Ask entrepreneurs in many parts of the world where they see the greatest scope for business growth if their organization was to put in place roots there, and there is a good chance that the United States will be mentioned.
Entering the US market is a fundamental milestone for many ambitious business owners
With its GDP of around $29.35 trillion USD at the time of typing, and Americans enjoying high spending power compared to many other areas of the globe, the US continues to represent fertile ground for enterprising organizations and investors.
However, there is also little denying that the US can be an extremely difficult market to crack, with its sheer size both a pro and a con in certain respects. So, if you are serious about embarking on such an expansion with your business, you will need to be well-prepared for it.
By familiarizing yourself with some of the common challenges faced by international firms that attempt to expand into the US, you can help negotiate the testing – but exciting – terrain that this powerful North American market continues to be.
Those challenges include, but are not limited to:
The hugely competitive labor market
As of 2023, there were more than 33 million small businesses in the United States, accounting for 99.9% of American businesses. So, your small firm entering the US for the first time can expect intense competition in its efforts to attract top talent.
Depending on where your business is expanding from, you may find that any cultural adjustments your organization needs to make are somewhat subtler than is the case for market and labor challenges. However, you certainly shouldn’t ignore the cultural aspect when you are trying to expand your business into the US.
Business relationships in the US, for example, tend to be transactional, with the cultivation of personal connections not as much of a priority as it is in some parts of the world.
Meanwhile, communication styles Stateside are more direct than you may be accustomed to in your home territory. But on the other hand, US companies take a more indirect approach to negative feedback.
As for decision-making within US firms, this is often done on the basis of a flat or shallow organizational hierarchy, with individual input being valued. This is as opposed to the more hierarchical approach favored in some other countries.
Understanding payroll obligations and the tax code
You will be highly attuned to the regulations applicable in your country of origin when it comes to such matters as payroll deductions and remittances. However, the tax code in the US represents a whole other level of challenge for newcomers to navigate.
This is why, if a given business from another country is looking to put in place a legal presence in the US, it should arrange for a review of the tax code. This will help the organization’s staff to grasp its obligations in relation to payroll administration.
Not every business aspiring to expand into the US understands the schedules the Internal Revenue Service (IRS) provides for remittances, for example. The American market also has its own rules with regard to public holidays and how holiday pay is calculated.
Benefits, entitlements, and workers’ rights
There are laws in the US that stipulate employers must provide certain employment benefits. Indeed, there is a maze of regulations to navigate that new entrants in the US market can understandably become overwhelmed by, encompassing such areas as workers’ compensation and the Affordable Care Act (ACA). So, it might not be immediately obvious what your business does, and does not, need to offer to its US-based personnel.
US healthcare alone is very complicated, with the ACA obliging certain employers to offer their staff particular levels of health insurance. Other employers, however, are exempt. You may end up spending a lot of time sifting through legislation and the IRS guidelines about the ACA and health insurance, which is time you won’t be able to focus on your core business.
How can you lift some of the burden of managing these issues?
With there being so many legal, practical, and cultural obligations that entrepreneurs and new entrants into the US market need to get to grips with, it should be no great surprise that Employer of Record (EOR) services have become so popular in North America.
An EOR – such as Aspirock – can act as a legal employer of your company’s US-based personnel. Such an organization can assume responsibility for compliance with the notoriously tricky employment regulations in this part of the world.
To learn more about how Aspirock can provide the global HR support that can help your business overcome the challenges involved in establishing a US footprint, please don’t hesitate to contact us today.