As markets become more global, and with the US economy experiencing strong growth with GDP annualised growth of 3.3% for 2023, many UK businesses looking to expand abroad will be tempted to look to the ‘land of opportunity.’ However, scaling into the US is no easy feat, with regulations and access to talent across 50 states creating different challenges.
ECI has helped many UK-based businesses achieve international success. With 77% of its portfolio companies pursuing international growth since 2016, the company understands the businesses challenges of expansion, particularly in the US. The company’s North America Growth Specialist, Brett Pentz, helps portfolio companies with their M&A and business growth ambitions across the US and Canada. He comments: “About half of the portfolio companies I work with are currently looking at the US as a growth opportunity, while the other half are already here. Expansion in the US has become more common over recent years as the dynamics in the US are often more compelling than other geographies. It has experienced less market volatility than the UK and wider Europe, and its GDP results show that the US has got back to growth more quickly. There’s a real opportunity for UK companies to take advantage of that.”
Pentz provides the following five tips on how to launch and expand a business in the US, while avoiding expensive and time-consuming pitfalls:
Analyse the US opportunity before you start
One of the most useful exercises we do with management teams is an overall analysis of the US market opportunity – given it’s such a massive end market, it’s always going to look compelling. The challenge is in how you start to segment that market in a way that’s meaningful for an entry or expansion strategy. For example, when deciding where to open your first US office, you need to consider proximity to customers, ease of access from UK head office, and your ability to recruit talent.
Is the US right for your business now?
Timing is everything. Many UK businesses establish strong leadership positions in their home market and see the US as a natural next step. Early wins from the UK validate the potential, but scaling that success across the pond requires careful planning. Before diving headfirst into incorporating, registering, hiring and engaging a whole range of professional services, we encourage businesses to consider if a US office is really necessary at this stage of their growth. Other options to consider include:
- A virtual presence: use a virtual US office address and phone number for meetings / sales calls and focus efforts on expanding US digital marketing and partnerships.
- Contracted support: Engage independent consultants or B2B sales providers to test the waters and validate the need for dedicated US based sales resources.
- Employer of Record (EOR): Partner with an EOR to add the first few US-based sales reps without the hassle of incorporating yourself.
Identifying the right time to open a US office
While virtual setups and external support can pave the way, once your customer base has grown to a scale that it can no longer be supported by UK-based account management or customer service, it’s a clear sign a physical presence is needed. A US office offers several benefits:
- Market commitment: Signals your dedication to the US market and attracts potential customers.
- Talent acquisition: Enables you to recruit and hire US-based employees more effectively.
- Market intelligence: Provides on-the-ground insights for localised digital marketing and partnerships.
- Business development: Increases your presence at industry events and outreach activities.
- Customer proximity: Offers better support for your growing US customer base.
What to look for in a US leader
It’s crucial to invest in the right leader. We see many companies looking to move people over from the ‘mothership’ to the US to make sure that the company culture is instilled and that there’s consistency between the two locations. For example, MiQ co-founder Gurman Hundal spent three years in the US establishing its operation and leadership. In contrast, Moneypenny had a regular commitment to senior teams going over for extended periods. This helps ensure integration and brings the US and UK cultures together. However, this may not be a long term solution, and a recruitment agency may be needed:
· If using a UK search firm, find out about their US coverage, networks, and resources. How will those in-market capabilities be deployed? If limited, how will they build a strong candidate list? Don’t select a known entity if they don’t have access to the right people.
· If you choose a US search firm, make sure that as an international client, you’ll be given the same priority as a local client. Your UK leadership team may need to meet them and build a face-to-face relationship, especially as you look to scale US operations.
· Remember that recruitment contract terms may differ between UK and US firms. It’s likely that a US firm may charge more, and payment terms may be based on the passage of time (e.g., billed monthly) rather than deliverables-based (e.g., delivery of long list, final appointment, etc.).
· Look for a candidate who is not only aligned with your company culture, but also understands how to reinforce that culture to US norms.
· Choose someone who can work well within an executive team despite geographical and time differences. Trust is always important, but there needs to be stronger trust than usual as regular monitoring is difficult. Prioritise someone who is an excellent communicator and willing to travel between the US and UK frequently to build that trust.
· Finally, it also helps to find candidates excited about a cross-border role. They need to like international travel, and they need a good understanding and appreciation for the differences that exist between the US and UK markets – for their employees and for their clients.
· No two recruitment processes will ever truly be the same, but it is important for businesses to be purposeful in their search for a US leader. But with the right approach and patience, your US operations will be well set up for its growth.
Learn from experience
A cross-cultural perspective can be helpful. For example, at CPOMS and Moneypenny, we could quickly understand how their solutions would apply across the different geographies with their various regulatory frameworks and customer demand drivers. So it really helps to work with a company with experience on the ground in the US, which understands the exceptional growth opportunities for UK-based businesses if executed with careful consideration and planning, while helping you avoid costly and time-consuming pitfalls.”
ENDS
Notes to Editors:
About ECI
ECI is a leading private equity investor, focussed on offering collaborative support to management teams. We pride ourselves on being straightforward to deal with, we help where we believe we can add value, and we work in absolute alignment with management teams. This is how we’ve delivered such exceptional results for over 45 years.
We manage funds of over £2bn and invest in growth businesses valued up to £300m, investing as either a majority or a minority investor. Our growth focus is integral to how we’ve built our team. We’ve created the capability to support management teams on anything from sourcing and executing acquisitions, developing market entry strategies, understanding and improving employee engagement, or ensuring your tech platform can scale as quickly as you are, and much more. Our whole team is committed to doing what we can for the teams we partner with.
ECI has helped companies such as CPOMS, a provider of cloud-based safeguarding solutions, and Moneypenny, a leader in global outsourced communications, to develop and expand in the US.
Get in touch to find out more about the fantastic people we’ve invested in and how ECI could support you to achieve your ambitions.
