Expanding Your Business in the U.S.

Your Entry & Expansion Kit

This Kit is not intended to be, and does not constitute, legal advice with respect to the matters discussed and should not be relied on as such. It is, by its nature, general in scope. An attorney, CPA and other professionals should be consulted regarding the legal, financial and other implications of any particular facts or circumstances.

Introduction

What help do you need to succeed in the U.S.?

Strategy

Marketing

Sales

Distribution

Development

Production

Customer Support (Technical, Billing, etc.)

Legal (Entity Establishment, Contracts, etc.)

Regulatory (Licensing, Taxes, Customs, etc.)

Funding

Financial

M&A

Staffing

Project Management

The U.S. market is a large, vibrant and exciting opportunity for you. It is a complex marketing, operating and legal environment you must understand well to succeed. This Kit provides a framework for and information about successfully entering and expanding your business in the US. It guides you through planning and implementing the elements of establishing and doing business in the U.S. You know that this work is challenging. This Kit, however, helps streamline your work. This framework encourages top to bottom thinking about your business to ensure your actions support a strategy that is clear and attainable. It helps in iterating your plans from strategy to implementation projects and back to strategy resulting in cohesive, consistent and continuously improving plans. Non-US companies operating in the United States encounter numerous business, legal and regulatory issues. Anticipating and dealing appropriately with those issues can improve significantly the success of your operations. The Kit identifies and discusses the issues commonly faced by foreign companies commencing operations in the United States. It also serves as a helpful checklist and monitoring tool for foreign companies already operating in the United States or considering expansion of those operations.

Making the Choice to Enter the U.S.

Making the choice to enter the U.S. is easy. But, committing to make it successful requires thoughtful determination, a willingness to learn, and application of frequent, perfection analysis and follow-up correction of critical business strategies and tactics in order to avoid disappointing results and failure. No two states are alike. Every state has different business laws, cultures, regulations and economic conditions that shape the development of a business. Marquis' first responsibility is to understand your country and business culture. Next, our job is to enable you to learn how to understand the major and minor differences in the U.S. To accomplish that we engage with your management to collaborate in planning, execution and take responsibility, with management, for the outcomes.

Whom We Have Worked With

In 1993, founder of Marquis, Steve Anderson, was engaged by Silicon Valley Bank during an organizational restructuring with multiple assignments over nearly 2 years in the professional and shareholder investment world; sustaining customer confidence; applying TQM throughout the bank and building employee culture strengthening. For the next 25 years, his firm has introduced many non-U.S. firms to a path of success in the U.S. starting with an Australian biotech firm traded on both the Australian stock exchange and on the U.S. Nasdaq, as well as a heavy run on IPOs in the late 1990s. Clients have come from Singapore, Australia, New Zealand, Indonesia, and Europe as well as the U.S.

How We Work

Marquis Advisory is the partner who helps you succeed. Our accomplishments with others over 24 years is evidence for the trust you can have in our capabilities and commitment to your success. Marquis resources are wide and deep, internationally through its affiliations with firms with significant professional skills in Spain, Australia, France, and an Advisory Board of professionals in e-commerce, M & A, Marketing, AI analysis in finance, and technology management. All at your disposal. We engage with the objective of a long-term relationship that takes Marquis and its clients from first step on U.S. shores until it becomes a stand-alone success differentiating from its competition in key ways that provide customers with increased ROI. Marquis works with you through an initial three-month engagement. During these three months, we jointly review and develop your comprehensive plan for the U.S. We also focus effort on the specific areas of your plan and its implementation that need the most work. Before the end of this initial three-month engagement, we mutually determine additional work by Marquis that will be valuable for you. Month One - Assess major problems. Month Two - Activate solutions. Month Three - Continue solution activation, and assess if we, collaboratively, are on the right track. And if not, what else needs to be done.

1. Plan

Use this section to provide a concise summary of your entire plan. This summary includes a very brief high-level description of each of the major elements of your planning as outlined in the table of contents. This section tells your high level “story” and provides an easy and quick understanding of your plans by your staff, investors and others who may need to know it.

