Author: Paula Cruickshank, SVP Ontario, Business Development Bank of Canada (BDC)
Canadian businesses are well positioned for U.S. expansion. But having the right strategies and fundamentals in place is critical for success. BDC Senior Vice President Paula Cruickshank shares insights into how to get it right.
It’s a great time for Canadian businesses to consider expansion into the U.S., and Canadian companies are well positioned to take advantage of the vast market south of the border.
Business leaders in Canada can leverage our shared language with the U.S., similar consumer preferences, proximity, close trade relations and Canada’s reputation for innovation and high-quality products.
But these advantages don’t mean Canadian companies should proceed without a carefully considered plan. The U.S. is a very large, highly diverse country with a competitive landscape. Expanding can be costly in terms of resources, effort and time. Making such a big investment in an ad hoc way can lead to expensive mistakes and lost opportunities.
Planning is essential
To help ensure a successful U.S. expansion, it’s important to have the right strategies and fundamentals in place.
One of the most common mistakes that Canadian businesses make is to assume they know the U.S. and don’t need any special preparation to expand. After all, aren’t Canada and the U.S. about as similar as any two countries can get to each other? We watch the same TV shows and movies and listen to the same music, after all.
This assumption often leads to serious missteps. The U.S. isn’t a single, homogeneous market. Its many states and regions have a wide variety of different consumer tastes, regulatory environments, laws, logistics and business cultures. That’s why some homework and planning are essential to improve your odds of success.
At BDC, we work with many successful Canadian exporters and and can help businesses with International Expansion, including to the U.S. Benefitting the most from a U.S. expansion often boils down to a few common ingredients.
“Americans may be skeptical about dealing with a non-U.S. company. How will you win them over and differentiate yourself?”
Review your company
Before expanding it’s important to step back and review your company. Do you have the resources to expand to the U.S.? Will you be ready to fulfill larger U.S.-sized orders? You may have to wait some time for cash inflows. Until then, do you have the financial resources in place to invest in needed machinery, personnel and material?
You also need to have a think about how you’ll adapt your products or services to U.S. tastes and requirements. Americans may be skeptical about dealing with a non-U.S. company. How will you win them over and differentiate yourself?
Canadian companies often lag behind the U.S. in using technology and productivity. How digitally mature and operationally efficient is your business? Your business should have strong fundamentals to be competitive in the U.S. You can use BDC’s free online digital maturity tool and operational efficiency quiz to gauge where you stand.
It’s probably a good idea to invest in improvements before you embark on an expansion. At least get the ball rolling. Better to invest ahead of time than to find out after the fact that your U.S. competitors have a major edge on you.
“Make sure your team is ready to expand. Is everyone in agreement on the benefits for your business?”
2. Assemble your team
Make sure your team is ready to expand. Is everyone in agreement on the benefits for your business? Do you have employees or outside advisors who are familiar with the U.S. landscape? Your success may depend a lot on personal connections and a good knowledge of the target market.
Be sure to have advisors who can help you navigate legal, human resources, accounting, distribution, logistics and marketing issues.
It’s important for entrepreneurs to be able to delegate and assemble a team to lay the right groundwork for growth. Find employees who can fill in your expertise gaps, then empower them to make decisions. As a business leader, your job isn’t to micromanage, but to set the vision for where the company will go.
Bringing together the right team is more challenging because of Canada’s labour shortage—a difficulty that U.S. businesses face too. BDC research has found that the best solutions are:
Investing in technology, digitization and automation.
Developing a people strategy and ensuring you’re an attractive employer.
Fostering an inclusive, diverse and engaged work environment and expanding your hiring pool to underrepresented groups, such as racialized people, new immigrants, Indigenous People, older people and people with disabilities.
3. Develop a market entry strategy
A market entry strategy is a must. This is where you do market research to identify specific U.S. states or regions that would be a good fit for your company. You can use trade data from such free online tools as the Canadian government’s Trade Data Online website or the U.S. Department of Commerce’s TradeStats Express site. BDC will follow its clients to about 20 different U.S. states (somewhere in this paragraph).
In most cases, we recommend starting small. Choose one state or region to target initially, then expand from there. You can deepen your knowledge by hiring an expert on the target market and attending trade shows, business events or trade missions.
“Logistics is a complex process that may require specialized expertise and good partners.”
4. Plan logistics and distribution
Think about logistics and distribution. Planning ahead will reduce the risk of costly problems down the road. You’ll need to consider:
Distribution—Will you use a distributor or agent, create a physical presence, sell online or use a multi-channel approach? Will you stock some products locally or ship directly? If the latter, you’ll have to sort out who will pay for duty and shipping.
Transport—Logistics is a complex process that may require specialized expertise and good partners, such as freight forwarders, carriers, customs brokers and insurance providers.
Intellectual property—Consider any intellectual property issues, such as IP ownership and employment contracts, IP indemnification and how to protect data. The Trade Commissioner Service offers a useful webpage on IP issues for Canadian businesses expanding to the U.S.
Packaging, documentation and labelling—You may need to adapt packaging to different consumer tastes and so that your product is protected during shipping. Also be sure to find out about documentation and labelling requirements.
Expanding to the U.S. is a fantastic opportunity that should be seriously considered by Canadian companies looking to grow and scale. With the right preparation beforehand, business leaders can significantly improve their chances of making a winning investment.
For more information on BDC, please visit our website: https://www.bdc.ca/en
