of employment requirements for businesses in the U.S. While it’s crucial you know about them and implement them correctly, most European leaders are not experts in U.S. employment law.
Hire a U.S.-based accountant to manage tax, compensation, and benefits issues
Hiring a U.S.-based accountant will keep you from making one of the most expensive missteps that CEOs can make. This is such an essential step in setting up your business in the U.S. that we’ve included a few tips for finding an American accountant below:
- Talk to other executives who are already operating in the U.S. They may be able to refer you to their accountant or firm.
- Search online, but don’t stay there. There’s no substitute for meeting someone face-to-face and getting a sense of how they operate. A Google search will help narrow down your options, but it won’t tell you who is worth hiring.
- Make sure that any potential accountant is well versed in the various stages of business growth—not just finance but also compliance and operations. This way, they will be able to help you as your company grows into maturity, rather than having to start over with a new company once your startup has graduated.
Make sure demand is there
Perhaps most importantly, make sure there is demand for your product or service. This may seem obvious, but you would be surprised how many companies overlook this crucial step before expanding.
“I think what you need to be very mindful of is making sure that you are setting yourself up to adapt your product to the U.S. market, rather than asking the U.S. market to adapt to your product and being able to do that quickly,” says Pascal.
You identified one of your goals for expansion as “provide a quality product.” Therefore, it’s vital to ensure there will be an audience that appreciates what you have to offer.
The easiest way to determine the level of demand for your product in a specific location is simply by asking potential customers. For example, suppose you’re selling handmade jewelry online and would like to expand into the U.S. market. In that case, you can use tools like Google Surveys 360 to gather data regarding specific demographics’ interest in your products.
If no one wants what you are selling, not even at a slightly lower price than competitors’, then maybe expansion is not suitable for your startup at this time.
Research local competition
“You need to figure out how to communicate properly so you understand what the market wants, and then you can adapt,” Erno advises.
It is crucial to understand the market before you enter it thoroughly. You would be wise to research the local competition and follow these steps:
- Is there a competitive advantage? How does your product or service compare? What are the barriers to entry? Do you have a plan for dealing with the competition if they undercut your price? Who are the key players in this space? What do customers like about their offerings, and what do they dislike? These are all critical questions that need addressing before you invest in entering a foreign market. Determining whether your company has a competitive advantage—and if so, how you can use that advantage to succeed within foreign markets.
- Consider seeking help from an experienced consultant; doing so can help you gain access to vital information and assist with strategic planning. It also gives your company more credibility when approaching new clients or investors.
Launch in one market at a time
The best way to enter the U.S. market is to launch in one market at a time. The U.S. is huge, complex, and often uncoordinated, so it’s better to understand the nuances of one state or city before trying to add more.
“The consumption culture in the U.S. makes it very attractive to launch new products. On the other hand, the size also represents a big challenge for companies that, probably just to enter the market, will need to reach much higher numbers or volumes than what they are used to managing in their market,” says Mateo.
This also gives you time to build out your team, attract customers, and get feedback on your product or service. After launching in one spot, you can then move on to other markets to leverage your existing company infrastructure, including hiring local salespeople or getting representatives and setting up a U.S. office.
Be open to change
There are many differences between American and European cultures, but a significant one is that Americans are more individualistic and open to change than Europeans. This means that the traditional ways of doing things in Europe may not work in the U.S. It’s essential to be willing to alter your approach as you learn more about your new market and what it needs from you.
Embrace innovation. Americans are more likely than Europeans to embrace new ideas, question authority, and be optimistic about the future. They’re also less likely to believe or follow experts without explanations or data. Many U.S.-based CEOs realize that they need systems in place that allow them to test new ideas quickly and make changes quickly if they are not working well.
There’s a lot to consider when expanding into new markets. While some things will be the same in your new market, there will also be differences in culture, language, and regulation and differences in market size and growth rates.
Remember that competition might also differ depending on where you are expanding—if you’re introducing your product to a brand-new market, chances are good that you’ll have less competition than if you’re entering an already-crowded space.
Though it may seem overwhelming at first, knowing that the process is manageable is good. If you follow the steps outlined here and keep these questions in mind along the way, you will have all of the information necessary to make decisions that will help create a successful expansion with lasting results.
About CEO Coaching International
CEO Coaching International works with CEOs and their leadership teams to achieve extraordinary results quarter after quarter, year after year. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 1,000 CEOs and entrepreneurs in more than 60 countries and 45 industries. The coaches at CEO Coaching International are former CEOs, presidents, or executives who have made BIG happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $10 billion, and many are founders that have led their companies through successful eight, nine, and ten-figure exits. Companies working with CEO Coaching International for two years or more have experienced an average EBITDA CAGR of 67.8% during their time as a client, nearly four times the U.S. average and a revenue CAGR of 25.5%, more than twice the U.S. average.