Roger Hardy - CEO, Shoes.com/Shoeme.ca
In the 12 months after Shoeme.ca expanded into the U.S. in 2014, our Canadian company grew from a team of 20 people and $8 million in revenue working out of a warehouse in Vancouver to a team of 600 people in four locations across North America earning over $200 million in annual sales. With this expansion, we instantly acquired a massive new customer base, but it also opened us up to volatility and increased competition. Here are three things to consider before expanding your business into the U.S.
Currency: To take advantage of currency volatility, Canadian companies conducting business out of the U.S. must be ready to adapt and disrupt their operations at any time. At Shoes.com we moved our call centre from Seattle to Vancouver, allowing us to find top-tier talent at more cost-effective rates while bringing 100 new jobs to Canada.
People: Recruiting and retaining top technical talent is becoming more difficult in the U.S., particularly in tech hubs like Seattle and Silicon Valley, where competition among tech firms is fierce. At Shoes.com, we designed a strategy that allows us to recruit for senior roles from across North America rather than limiting our reach to Vancouver and Seattle.
Execution: When we bought operations in the U.S., we quickly discovered that speed-of-service expectations are much higher there than they are in Canada. To compete, particularly in a service-based industry, companies need professionals who have won in the U.S. and can do it again.
Wisam Abdulla - CEO, Rise
We’ve spent the last four years building our business exclusively in Canada. This year, we’re finally going to start selling into the U.S. As you can imagine, this has prompted a lot of questions and has also raised some fears.
Are U.S. buyers going to be receptive? Do we need any sort of legal presence? Do we need to show that we have some physical presence? Should we tailor our messaging? What about Canadian spelling on our website and marketing material? What about Canada-only products that we can’t sell in the U.S.? Our website traffic is mostly Canadian; how do we start to change that?
Also, do we need to update our contracts? Do we start charging in U.S. dollars? What about new Canadian customers – do we also charge them in U.S. dollars? Do we even have a U.S. dollar account? How do we open one? Do we need to update our toll-free number? What are the tax implications? Do we have to pay U.S. taxes? Are there other regulatory filing requirements? Should we incorporate in Delaware? Should we start saying “y’all” more?
Unfortunately, the answer to most of those questions is “It depends.” But the most important thing we’ve learned is, despite 1,000 questions, big and small, you just need to get started. The hardest part is overcoming that early Canadian nervousness from the uncertainty. Once you get past that, you’ll quickly realize that our friends to the south are very much like us; they just use fewer u’s.
Dan Roberts - Incorporated partner, Wolrige Mahon
With careful planning, business expansion into the U.S. can be a rewarding experience. Below are factors to consider.
Entity structure: The choice of legal form – operating through a U.S. branch of your Canadian operations or incorporating a U.S. corporation – will depend on the nature of your U.S. business and the extent to which a physical presence is required there.
Legal: Because the U.S. is a litigious marketplace, consider the following.
•Agreements: ensure you have contracts reviewed by both Canadian and U.S. legal counsel.
•Insurance: do you have sufficient and appropriate insurance coverage in place?
•Intellectual property (IP): if your U.S. business involves the use of IP, evaluate whether your IP needs any protection in the U.S.
Tax: The U.S. tax system is complex. Income taxes can be imposed at the federal (Internal Revenue Service) and individual state level. There is no GST/HST in the U.S. Sales tax is determined and collected on a state-by-state basis.
Customs and regulations: If your business will involve importing goods into the U.S., you will need to work with a licensed customs broker to ensure you comply with all your customs obligations.
Visa considerations: If you plan on having Canadian employees visit the U.S. to assist with the expansion, you will need to ensure that work visas are obtained prior to travelling to the U.S.
