Lasse Neumann, Owner of Neumann Consultancy

Starting A Company In The U.S? Great Idea, If You Understand The Particularities Of The U.S. Market

With 325 million consumers, which is four times the population of Germany, and a gross domestic product of 18,558 billion USD, the U.S. offers a prosperous future for companies of all industries. Especially products and know-how “Made in Germany” are still in high demand. Cars from Wolfsburg might not do that great at the moment, but that will change again as well. In recent decades, the traditionally strong German “Mittelstand” in particular developed world leading technologies, which have great potential to generate new sources of income. In spite of these prospects, many entrepreneurs hesitate to set up a business abroad due to risk and uncertainty as well as language barriers and cultural differences.

Once the decision to expand abroad is taken, it is important to adhere to an old German virtue: detailed planning. Is there a demand for the products? And if so, how should you market them? Being successful in the domestic market doesn’t necessarily mean that you will be successful in the U.S. market. An example: The German “Schwarzbrot” in its hundreds of variations isn’t very popular in the U.S. Americans love their white bread. There are some rye versions that are dyed with molasses to look similar, but these breads have nothing to do with the “Schwarzbrot” that we know in Germany. Conducting a thorough research is vital. Once the homework is completed, it’s time to take action. The main focus should be to build a sustainable structure that is in line with the companies’ unique characteristics. Operating in a different cultural and legislative environment is one of the biggest challenges as explained in the following two examples.

The US Labor Market

Firstly the US labor market has its own rules. On the one hand it’s very flexible due to literally non-existing employee protection rights and on the other hand it’s very tricky. The combination of a sub-par educational system and a huge market make it easy to hire hardworking unskilled labor, slaving for minimum wage. When it comes to highly qualified employees, the situation changes. This employee group is far more difficult to recruit and the income is up to 35% more compared to their German colleagues, plus the common yearend bonus. Since 2015 the Midwestern branch of the German Chamber of Commerce is commendably implementing the traditional German dual educational system in cooperation with U.S. companies. This program is called ICATT.

US Law And Attorneys

Secondly there is the topic law and attorneys in the U.S. Legal advice is expensive and fees are much higher than of their German colleagues. When considering doing business or selling a product in the U.S. it’s very important to take all possible precautions to minimize one’s liability exposure, contractual as well as third party liabilities. Whether it makes sense to Europeans or not, everyone has heard at least one story of an American jury awarding a multi-million dollar damages compensation against a company.

The Time Difference

Another challenge is to overcome time and space. Due to the up to nine hour time difference at the West Coast, the German business day might be almost over when the working day in the U.S. begins. Companies with a limited number of employees will not always be able to send managers abroad to set up the new business. Even as we are living in a totally connected world, the personal connection can’t be replaced by emails.

Therefore it is essential to collaborate with a bilingual project manager on site, who knows both worlds and who is capable of managing the market entry in business related and cultural matters.

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Neumann Consultancy from Chicago consults small to mid-sized companies of all industries in regards to setting up a business in the U.S. Together with a network of specialists, Neumann Consultancy is your partner to coordinate a successful start or to support ongoing operations.

In Germany we are cooperating closely with croXXing – International Business Development.

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