3 essential steps for a successful U.S. entry
With nearly 330 million people and 15% of the global economy, the United States is the richest market in the world. Little wonder that many Canadian business owners want a piece of the pie.
But geographic proximity and a familiar culture are not guarantees of success south of the border. From finding partners to marketing, logistics and product adaptation, Canadian companies have many challenges to navigate. Many business owners run into trouble when they expand to the U.S. in an ad hoc way and neglect strategic preparation.
The good news is that doing your homework and proper planning can help you maximize your success in the U.S. market.
Follow these essential steps for a winning U.S. expansion based on recommendations from the BDC Advisory Services team.
1. Review your company
Take a step back and make sure the winning conditions are in place inside your business to expand to the U.S. If not, where are the gaps and what actions must be taken?
If your company has weaknesses, addressing these before you start exporting will help you avoid surprise costs and delays and maximize the returns on your investment in the expansion.
Review these elements:
Capacity to expand
Do you have the capacity and resources to expand to the U.S.?
Many Canadian businesses accustomed to operating at a Canadian scale become overwhelmed when they get their first large U.S. order. U.S. customers may also expect a lower price because of the larger volume. Being unprepared may lead to fulfilment delays, lower-than-expected margins and a scramble to find new employees and equipment to fill orders.
Expanding to the U.S. may also be more expensive than you think. Preparing detailed projections before you invest can ensure you have the financial and operational capacity to expand.
Are the owners and senior managers on board? Are you ready to get any outside expertise you’re missing? You may need to appoint a senior dedicated executive to manage your U.S. business.
Do you have the right marketing, sales and other human resources? Think about any training and other gaps you will need to address—for example, to operate new equipment. Depending on the state or region you target, you may benefit from having Spanish-speakers on your team.
Product or services
Americans are often skeptical about doing business with foreign companies, even if they’re from neighbouring Canada. One of the biggest mistakes Canadian firms make when expanding to the U.S. is failing to properly differentiate their products or services to bring something unique to American customers. U.S. companies will often ask, “Why you? Why should I risk dealing with a non-American company?”
Also, don’t assume a product that sells well in Canada will do as well south of the border. Make sure you are ready with a product or service that fits the needs and tastes of the U.S. market.
Canadian companies often lag behind the U.S. in using technology. This can include everything from having a robust online presence to operational efficiency. Analyze how you can use technology to boost sales, improve productivity and be more innovative.
2. Develop a market entry strategy
Your next step is to develop a market entry strategy.
It’s important to understand that the U.S. isn’t a single, homogenous market. Instead, it’s a patchwork of local markets with different regulations, logistics, laws, business cultures and consumer tastes. Export Development Canada, for example, breaks the U.S. down into 11 regions, each with a distinct market.
It may be best to start with one state or region, then expand from there. To help narrow down your choices, you can use free online trade data tools such as the Canadian government’s Trade Data Online website and the U.S. Department of Commerce’s State Import Data website. You can search both sites by product and industry to see where Canadian goods are valued and sold competitively.
Once you settle on two or three high-potential states or regions, you can attend trade shows or business events to learn more and make contacts, then pick the market with the best opportunities for your company. You can save money by attending virtual events or participating in government trade missions, which are usually subsidized and often cheaper than privately run missions.
3. Get your products to market
Logistics and distribution can have a big impact on the success of your U.S. expansion and may be more complicated and costly than expected. Doing homework and planning ahead of time can save you headaches and significantly improve results. Here are aspects to consider:
How will you reach customers? Options include using a distributor or agent, opening a physical presence in the U.S., selling through online marketplaces or an e-commerce site, and fashioning a multi-channel blend of direct and indirect approaches.
If dealing with an intermediary, it’s useful to find a long-term partner who understands and shares your goals. Your agreement should clearly spell out responsibilities and how information will be communicated. Also be sure to not neglect promotion.
How will you get your products to their destination? Logistics is a specialized task that requires in-house expertise or good partners to handle a variety of tasks, such as dealing with carriers, customs clearance, packaging, labelling, documentation and storage en route.
Canadian exporters often work with freight forwarders who can take care of all or part of the shipping process and coordinate with carriers, customs brokers and insurance providers.
The size of shipments
If your buyers are concentrated in a single U.S. location, it may be worth having a local warehouse facility so you can do bulk cross-border shipments and minimize customs and administrative fees. If your product goes directly to a single buyer, be clear on who’s responsible for paying duty and delivery fees.
There are several considerations regarding intellectual property (IP) in the United States. The Trade Commissioner Service has created a web page on practical IP considerations for Canadian small and medium-sized enterprises interested in learning more about best practices, contracts, patents, trademarks and available resources.
Certain products, such as food and fragile items, may need to be packaged in a specific way for the U.S. market. Packaging can also affect the cost of shipping and how your product is protected during transit.
Documentation and labelling
Exporting to the U.S. is subject to various U.S. and Canadian regulations and documentation requirements. Mistakes can lead to delays and unexpected costs and penalties. Needed documentation can include a business invoice, bill of lading or air waybill, entry manifest and Customs Assigned Number.
Look into Canadian rules for controlled and restricted products to make sure your products can be freely exported. Check Global Affairs Canada’s Export Control List for more information.
Also research the labelling and documentation rules of various U.S. government agencies to see which apply to your products. Agencies with possibly relevant rules include:
- Federal Trade Commission (http://www.ftc.gov/) has labelling requirements for goods that are consumed, such as candles, as well as textiles, clothing, wool, fur and leather.
- Food and Drug Administration (https://www.fda.gov/industry/import-program-food-and-drug-administration-fda) has rules for labelling of food for human and animal consumption, dietary supplements, cosmetics, drugs, medical devices and radiation-emitting devices. Small businesses may be eligible for less strict requirements.
- Department of Agriculture (www.fsis.usda.gov) has rules for retailed meat and poultry products and organic food.
- Bureau of Alcohol, Tobacco and Firearms (www.atf.gov) regulates alcoholic beverage labelling.
- Customs and Border Protection (www.cbp.gov) has country-of-origin labelling requirements for imported items.
- Environmental Protection Agency (www.epa.gov) requires labelling of items containing certain chemicals or that are used as pesticides, fungicides, rodenticides or anti-microbial agents.
- Consumer Products Safety Commission (www.cpsc.gov) requires labels on various hazardous items and flammable products.
- Occupational Health and Safety Administration (www.osha.gov), which is part of the Department of Labor, has rules for labelling and information sheets on hazardous products.