Doing business in the USA: Key facts to get started
Planning to sell goods or services in the United States? Read our fact sheet to help you build a plan to succeed in the market of the world’s largest economy
As the world’s largest economy, breaking the US is so often seen as a yardstick for British businesses seeking to achieve international success.
Whether exporting or opening an international office the US is a market you need to be intimately familiar with to make a mark.
In order to build your plan to grow overseas you need to pinpoint where the opportunities lie, such as how big your target customer base is, the level of mobile phone penetration, and a nation’s most popular imports before researching more deeply.
While you may be familiar with the US, our series of country guides will pull out some of the key facts you need to know.
Relationship with the UK
Regulations and trade laws make some nations easier to build a business relationship with than others. Here we look at the connection between the UK and US.
The removal of trade barriers between the US and EU (of which the UK is a member) via the Transatlantic Trade Investment Partnership (TTIP) should open up business opportunities for UK-based companies in the US.
As not only the world’s largest business market, but also the nation with the world’s largest private sector, there are many areas where UK business can make inroads in the US. Other major plus points of doing business in the US as opposed to other nations include; few, if any, language barriers, exposure to an innovative consumer market, regulatory barriers which can be navigated with relative ease, a similar business culture and access to a highly mobile and skilled labour force.
Of course, there are also challenges attached to doing business in the US, the most considerable of which include; the notable time difference between the US and UK, the costly and labour-intensive process involved in acquiring work visas, a high level of competition, sizable business insurance costs, and the extensive regional differences across the nation’s 50 states.
Main opportunities for UK businesses
There are many opportunities for a range of UK businesses to make their mark in the US, but certain sectors have more potential than others.
The following list – though not exhaustive – features the key areas which can be exploited by UK businesses: Aid Funded Business (AFB), aerospace, automotive, clean technology, consumer goods, creative and media, energy and renewables, financial and professional services, homeland security, ICT, and life sciences.
As of 2014, the population of the United States stood at 318,892,103
In terms of age, the population of the US breaks down as follows;
- 0-14 years: 19.4%
- 15-24 years: 13.7%
- 25-54 years 39.9%
- 55-64 years: 12.6%
- 65 years and over: 14.5%
Of the total population, there are 2.45 migrants per 1,000 of the local population.
The labour market
The US has a comparatively low unemployment rate, with the greatest proportion of employees working in the managerial, professional and technical sectors. However, over 20% of the US labour force is engaged in manufacturing, extraction, transportation and crafts, so if your business is looking to outsource tasks in this area the US may offer ample opportunities for this.
Something which should be considered before planning a US business venture is that acquiring work visas can take a long time and incur a number of costs. You may find that hiring a local workforce is more cost-effective than attempting to transfer existing employees.
In the US the government type is a constitution-based federal republic. There is a strong democratic tradition in the nation, with the two major political parties being the Republicans and the Democrats.
The capital of the US, Washington DC, is the seat of the President. Each US state has two senators and its own laws and regulations, which cover anything not decreed by federal Constitution, federal statutes, or international treaties ratified by the federal Senate.
For business owners, this can often mean you need to think as much in terms of targeting specific states as much as the US as a whole.
Gross Domestic Product (GDP) represents the monetary value of all finished goods and services produced within a nation/region’s borders within a specified time frame, typically viewed on an annual basis.
In the US, GDP in terms of purchasing power parity stood at $17.46 trillion in 2014, while GDP in terms of real growth rate came in at 2.4%. On a per capita basis, GDP printed at $54,800 in 2014 – up from $53,100 in 2013.
If GDP is broken down by sector of origin, we see the following distribution:
- Agriculture – 1.6%
- Industry – 20.7%
- Services – 77.7%
Exports of goods and services
If you open an office in the US, how big is the export opportunity and what is the US known for selling overseas?
The export of goods and services is worth around $1.61 trillion to the United States on an annual basis.
The nation’s major exports include agricultural products, aircraft, capital goods, computers, consumer goods, industrial supplies and motor vehicle parts.
Imports of goods and services
Before you target a market to export to it helps to know how receptive the country is likely to be to what you have to offer. So how big an importer is the US and what does it tend to bring in from overseas?
Imports of goods and services cost the US around $2.344 trillion on an annual basis.
The nation’s main imports include agricultural products, capital goods, consumer goods and industrial supplies.
Capital goods are items such as computers, telecommunications equipment, electric power machinery and motor vehicle parts, while consumer goods are items such as clothing, furniture and medicines.
Main trading partners
Which markets are you likely to have access to if you have a base in the US? And which nations are you likely to compete with to export?
The largest trading partners of the US include Canada, China, Mexico, the European Union, Japan, Germany, the United Kingdom, South Korea, Brazil, Saudi Arabia, France, Taiwan, the Netherlands, India, Venezuela and Italy.
Historic exchange rates
Currency exchange is invariably involved when doing business with any foreign nation, which makes having an awareness of the currency market and its movements an important part of maximising profitability.
The currency of the United States is the US Dollar, also known as the ‘Greenback’ or ‘Buck’, and this is the asset you’ll have to deal with when conducting business with or in the US.
