Should you be looking at opening an office in the USA? - Business Leader News

Should you be looking at opening an office in the USA?

Brett Pentz, Vice President of ECI North America, a growth-focused mid-market private equity firm, recently spoke to Business Leader about the best practices to consider when looking at expansion opportunities and entering the US market.

Increasingly, UK management teams are looking across the Atlantic to maximise their growth potential. In fact, over half of our portfolio are currently focused on US growth with 30% of their revenues already coming from North America. When considering expansion in the US, there are big strategic questions businesses need to think through.

Why are you opening in the US?

So, it is not a ground-breaking question, granted, but you’d be surprised at how often companies open in the US without a clear approach – and it can be costly.

Given the market-size, a popular reason to open a US office is to sell more effectively to US-based customers, but there may be other reasons too such as account management, customer service and support or in-country marketing. Ensuring the Board are all aligned behind the same objective will be a key foundation to assessing the right criteria for where to open that office.

Are you planning to enter organically or through acquisition?

Businesses will need to assess if they can enter the US organically, or if an acquisition is needed or preferable to develop the requisite scale, capabilities or brand recognition.

If considering M&A, your first filter will be acquisition criteria to find potential targets. If you are considering an organic entry strategy, it may be important to understand where strategic customers exist to provide a strong source for early growth.

At ECI, our Commercial and Origination teams support businesses to scope both organic and acquisitive strategies. For example, we supported portfolio company, Moneypenny, in mapping the US market, narrowing down from about 750 businesses to 60 businesses we wanted to reach out to, by assessing location, size and services provided. In that instance, it led to Moneypenny acquiring VoiceNation and Ninja Number in March 2020 in an off-market deal, taking international revenue for the Group from 5% to c.35% today, and centralising US operations in their beautiful Atlanta office.

Who are the key relationships you need in the US?

Your purpose for launching in the US should inform with whom you need to build relationships but some common answers include:

  • The buyers of your product/service
  • Strong purchasing influencers
  • Key associations or networking forums
  • Understanding which relationships will be the drivers for success in the US will be key to mapping the market.

What is your staffing plan?

It is important to develop a staffing plan for a new office, considering how many people you will need to hire, in what roles and functions, and what the roadmap looks like over time. It may be that you have the appropriate individuals or teams already, particularly if you expanded through an acquisition; regardless, it is important to agree what the future hiring picture looks like. The answer will determine the relative importance of location factors such as access to talent, ease of travel from other offices, cost and quality of living, and available office space, amongst other things.

What does a successful market look like for your business?

Once you have considered these other questions, you will be much better placed to consider what a successful local market looks like for your business. Some common areas to consider, for example, include:

  • Concentration of buyers
  • Key customer sectors
  • Proximity to talent or universities
  • Socio-economic indicators

When considering these, it is important to consider the difference between the US and your existing markets. It is also worth assessing what potential competitors in the US are doing and understanding their rationale, as it may impact yours. For example, this could be looking at a company’s macro criteria, including % internet access and % employment, and their market criteria, which may include local talent hubs and key client verticals, and assessing where competitors have US offices and why.

By providing scores to different markets against those key measures, then the company could start overlaying an operational view, such as existing client footprint, local salary benchmarks and transport links, to start prioritising potential location choices. A common approach is to sell in a few key US states to start, which may further narrow options.

Expanding into the US offers unique challenges in ensuring your choice of location is right, but expansion into the ‘land of opportunity’ can truly transform the growth potential and market position of businesses if done well. It’s critically important to speak to people who’ve done it before, supporting management teams to make those decisions and get it right the first time.