The US is well known as the land of opportunity. But how to spot and capitalise on that opportunity, while avoiding the pitfalls, is the key to success there.
It's something Louise Kelly, tax partner with Deloitte, is well versed in. Not alone can she help clients looking to establish operations Stateside but she lived there herself, having previously headed up Deloitte's Irish desk in New York.
“The sheer scale of the US market is definitely a huge opportunity for Irish companies and having a US presence can make it easier to access US venture capital too – they like to see a presence there,” she says.
As a result of US tax reforms at the end of 2017, the headline tax rate is down from 35 per cent to 21 per cent “Even though you’ve to pay state taxes on top of that, it means that if you’re a US company making profits, you’ll be paying less tax,” she says.
Ironically, the barriers can look pretty similar. Firstly, there’s the size of the market. “It’s just a huge country so you can find yourself having to do an enormous amount of travel.”
As an unknown entity, your potential US customers like to meet with the chief executive, at least at first. “You can build out a team there after that, but be prepared for the top team to be away and have the resources in place to deal with that,” Kelly says.
Ensuring your US operations share the same culture values as your operations in Ireland may mean sending people on secondment in both directions, again a significant investment.
Beneath the headline tax rate, be prepared for the greater complexity of the tax regimes in the US, both in relation to federal and state tax returns. Be clear about what constitutes a ‘presence’, in operational terms, and make sure all your registrations are in order.
“Get it right from the start,” Kelly says, to avoid getting into trouble with the IRS. “Be aware too of uncertainty around tariffs, which can be introduced with short notice.”
Do your homework. “Enterprise Ireland is a great resource for training and development as well as for help with relationships and introductions, so use those resources. If you supply Irish subsidiaries of US MNCs, leverage those relationships,” she says.
‘Use the diaspora’
Finding the right agents or distributors allows you access to their network. “And make sure to use the diaspora.”
One advantage to dealing in the US is that the dreaded – and resource-wasting – “slow no”, which is such a part of Irish business culture, simply isn’t a feature there. “Americans are typically straight talkers. If something’s not working, they’ll say so quickly,” she says.
When David Walsh set up Carlow-based security services company Netwatch in 2003, he did so with the US as his intended first export market. "Netwatch is a high-value proposition with a strong customer service ethic which we felt would suit the US." That subsequently proved to be the case, but it took him until 2011 to fully launch there.
“From day one we had said we wanted to go to the US rather than the UK but like so many Irish businesses, you end up in the UK first. It happened that we had Irish clients with UK operations, and we piggybacked on those.”
Netwatch also built up a client base in Africa and Europe, but kept the US in its sights. Before officially launching there, the company had to prepare. This saw it build an R&D lab to supercharge innovation, such as the ability to provide a smart system for remote video surveillance. Then it changed its business model and stopped charging customer for security equipment and started offering a managed security service instead.
Next it beefed up its board, appointing former Boston police commissioner Kathleen O’Toole. “Kathleen gave us credibility. No matter how big you are in Ireland, it means nothing there. To them you’re just starting out.”
It launched in Boston too, to make the most of that city’s traditional Irish connections, with then taoiseach Enda Kenny doing the honours, and very quickly won major clients such as Massachusetts General Hospital and MIT.
Today, it has offices all over the US and employs 300 people there – almost one-third more than it employs at home.
Be aware that the 50 states have their own nuances, Walsh advises. “The culture in the east coast is different to that in the west coast which is different again in the south. You have to position your product so that it aligns with each.”
Getting your marketing right is vital. “You can have the best product in the world but you still need to have the right marketing and PR to make it happen,” he says.
Play the Irish card
Play the Irish card but be aware that “it opens doors but it doesn’t close deals”, he says. And keep your focus laser-sharp. “In Ireland, you can be all things to all people. In the US, the narrower the focus, the greater the opportunity.”
The US has proven to be the land of opportunity for healthcare services provider RelateCare too. In fact, the business first began as a joint venture between leading US healthcare provider Cleveland Clinic and experienced Irish business process outsourcing company Rigneydolphin.
In 2009, a team from Rigneydolphin travelled to Cleveland Clinic to take a look at its patient communication models and to carry out a ‘Current State Assessment’ report. The findings of this report formed the basis for a vision of a new patient communication model.
“So impressed were they by our findings that we began working with Cleveland to help them create a brand new, state-of-the-art centralised model of patient access,” says RelateCare chief executive Conor O’Byrne.
The proposed ‘Access to Care’ centre aimed to be the nerve centre of the organisation, where almost all patient communication across the system would take place.
The subsequent success of the centralised ‘Access to Care’ centre resulted in other US healthcare organisations turning to Cleveland Clinic to request help building out similar models.
“Both Rigneydolphin and the Cleveland Clinic identified an opportunity to offer the combined call centre knowledge of Rigneydolphin and the world-renowned healthcare expertise of Cleveland Clinic as a bespoke service offering to the marketplace,” he says.
While Cleveland Clinic no longer has a stake in RelateCare’s ownership structure, a positive working relationship remains.
“So in terms of strategy, we were able to leverage the success of our work with Cleveland Clinic and its world-class healthcare brand to offer similar services to healthcare systems across the US. We were fortunate to have developed such a strong partnership with a leading organisation like Cleveland Clinic and this allowed us to enter the US market from a relatively strong position,” O’Byrne says.
“In many ways, both the US and Ireland are very similar, with both countries having a high work ethic. Irish people are, however, probably a little more laid-back when it comes to work instructions and clarity of role. This has meant we have had to adapt our on-boarding and training process to suit the different styles in the US and Ireland,” says O’Byrne.
“Also, each culture varies in the ways in which to keep employees motivated and enthused. For example, in Ireland there is a strong emphasis on the ‘social outlet’ side of work, whereas this is less of an emphasis in the US.”
His primary advice for businesses looking to succeed in the US is to really commit to it. “It’s not something you can half do so engagement with local agencies and organisations like Enterprise Ireland and the American Chamber of Commerce is encouraged. Planning appropriately in the beginning so that you have the time, resources, and energy to stay in it for the long haul is really essential given the size of the market, the complexity of regulations and the long sales cycle. However, if companies do go for it and are committed they can really reap the rewards,” says O’Byrne.
Taxing matters
“Any business looking to expand overseas will look at its commercials first and how it structures that overseas business second, that’s just the nature of business. However, when you are expanding into the US, how you set yourself up from day one is key because it can have a huge impact on the way you are going to pay tax going forward,” says Peter Reilly, tax partner and policy leader at PwC.
Including state, federal and local taxes, you could be looking at a tax rate of about 26 per cent, compared with an Irish tax rate of 12.5 per cent. “So being able to maximise the amount of profits you can tax in Ireland is important. But, in doing that, you have to set yourself up in such a way the Irish part of the group is making the main decisions and you have to get your transfer pricing correct at the beginning.”
Be aware of US anti-avoidance rules BEAT (base erosion and anti-abuse tax) and know not just what the varying state taxes are, but whether there are also varying regulations from state to state if you are operating in a regulated industry. “You may need to tweak your product from state to state, which is something Irish companies are often unaware of going in. Getting it right from the beginning will save you a lot of money down the line,” says Reilly.