2. Principles

Describe the two to three key principles by which you run your business. This description provides clarity for everyone in your business about these principles with which you operate. Example: a) Trust in every way is the essential principle. The greater the mutual trust, more worthwhile the relationship. Can you trust me and can I trust you to: • Understand that individual self-interest is best served by serving the self-interest of others (as they define their self-interest) and act on that understanding • Continuously improve individual professional and interpersonal competency b) Success is dependent 80% on good relationships and 20% on the best tools and techniques

3. Prospects

Identify the types of business segments and Prospects within those segments who have the applications for which your products can be used. Determine who, in general, are the influencers and decision makers (e.g., engineers, purchasing managers, CFO’s, CEOs) for your Products with Prospects in your business segments. Then identify those specific individuals and their contact information for your target Prospects. Maintain that information in your marketing database. Determine the mix of smaller and larger Prospects that you want to target. Smaller Prospects often have shorter sales cycles and the influencers and decisions makers are easier to identify than with larger Prospects. Larger Prospects, however, can mean larger sales opportunities. 7 Channel partners can be valuable for marketing, distributing and supporting your products in the U.S. Large channel partners (sometimes called master agents) serve smaller distributors. Working with master agents can give you access to a large number of distributors without having to deal individually with each of the small distributors. Channel partners must be marketed to and supported similar to end user Prospects but in a somewhat different manner. Working with channel partners should not be an afterthought but a thoughtful wellsupported effort. Information is provided in the Promotion section (section 8) about how to identify and market to your target Prospects.

4. Places

Given the requirements to market, deliver and support your products, determine the states and cities in the U.S. where you want to offer your products. You may find it best to phase in additional locations over time as you expand your presence in the U.S. Considerations that may affect your geographical focus include:

  •  Concentration of Prospects

  • Practical locations for your business in the U.S.

  • Locations of key channel partners

  • Locations of suppliers

  • Taxation

  • Regulatory requirements

  • Personal preferences

Understand the value you can obtain by selecting lesser known regions that have vitality and resources you need, and additional operational benefits that are not apparent. Silicon Valley or Boston or Austin Texas, etc. may not necessarily be your "must have" locations. Consider other locations throughout the United States where there is less competition for everything from office and other space to professional resources to cost of living and operations. Within those regions select the types of retail and wholesale distribution affiliates you will use in addition to your internal distribution capabilities.

5. Providers

Providers include your competitors in the U.S. market. Identify the strengths and weaknesses of your key competitors. Describe the capabilities of their products, support and other relevant aspects of their business. The description of each key competitor’s capabilities should include:

  • Marketing message

  • Product features and customer benefits

  • Pricing structure and levels

  • Customer support

  • Customer experience (end to end)

  • Locations

  • Organization and staffing

  • Financial position

Then compare each key competitor to your strengths and weaknesses. Describe how your strengths can be of more relative value for a customer. These advantages will be part of the basis for your marketing and selling.

6. Products

Describe your Products in terms of the customer problems that they solve and other benefits the products offer. Identify how the Product features and other capabilities directly contribute to those solutions and benefits. Include a description of how your products are used by an end user. Indicate why your product is easy to use and how their ease of use is superior to the use of other Providers’ Products.

7. Pricing

Establish your Pricing strategy. Are you priced versus your competitors at a premium, the same or as a discount to the typical industry price level? Determine your pricing structure and levels including any discounts. Include non-recurring and recurring charges. Does your pricing strategy and include aspects such as “anchor” pricing (seed desired price with a larger number), “charm” pricing (ending in “9”), “Freemiums” (free alternatives or free trials), straightforward simple Pricing (may match a message to customers of your offerings being simple)? Describe how your pricing structure and levels compare to those of other Providers with which you compete. Indicate the advantages of your pricing structure. Will you provide financing for customers? Define any Pricing experimentation you plan to conduct. Following is one example of a Pricing experiment:  

  •  3 different plans/packages; intention is to sell the middle one.

  • The first plan is a decoy. It’s similar to the middle plan, but offers less value while costing almost as much.

  • Second plan, the one you want to sell, offers good value for money. The price ends with 9. Shows it has been reduced from a previously higher price .

  • Third plan is to serve as a contrast to the middle one, it is a high figure as an anchor. It is much more expensive than the middle plan. You don’t actually intend to sell it, but make sure you can actually deliver on it if someone purchases it.

