Regardless of whether it is a large company that wants to expand its presence in America, a medium-sized enterprise that wants to create a production site or a start-up that intends to open a representative office in the USA, the choice of the state where to locate its business is one of the critical factors that will determine the success of the project.
Colleagues at Roncucci&Partners North America Inc. recently conducted a qualitative survey of a small sample of interlocutors active in the world’s largest market, both institutional and representative of the business world. The interviews revealed that the wrong choice of the state is one of the main reasons for failure. There is a tendency, in fact, to emphasise the presence of federal, state or local incentives to support our development project in the US market, when the key criteria for choosing the state are inherent in the very nature of our business.
As always, in order to move abroad with awareness and effectiveness, the company must start with itself, its DNA and its business model.
Mr. Eduardo Torres, Director of the South Florida U.S. Export Assistance Center, U.S. department of commerce, interviewed by Roncucci&Partners North America Inc. in this regard, confirms that “Incentives vary depending on the objectives of the state and the priorities given to certain sectors, but there are opportunities for all companies wishing to invest in the U.S. and above all there is the possibility of negotiating support at all levels, federal, state and local communities, to support their development projects. Italian companies,’ continues Mr Torre, ‘should not choose a state based solely on the incentives offered, but should carefully consider a well thought-out site selection that takes into account all relevant business aspects.
So what are the key factors in choosing a state?
There are many key questions to guide our choices, and here we elaborate on a few that we consider particularly relevant.
The answers to these questions can in most cases be found through a lucid internal analysis of the company and a thorough analysis of the target market.
1. Where are your current or potential customers?
Applies equally to B2C end customers as it does to B2B business customers, the distance your customers have to travel to finalise the purchase of your product or service must be minimised and simplified as much as possible in order to increase the chances of success. So an in-depth mapping of the 50 US states aimed at understanding where the largest presence of my interlocutors is located is one of the first steps.
2. Where are your current and potential suppliers?
The supply chain is a key element in the value generation of your business and is subject to major criticalities. For this reason, the presence, quality level and ease of access to suppliers must be carefully considered and analysed in the analysis process prior to site selection.
3. Who are your main competitors and where are they located?
A strong presence of competitors can be a disadvantage in terms of pressure on sales and prices, but also a positive element, because it attracts customers inclined to comparison and choice.
4. What kind of human resources are needed for your business? Does your business sector require special skills?
It is important to verify the presence of qualified human capital suitable for the management of the business you intend to develop. Particular thought must be given to the tools and assets that the company can deploy for the retention of personnel recruited in the United States.
5. What are the operating costs of your business?
These costs do not vary with the amount of products or services sold and include expenses such as building rent, wages of full-time employees, electricity and water bills, and overhead costs. They are essential to keep the business running and cannot be avoided. The costs of doing business are very different in the 50 states and have a significant and not insignificant impact on the profitability of our development project.
6. How do you plan to manage your human resources in the North American office?
Directly in the field independently or with direct reporting from your HQ in Italy? Time zone differences and flight duration will affect you differently, and in the second case you will certainly have to consider a time zone closer to your own.
7. What are the logistics of your business?
How people and products travel, from raw materials to the finished product.
8. Finally, what incentives are there in each state for your company?
The suggestion is to start mapping the opportunities on all selected states through the previous questions and to start the in-depth analysis and negotiation of incentives with at least 3 different states in parallel. The process is rather lengthy and the outcome is not guaranteed. Having two back-ups in case negotiations fall through is a security so that the time invested is not lost and the deal can be finalised.
In conclusion, we can therefore reiterate that relevant business factors, such as proximity to customers, accessibility to suppliers, availability of qualified human resources, operating costs and tax conditions, are some key elements on which to base the choice of state.
Then comes the evaluation of incentives at the federal, state and local county or even city community level. Incentives certainly support the company’s business but they cannot determine it and are not the main critical factor in choosing where to locate one’s business.
At Roncucci&Partners we help companies develop themselves and their business, embrace change and evolve to thrive in a world that is increasingly complicated, insidious and requires great expertise. We do this by applying punctual methods and rigorous strategies, the result of many years of experience and the richness of the numerous success stories we have conducted all over the world. Passion and method are indeed our guides to enhance the present and build the future.