It was the playwright George Bernard Shaw who reputedly said: “England and America are two countries separated by a common language.” Despite this, the US is an attractive market for many mid-sized businesses wanting to expand. The country offers several advantages: a skilled workforce, a huge customer base, an entrepreneurial culture and a vibrant investment environment.

Not only that, but the US economy is vast: its gross domestic product was $29.2tn (£23.5tn) in 2024, almost 10 times the size of the UK’s. Make it there and your business is probably on the way to global success.

But these factors belie the difficulties of expanding Stateside. In many ways, what makes the US an attractive market is also what makes it difficult. The market is huge, the workforce demanding, competition high and regulation more complicated.

When expanding to the US, all the same considerations apply as they would in any market. You need to assess the US market fit for your offering, the demand you are likely to see, how to price and market products, and where to sell them. There are also tax, labour, legal, structure and timing implications to consider. Business Leader recently held a Masterclass Live event to help guide our members through expansion across the pond. Here are the five main points to consider:

1. The size of the market

With an economy almost 10 times the size of the UK’s, a population around five times larger and a landmass almost 40 times larger, taking on the US purely from a size point of view is a huge undertaking.

“The biggest thing to understand about the US is how vast it is,” says Steven Cook, non-executive director at the UK homewares company Mrs Alice, which recently entered the US.

“I know that sounds a tad trite, but it is understanding not just the geography but the belts within it that may or may not be for you. It is very different seasonally, markdown cadence is very different across the country, you may not sell regionally in the Bible belt versus the northeast, California may be a key market for you. It is analysing where you’re best suited to get started.”

This, says Cook, is the biggest error UK companies make. Having had success here and possibly even in Europe, they underestimate the vastness of the US and how different each community is. “There are lot of things to consider, but scale is the one that is so important to understand.”

At Mrs Alice, the company researched which markets would suit the product and went to those areas to talk to people who understood it: retailers, suppliers and customers. The business then partnered with key retailers on pop-ups in these locations, which included the Hamptons, Los Angeles, Miami and Dallas.

“You have to go to these markets, speak to people, speak to competitors and visit retailers,” Cook says. “It’s amazing what you get back and the number of people, even through LinkedIn, that will help you if you reach out.”

From there, he advises companies to build a market at a time. And to think beyond the obvious locations such as New York, Los Angeles, San Francisco or Chicago. “Go to secondary and tertiary markets because there is a lot of business to be done.”

2. The cost of hiring

Americans are expensive. The average compensation for a US employee is likely to be between one-and-a-half and three times as much as for a UK-based employee, once pay and benefits are factored in. That might put some off hiring, especially initially. But if you’re expanding to the US, you will probably need to hire Americans.

As Daniel Glazer, London office managing partner at US law firm Wilson Sonsini Goodrich & Rosati, puts it: “Americans like buying from other Americans.”

That makes it important to consider the return on investment of putting people on the ground in the US. Any business expanding there should consider whether this is necessary, or whether they could get the same benefit by having someone in a country with a similar time zone, such as Mexico or Canada.

A few areas where you will probably have to hire locally are sales, business development and marketing – jobs that are public- or customer-facing. These are also expensive roles. As Glazer says, a head of sales in New York could easily cost north of £500,000 a year, which puts off a lot of UK companies. But, he says, the right person can make or break a business.

Compensation packages are often expensive as well. In the US, there is no universal healthcare and so employers are expected to provide insurance, which can cost up to £15,000 per person per year. Americans also typically save for their retirement through a 401k, where an employer matches funds. Options in a business are also more common.

One area you can make some of this back is holiday. In the US, the average worker will have 10 days of paid holiday a year. “Americans may cost more but they will also put in, on average, more hours working for you over the course of the year,” says Glazer.

This can also be used as a competitive advantage in the tight US labour market. Offering a British-style holiday package plus the opportunity to travel to a UK HQ is likely to prove attractive to many.

3. The complexities of hiring

There are as many as four different ways of hiring in the US, all of which have pros and cons. The first is to hire an American directly as an employee through a UK limited company. But Glazer advises not to do that, for tax and liability reasons.