The US Dollar (USD) is the world’s most traded currency, typically forming one half of the most popular currency pairs or else being used as an intermediary in triangular currency transfers. The US Dollar is held by almost all of the world’s central banks and acts as the unofficial global reserve currency.
Since the onset of the global economic crisis in 2008, the US Dollar has regularly been sought as a ‘safe-haven’ during periods of particular strife or uncertainty.
Here we look at the way the USD exchange rate has shifted over the past seven years, based on the low struck in each of years listed:
- USD/GBP: 0.4920
- USD/EUR: 0.6287
- USD/GBP: 0.6120
- USD/EUR: 0.6681
- USD/GBP: 0.6146
- USD/EUR: 0.7434
- USD/GBP: 0.5837
- USD/EUR: 0.7206
Property purchase laws
If you’re considering setting up a permanent base in the US it helps to know the property purchase laws first.
While there are some restrictions on the foreign ownership of US real estate, these do vary depending on the state of purchase. There are only minor restrictions placed on Non-Resident Aliens (NRAs) owning real property at a Federal level, however.
The procedure for purchasing both commercial and residential real estate as a NRA depends on not only the state the property resides in, but also the city.
For example, if you were purchasing a property in New York you would work through the following procedure:
- Make an oral offer to your agent. The agent will transmit your offer and let you know if it’s been countered. This dialogue then progresses to forming an agreement on price, closing date etc.
- Once a verbal agreement is in place, the seller’s attorney prepares the contract of sale upon reviewing the following documents: deed, survey, title insurance policy, promissory notes or mortgages, occupancy certificates, tax bills, fuel and utility bills and leases.
- At the same time, your own attorney will investigate the financial condition of the property you’re purchasing.
- This is followed by a review of the contract deed, title search and title insurance policy by your attorney.
- Once your attorney is satisfied and has given the contract of sale to you for approval, you will be allowed to sign the contract and present a deposit (typically 10% of the total purchase price). The contract and deposit are then forwarded to the seller for their own signature.
- An important point to remember is that up until the contract has been signed by all parties, the seller can still accept other offers on the property.
- After this stage, your real estate agent will send you application materials and board requirements (if purchasing in a condominium). On review of your application, approval will be granted and you can move to the closing stages.
- The closing stage of the property purchase process in the US varies according to region, but typically all parties involved in the sale are present (with the meeting usually held at the office of the seller’s attorney) so their identity can be verified and the documents finalised. Money and information is then exchanged, with the various costs incurred throughout the process being met.
As stated above, this example applies to real estate in New York and you may find the process slightly or entirely different depending on which state your property resides in.
If you’re looking to buy property in the US, seek impartial, reputable advice prior to taking any steps.
The US supports a number of diverse industries, including; aerospace, chemicals, consumer goods, electronics, food processing, lumber mining, motor vehicles and telecommunications.
In the last 20 years the number of internet users has increased exponentially. When conducting business dealings while trying to navigate considerable time differences, the internet is a highly valuable resource.
The internet country code for the US is .us, with the nation having an average of 245 million internet users. There are 505 million internet hosts in the US.
Mobile phone users
The level of mobile penetration in a nation is another factor which should be explored before choosing to expand your business’ operations in another country.
The number of landlines in use in the US stands at 139 million, with the number of mobile users coming in at 310 million.
Easy access to airports can be an important consideration when planning business trips to and from the US.
The total number of airports in the US is over 13,500, with more than 5,000 of these having paved runways. With each US state having at least one major airport, travel to the nation is relatively straightforward.
The major mainline passenger US airlines include; Alaska Airlines, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue, Southwest Airlines, Spirit Airlines, United Airlines, US Airways and Virgin America. Envoy Air, Express Jet and Skywest Airlines are all regional airlines.
When searching for flights from the UK to US (or vice versa) Skyscanner can be a valuable resource.
If you’re planning your logistics and where your goods will ship to or from it helps to know where the key trading ports are.
There are a number of major ports in the US; they are listed according to purpose below.
- Cargo Ports: Baton Rouge, Corpus Christi, Hampton Roads, Houston, Long Beach, Los Angeles, New Orleans, New York, Plaquemine, Tampa, Texas City.
- Container Ports: Hampton Roads, Houston, Long Beach, Los Angeles, New York/New Jersey, Oakland, Savannah, Seattle.
- Cruise Departure Ports: Miami, Port Everglades, Port Canaveral, Seattle, Long Beach.
- Oil Terminals: LOOP terminal, Haymark terminal
- LNG Import Terminals: Cove Point, Elba Island, Everett, Freeport, Golden Pass, Hackberry, Lake Charles, Neptune, Northeast Gateway, Pascagoula, Sabine Pass.
- LNG Export Terminals: Kenai
The number of key natural resources which are in abundance in the United States is one of the reasons why the nation has become the world’s largest economy. If your business imports raw materials, these are the ones most commonly sourced from the US.
The nation’s main natural resources include arable land, bauxite, coal, copper, gold, iron, lead, mercury, molybdenum, natural gas, nickel, petroleum, phosphates, potash, rare earth elements, silver, timber, tungsten, uranium and zinc.
If you’d like more information about opening or expanding a business in the US, the UKTI export guides are an industry-recognised and extremely useful resource.