What Canadian businesses need to know about expanding into the U.S.

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Now is the time for Canadian small-and-medium sized enterprises to start exporting to a strong U.S. market, says Jim Shenkman, advisor at Toronto’s MaRs, and also an early stage angel investor, event planner and former publisher.

The proof is in the numbers. Canadian exports rose 5.7 per cent over 2014, says the recent annual report from Economic Development Canada (EDC), yet just four per cent of Canadian companies export their goods and services.

“The U.S. market is firing on all cylinders. To avoid doing that with all of your resources isn’t just a shame, it’s a lost opportunity,” added Shenkman, President and CEO of Bivio Events Inc.

With the American economy back on its feet, and the Canadian dollar dropping and thus driving exports, along with falling oil prices, the stars align for opportunities, he says.

Shenkman, who launched and subsequently sold five trade publications, began with five employees and developed the majority of the company’s revenues from the United States and other global markets.

“What can trip you up,” says Shenkman of US ventures, “are cultural differences.”

Americans, for example have a different way of doing business; New York City negotiating varies heavily from Montana’s, he explains.

“Even a way that an American lawyer may be pushy, and a Canadian lawyer might just be looking for a better deal. There are also regional differences that can trip you up; compliance, agents and distributors.”

Challenges to B2Bs in a new American arena, he maintains, also include: being prepared for the amount of regulation and reporting requirements that some states, complying with restrictions and reporting requirements for goods shipped to the U.S.; understanding any visa requirements for Canadian-based employees traveling to the U.S. for sales, installation, service, training, and other purposes.

“Obviously, there are risks, costs, and competition to be taken into account. But with the right strategic decisions and sufficient financing, the rewards can be immense.”

A small company could try penetrating the U.S. on its own, or it might be better advised to seek partners, but that decision may be influenced by the size of the business, the expertise of current management, and financial resources, according to Shenkman.

Contrary to popular belief, tax breaks are not among the most important factors in deciding whether or not to expand in the USA.

And while many are taking their start ups to Silicon Valley, Shenkman encourages looking at the broader picture of opportunities.

Jim Shenkman
Jim Shenkman

“Silicon Valley is probably not over-hyped, especially for early-stage technology companies that will be looking for additional venture capital financing. However, there are other urban centres of technology centres which might provide excellent alternatives.”

In the spirit of understanding what it takes to move into the US market, Shenkman is organizing the Expand in the USA conference in the Toronto-area, June 16 to 17, bringing together more than 400 Canadian SMEs, investors, lenders and experts.

Stephen Granovsky, one of the keynote speakers, is the CEO and principal of Grano Retail Holdings, whose aim is to acquire merchandising businesses with significant turnaround or growth opportunities.

Granovsky is currently also CEO of Luxury Men’s Apparel Group, a Grano portfolio company that owns Samuelsohn in Montreal, and Hickey Freeman in Rochester, New York.

Since the initial acquisition under Luxury Men’s Apparel Group, it has grown almost fivefold and is now the largest manufacturer of luxury tailored clothing in North America.

“It has come because our strategy has expanded in the US – from an independent customer base, to major department stores: Nordstrom and Sacks Fifth Avenue, and Neeman Marcus,” says Granovsky.

“We have wholesalers selling to retailers; and unprecedented, relatively unknown brands taken to major outlets. We went through a lot of growing pains, especially the currency change in the US dollar. That huge sales growth is now good profit growth.”

Five years after the Samuelsohn acquisition, the tailored clothing corporation that makes pants, sports jackets and suits, now employs 500 in Montréal and 500 in Rochester, New York, according to Granovsky.

For the B2B business, he advises, the secret to success is a combination of factors that work in tandem.

“For us, it was having a strong point of view on our brand, and partnering with the right retailer, as the most important part of our success. We were laser-focused on our consumers, and who is walking into our retail stores.”

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