“Your parent company may come up as tax resident in two different geographies and have a direct line of potential liability from the US,” he points out. The second option is to hire contractors directly through a UK company. That is a better option but companies must bear in mind that each state has its own employment rules and its own laws as to what constitutes a contractor and what constitutes an employee.

“The way I describe this employee-contractor distinction is this: if it looks like a duck and it quacks like a duck, it’s a duck, even if you contractually stipulate that it’s a goose,” he says. “You can call someone a contractor in an agreement, but if their actual day-to-day role is that of an employee under that state’s employment rules, they’re likely going to be considered an employee.”

The third option is to use an employer-of-record (EOR) service, which has become increasingly popular in the past few years. This involves a UK company entering into an agreement with an EOR service, which then employs staff for you. This often works well but again can come under scrutiny if it’s clear the staff member is really an employee of the UK. For example, a UK company hiring a US-based CEO through an EOR could be deemed to have created a permanent establishment of the UK company in the US. “The EOR model works very well for the right employees,” says Glazer.

The final way is by setting up a wholly owned Delaware corporation that is a subsidiary of the UK limited company. It can be registered to do business in each state where it has offices or employees, which sees employees then given state-specific employment documents.

“If you hire in New York, you give New York documents; if you hire in California, you give California documents. The tendency might be to just cross out New York and write California, the problem is that is like crossing out France and writing Germany. It doesn’t work because the differences between the US states are sometimes quite substantial.”

4. Setting up a US entity

UK companies can sell remotely almost indefinitely, but if you want boots on the ground, you are likely to need to set up a US subsidiary. In the US, there is no such thing as a “US company” in the same way there are UK limited companies or a German GmbH, so businesses are free to incorporate in any state.

Typically, however, it means setting up a Delaware subsidiary. The state has become the default location because of its business-friendly tax, legal and regulation policies and well-established corporate court system. Plus, advisers from around the US know how to deal with Delaware companies, whereas, for example, an adviser in New York will probably not know how to advise on a company based in California.

“The state that long ago set itself apart as the de facto national company in the US is Delaware,” says Glazer. “The headline takeaway is ‘Delaware reduces friction.’ If you incorporate a subsidiary in a state other than Delaware, you may end up having a fair amount of administrative friction.”

Sometimes, US investors – particularly early-stage investors – will insist on investing in a Delaware corporation, especially if it is not a US-based business. And the earlier stage a company is at, the more likely a US venture capital firm will want to deal with a Delaware company. “Many early-stage US investors do not like taking the corporate governance risk they perceive comes with a non-Delaware corporation,” says Glazer. “From their standpoint, you are introducing friction without any economic upside.”

That often leads to something called the Delaware flip, where a UK limited company does a share-for-share exchange so that the capitalisation table of the UK company becomes the capitalisation table of the Delaware company. That, says Glazer, is time-consuming and expensive – but can be worth it if the deal is good enough.

The likelihood of having to perform such a flip when raising a round led by US-based VC investors is around 80 per cent at the seed-funding stage but drops to about 20 to 25 per cent for Series A funding. Delaware flips for Series B and later funding rounds are relatively rare, according to Glazer.

5. Building a brand

The way that people buy is also vastly different across the country and so are the marketing levers. “A lot of organisations across Europe underestimate what is required [in the US] and what marketing levers will work,” says Oliver Yonchev, founder of the creative studio Cocreatd. “The interesting thing about a brand and reputation is you can be hot in Miami and tacky in LA, that’s the reality.”

That makes building a brand important. It would be easy to pick up some sales just by dint of launching in the US, but those sales need to be sustainable and growth long-lasting. “When you take a scattergun approach to the US, you may get some sales, but you’re not building a brand in that market,” says Cook.

Many companies that go to the US will try to trade on their Britishness. That can certainly work, says Jane Gorley, interim vice-president of digital experience at jewellery brand Pandora, but it can’t be the only point of difference. “Most British businesses have other things to tap into in terms of quality, uniqueness and design aesthetic that can be very appealing to the US market, but it’s about communicating that in a very upfront way.”

Marketing in the US can also be expensive. Typically cost-per-acquisition in digital marketing is higher. “That is certainly my experience,” says Cook. “There is a lot of noise and there’s a lot of segmentation in the market.”