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Golden rules for doing business in the USA

Apr 08

WHAT DO INDIAN COMPANIES LOOK FOR, WHEN DECIDING TO ENTER THE US MARKET?

Having spent a good amount of time interacting with many Indian business leaders, we’ve realized that there are common top items on any Indian company’s wish-list when considering investing in the US.

The Wish List

  • Access to US markets (Federal/State/Commercial)
  • Business environment and Quick time-to-market
  • Access to qualified Partners (Technology, Systems Integrators, Defence Contractors, Life Sciences, etc)
  • Highly skilled workforce
  • Business and Professional services
  • Business friendly government, competitive taxes, dynamic entrepreneurial community
  • Excellent transport connectivity : Air, Rail, Road, Sea
  • Easy access to commercial real estate
  • Quality of Life: Healthcare, Education, Leisure, others
  • Local community of Indians

The underlying motivations behind the above wish-list are:

  • Access to high-growth markets
  • Technology & knowledge
  • Economies of size & scale of operations
  • Tap global natural resources
  • Leverage International brand names

There are several essential considerations any Indian high-tech companies (large or small) need to make before taking that all important step of setting up shop in the US.

Part I – Prepare for your move to the USA

For most high-tech companies the decision whether to expand to the US will be one of the toughest they will have to make.

This step is crucial if a company – Biotech, Aerospace, IT, Telecommunications or the Internet industry – has plans to conquer the North- American (and other global) markets.

But it will involve considerable effort and money to establish a US branch – and if this fails it can be ruinous for a company.

So the first recommendation is: Take your time. Collect all necessary information and look to establish as many contacts on the ground at an early stage. High-tech companies that have successfully established branches in the US report that it took them a few months of careful preparation.

Here are four critical questions to be addressed at the outset:

  • What is the market for your products and services in the US? Who are your competitors and what advantage does your product/solution have over theirs?
  • Is there a real, not merely perceived, need for your products and services?
  • What resources do you need to ensure success in the competitive US market?
  • How much can you realistically outlay to set up a US branch bearing in mind your expected ROI? Is there a partner organisation that can assist you in market entry?

Part II – Choosing your preferred US location

To find the best place for your particular company consider the following items:

  • Availability of high-speed Internet access as well as the degree of fibre-optical networking within the region and its buildings;
  • Availability of well-educated employees with expertise and skills in IT, telecommunications and Internet-related fields;
  • The presence of top companies in your industry (e.g. for partnership and alliances);
  • Availability of high-class office space;
  • The general importance of the region for venture capital (if needed);
  • Flight distance and time difference to India;
  • Look at the wider location. The perfect office can mean very little if the overall quality of life in the district is poor. Climate, education, recreation, safety and healthcare are just some of the considerations that should be taken into account;
  • Availability of a highly qualified, professional economic development group that can assist with market entry and negotiate financial incentives.

Part III – Decide your Business and Private Banking needs early

Few Indian business people might be aware that it can be extremely difficult to find a US bank willing to provide a business and/or private account (not to mention a credit card). Since stringent US laws concerning money laundering were introduced some years ago, US banks only accept clients from foreign countries if they are convinced they are absolutely ‘clean’. Following are three strong recommendations to follow when establishing links with a bank in the US:

  • Open an account at a branch of a US bank in India very early in your planning stages (at least two years before your planned move if possible).
  • Again if possible, duplicate your efforts with more than a single US bank.
  • Whichever bank you finally decide to use, ask the Indian manager to write a letter of recommendation to his counterpart at the branch in the location you plan to move to. It cannot be overstressed how important this step is – it can greatly speed up the process. Indeed, this applies also to opening a private account and to making arrangements for credit cards.

Part IV – Arrange Legal and Accounting requirements in advance

If you are expanding into the US, it would be wise not to rely entirely on your Indian experience as the US situation is not the same.

In the United States contracts are extensive; far more detailed than you might be accustomed to in your home base. And the laws are very different as well.

This is why you need to consult a US lawyer even before you make the move across the globe. Some US law firms have branches in India where you can make personal contact; some have helpful websites where you can get e-mail addresses to get in contact. Still others can be reached through your local Chamber of Commerce.

Once again, it is strongly recommended that you pay a visit to the lawyer of your choice in the preliminary stages of your plans to discuss important matters such as:

  • Visas for all employees of your company that will be going to the US (consider carefully how long they will be staying there)
  • Renting or leasing contracts;
  • Hiring contracts;
  • Service contracts;
  • Patents;
  • Warranty and related legal aspects.

The same principle applies to pertinent issues surrounding your accounting requirements.

You need to identify a suitable accounting company in advance; if you do not there is every chance you might encounter serious tax hurdles that could seriously hinder your move. A good accounting company is important for all payroll-related issues.

Part V – Identify Suitable Office Space

Office rental varies considerably depending on location. Prices can differ by a factor of up to three.

It is also worth bearing in mind that the amount of available office space can be limited depending on location, and this can involve huge security payments to landlords, even as much as a one or two years rent.

The owners of office buildings tend to look favourably on companies wanting to lease large space rather than simply one or two smaller offices. So finding office space for a start-up team of five to 10 employees can be time consuming and anything but simple.

Therefore, the following recommendations should be noted carefully:

  • If you need a rather small area of office space, rather than beginning with your very own individual but tiny office accommodation, consider sub-letting from a bigger tenant;
  • If your company is a high-tech start-up, give serious thought to the advantages of establishing your first offices within an incubator (which would bring additional benefits such as comprehensive office services or centre management, access to venture capital, legal and accountancy advice, contact with potential customers and partners);
  • Try to avoid long-term leasing (sometime contracts offered cover five or even 10 years);
  • Consider serviced office accommodation. Although expensive, it can be cheaper and quicker to obtain when compared with the cost and effort required in doing it all yourself;
  • Consult reputable real estate agents/brokers in your region of choice and compare services and offerings very carefully.

The author, Siddharth Sarawgi, is the founder Director and CEO of Innoversant Solutions Pvt Ltd (www.innoversant.com) – a management consulting firm head-quartered in Bangalore.

He can be reached at Sid@Innoversant.com

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