Expanding abroad

What is your budget?

Personnel is more expensive in the US, as is building brand. Ensuring you have sufficient resources set aside will enable you to stay competitive in the fast-paced US market.
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Many founders underestimate how long it will take to establish operations in the US. When planning, many companies found it crucial to have someone dedicated exclusively to the forecasting and due diligence of the US expansion. In a world of high costs, it is also advisable to have a finance person as part of the team, especially if you’ll be managing a P&L in country.

It is not uncommon for companies to spend around 2 years to set up shop in the US properly.

The US employment market for tech-related talent in the large centers is very liquid, and as such employee retention is low and costs are high. For example, In London, a Senior Account Executive might cost you £40-60k ($51.5-77k) base salary, whereas in San Francisco the same person would command a base of $90-120k.

Additionally, it can be hard to attract high quality local talent without local product-market fit validation. That said, hiring from the competition will send a strong market and talent signal and cost you commensurately.

If you build your budget and planning strategy around specific milestones for performance and de-risking, and stick to them, you are likely to invest behind success, and to minimize costly course-corrections.

Budget benchmarks

This is a sampling of what salary and variable compensation could cost you in different geographies, before taxes, healthcare and other benefits, which can be an additional 25% of salary.

For a detailed look at 2018 average salary ranges in sales and marketing in San Francisco, New York, Austin and London, download the Question the Questions report below and check out page 37.

“ Given the amount of cash you can burn with a market at least five times bigger than a European market, higher salaries and more competition, you need to be clinical in execution.” Ian McCaig, Qubit

“ It costs a lot to hire here; a lot more than we assumed. The competition in the industry for talent is fierce, so expect $100k salaries for the best sales people in NYC as the norm. They cover costs if they’re good though.”

What else is in your budget?

A typical US expansion budget includes a number of standard considerations. The cost of each line item exemplified here will vary significantly depending on where you set up the company. There is a trade-off between being downtown in a city (i.e. San Francisco or New York) and saving between 10%-45% on operating overhead costs by being as little as 10-20 miles away: the distance can affect talent attraction and retention, so it’s important to evaluate the talent requirements of your company, and the distribution of the population with the requisite skills for your business.

 

 

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