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Taking it South - Expanding Your Canadian Business to the U.S.

The globalization of business is occurring at an unprecedented rate. Focusing a business solely in Canada dramatically limits the size of market a Canadian firm can serve. Wise Canadian business leaders are casting their eyes around the globe searching for growth opportunities.

Why Expand to the U.S.?

Canadian businesses preparing to expand have good reason to rank the U.S. at the top of their prospects list.

Unlike many locations overseas, the U.S. offers the full spectrum of advantages, starting with the most basic – the use of Western business models, English as the first language of business, a democratic and stable political climate, highly developed infrastructure, and quality labour assets. In addition, the current U.S. population of approximately 300 million people offers Canadian businesses access to a market that includes nearly ten times the number of people living in Canada.

Consider also the similarities in consumer-culture between our two countries, our sheer proximity, the unparalleled trade and investor relations that we enjoy, and the choice of expansion to the U.S. becomes clearer.

Canadian companies who’ve already made the move - and ours, Contract Pharmaceuticals Ltd. is just one of many - enthuse about all they have gained. It starts with the instant boost to capacity and capabilities and the elimination of currency exchange risk. Add to the list the enabling of U.S. domestic shipping that US customers frequently request, the appeal of "Made in the U.S.A." labeling which U.S. customers revere and the ability to work with the same regulators as their U.S. customers for production purposes.

Finally, setting up south of the border is becoming vastly more affordable. Across the U.S., well-funded networks have sprung up at the state and municipal levels to ensure Canadian companies tap into the best strategic and cost-saving advice available, early in their decision making.

Together, these factors make the U.S. a winning prospect for Canadian expansion.

Your Step-by-Step Guide to U.S. Expansion

Step 1 – Connect with field experts in the U.S.

I strongly recommend that the first step you take in your expansion plans is to seek the advice of organizations that specialize in helping companies grow their business in the U.S. Throughout the U.S., economic development organizations, Chambers of Commerce and investment networks offer Canadian companies a range of services and frontline expert advice free of charge. Some groups have representatives in Canada who will meet right in your own office, as Buffalo Niagara Enterprise (http://www.buffaloniagara.org/) did for us when we started to think about expanding CPL into New York State. The beauty of this arrangement is that it provides a single point of contact to a roster of experts in every key area imaginable: site selection, HR, accounting, taxation, insurance, legal issues, patents and trademarks, financial services, real estate, utilities, distribution services, exports, and corporate incentives.

These economic development groups also have connections to local agencies, suppliers and customers that can provide insight and advice. For example, by linking us to knowledgeable advisors, we were better apprised of issues related to site selection which ultimately helped us locate a regulatory approved site.

Overall, the economic development organizations like Buffalo Niagara Enterprise save you time and money and help you leverage the U.S. system in your favour while avoiding pitfalls. It’s worth contacting them first.

Step 2 – Structure your company to gain the best tax and financial advantages.

Significant government incentives exist to attract Canadian companies to the U.S.. The way you structure your company - whether as a branch, subsidiary, joint venture, other partnership, or limited liability company (LLC) - will considerably impact the tax incentives to which you may be entitled. Your organizational structure can also impact other forms of financial assistance like capital and training grants and special programs in areas like recycling market assistance.

When you explore your options with a U.S. economic development group, they can recommend a plan of action so you reap the benefits of incentives over time and allocate them in a strategic manner. There are 74 designated Empire Zones in New York State. Buffalo Niagara Enterprise guided us through the entire Empire Zone application process and their assistance gained us substantial savings and access to incentives specific to these zones. The state benefits surprised us - they were far better than we expected. Buffalo Niagara Enterprise also advised us of the incentives available through the local utilities. These incentives helped us to offset some start-up and operating expenses.

Step 3 – Locate in an area that provides your management team easy access.

Whether your business is big or small, the complexity of today’s business requires that your company’s leaders are able to be engaged in a hands-on manner. Critical members of your management team must be able to reach your U.S. site easily and economically to enable the face-to-face coaching, oversight and knowledge exchange that are critical to expansion success. Ultimately, this exchange and in-person oversight ability strengthens both your Canadian and U.S. operations.

Step 4 – Ensure your essential business resources are available now and in the future.

Determine, along with your U.S. economic development contacts, where your transportation, distribution and communications infrastructure requirements are best met, currently and over the long-term. Likewise, conduct due diligence on the initial and continued availability of a quality workforce, so you can mobilize around market trends and focus in on succession planning.

Step 5 – Choose a location your employees will want to call "home".

Employee satisfaction is enhanced when staff can live well where they work. Reduced commute times in growth areas that offer excellent quality-of-life paired with reasonable cost-of-living are preferred. Look for signs of investment in the communities like reputable schools and property development that caters to the full range of singles, couples and families.

Step 6 – Learn from other Canadian companies that have successfully expanded.

Gain insight into the challenges and payoffs of U.S. expansion from Canadians who’ve been through the process. One way to access your fellow Canadians is through the U.S. economic development groups that have advised them.

We are proud of what expansion to the U.S. has achieved for CPL. We have attracted new business into our Buffalo site, from both new and existing customers, and grown employment by over 20% in just two years.

The trend to U.S. expansion certainly did not begin with us, but it is gaining momentum as more and more Canadian companies grow and strengthen their business by looking to the vast U.S. market. In 2007, according to the Regional Institute at the University of Buffalo, nearly 500 companies from Ontario alone are invested in New York State - leading more Canadian companies to naturally query, "So when are we stepping up?".

CPL is a leading manufacturer and packager of prescription and OTC pharmaceutical products.

Article Provided by: John Ross, General Manager, Niagara Operations, Contract Pharmaceuticals Ltd.

For more information visit: www.cplltd.com