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Getting Started

How to crack the USA

A big, but challenging, opportunity for UK SMEs

How to crack the USA

The USA is the UK’s largest export market by far. The annual value - around £100bn - is double that of exports to Germany, the next largest market, and makes up around 18% of all UK exports1.

Currently, only about 10-15% of UK SMEs export to the USA2. It’s been mostly the domain of larger businesses.

However, Jeff Lewis – a US market specialist and adviser to the Institute of Export & International Trade and to exporting businesses – says that interest has picked up since the Brexit referendum. With no language barrier, and less uncertainty around the future trading relationship, the US is nearly always top of the list of target export markets for SMEs.

Research first

For those businesses not yet trading with the US, Jeff recommends going on a trade mission, which are run by some chambers of commerce, the Department for International Trade, and by the devolved governments of Scotland, Wales and Northern Ireland. Ideally, the mission should be sector-specific or at least include the opportunity to attend a relevant sector trade show.

This helps businesses to find out more about customers, competitors, potential distribution partners, and also gives a first hand experience of sector trends and developments. Industry trade associations in the US are also worth contacting, as they tend to be very helpful, and are a good source of information and contacts.

But before committing to a trade mission, businesses should have thoroughly researched the market and established their likely competitiveness. Jeff says: “I see so many companies who go to the USA on trade missions, and come back saying ‘we didn’t realise that the competition from Mexico was 25% cheaper than us’. It’s true that British businesses enjoy a reputation for quality, but they still need to compete on price.” 

Understanding how competitive a product or service will be in the US, and how profitable, can be a complicated exercise. Because of the federal state system, laws, regulations and taxes can vary state-by-state.

The more litigious nature of the US also adds to costs – liability insurance is more expensive – and to business risk.

It will also be important to fully understand, and take advantage of, the UK-US double tax treaty, so that tax is not paid twice.

Culture clash

Jeff also cautions that despite sharing a common language with the UK, business cultures in the two countries can be ‘worlds apart’.

He says that UK businesses will need to deal with expectations of customer service and support that are typically higher than in the UK: “You need a local support structure to cope with this demand. Americans want to speak to someone with a US telephone number, who is also based in the USA. So setting this up is a big part of the planning process.”

Chris Jones, managing director of Corgi Hosiery, a 125-year-old Wales-based luxury knitwear company that has been exporting to the US for decades, has had to navigate a number of potential potholes. He says that slow payments can be a problem: “It’s quite common for customers not to stick to payment terms, so if you don’t know the customer, it might be a good idea to negotiate a ‘first order by pro-forma invoice’ (payment in advance) or at least an upfront deposit.”

The prevalence of cheque payments in the US can also be a surprise to many UK businesses. So it is essential to have a US dollar bank account. Chris says: “Even big companies don’t always do bank transfers. I once received a cheque for a $50,000 order, because it ‘wasn’t big enough to do a bank transfer’.”

But Chris also highlights the positive differences. For his American customers, the ‘made in the UK’ label is a big selling point, and especially Corgi’s Royal Warrant.

He has found the less formal nature of Americans, compared to countries like Japan, makes them fairly easy to work with once a relationship is established, and that US customers do tend to be quite loyal.

​​​​​​​Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

1 Office for National Statistics, 2016

2 ‘Thinking Global, The route to UK exporting success’, a survey of 1,000 UK SMEs, World First, 2016