8. Promotion

Effectively marketing your business is your biggest challenge in the U.S. The average person in the U.S. is bombarded with more than 5000 marketing messages per day. For your business message to break through that clutter, you must consistently apply principles of effective marketing and sales to the following:

A. Marketing Message

B. Collateral

C. Web & Social Media Marketing

D. Advertising

E. Direct Sales

F. Channel Partners

G. Events

H. Affinity

I. Referral

A. Marketing Message

Purpose • Master Message documentation (with variations for targeted segments/channels) • Using document content, source the messaging content for customer touch points (sales scripts, product sheets, web site, blogs, etc.) • Document is not static, takes feedback from market/customers and evolves The message is essential • It defines the business inside and outside • It takes effort and time to create it well using key principles The goal of your message is to help you: Separate yourself from your competition … and then eliminate them as a choice in your prospective customers’ minds Example – Search Engines Market Share 1998 2013 Alta Vista #1 Defunct Google Unborn #1 Google now has a dominant 85% market share

Effective marketing is based on proven principles Following these principles and methods does not guarantee success but significantly increases the probability of success … and provides a framework to adjust the message going forward in a controlled manner. Most marketing is based on puffery, platitudes and price cutting and leaves the prospects frustrated and unable to make an informed purchase decision. They instead decide solely based on price or recommendations from others. Good marketing educates the prospects and leads them to an informed decision. The provider that helps inform the customer typically is viewed by the prospect as more valuable than other providers. Other providers could inform, but don’t. The prospect is led to the conclusion that he/she should buy from you. Develop the message until you would rate it at least an 8 out of 10 in effectiveness. Remember that for any claim, the prospect probably is thinking: “prove it”. These principles help you break through the marketing message clutter and have your message heard.

1) Have something good to say Your Products, Processes and Platforms have the functionality and capacity to separate your business from your competition and eliminate them as a choice in the minds of your prospects. Don’t waste your money on marketing until these things are in place. 2) Say it well Using the following framework a) Interrupt (with something familiar and/or problematic. Clever if possible, but clever is not easy to do well and is not essential) b) Engage (with the promise of info to follow that’s valuable to the prospect) c) Educate (deliver the info that truly is valuable to the prospect … including real evidence to support your claims) d) Offer (low risk next step in the buying process) Ensure the message responds to the key interest (aka “hot buttons”) of the decision makers. You have about one second to Interrupt and then another second to Engage a prospect. If you deliver in a useful way valuable information promised in the Engage claim, a real prospect likely will spend as much time as needed to absorb the Educate and Offer portions of your message.

3) Say it often The average prospects must see a message 8 to 15 times before they become fully aware of it. Only 1% to 2% are ready to buy when they do become aware … so, continue communicating your message until they are ready to buy and then at that time think of you as their most logical choice. Frequently communicate valuable information to each prospect until they are ready to buy. Then they will remember you and consider you as their best choice. Use message plus comprehensive disciplined marketing and sales tactics to separate you from competitors

10. Processes, Platforms & Partners

Outline your plans for the following Processes and the Platforms you use and Partners you work with to help operate your Processes. Enterprise Management • Strategic and Operational Planning • Organization, Human Resources, Compensation, Incentives • Accounting, Financial, Insurance, Tax, Banking • Legal, Regulatory, Intellectual Property • Reporting: Operational, Financial, Management Dashboard • Portfolio, Programs and Projects Management Consolidated list (Portfolio) of Programs and Projects tracked against development stages Clear leads, team members and responsibilities for each Program and Project Marketing & Product Management • Maintain a prospect and customer database • Evaluate results of customer and prospect surveys to identify opportunities for improvement of customer experience. • Maintain marketing and sales tools as needed: Marketing message at 3 levels of detail … including hard “evidence” to support claims 10 to 30 second verbal message Curated valuable information Case studies Product information sheets Web site/SEO/SEM Social media: LinkedIn; Facebook; YouTube Email marketing (with information valuable to prospects) Maintain personal contact with key prospects (offer new valuable information) Industry events Partners • Maintain information on competitive pricing • Prospect data • Leads to sales • Direct Mail • Email marketing • Digital marketing: Web. SEO. SEM. • Online orders • Direct Sales • Inside sales (inbound; outbound) • Channel Partners • Customer Relationship Management (CRM)

Design & Development • For U.S. specific product design and development • Coordination between U.S. and non-U.S. development organizations. • Any U.S.-specific standards and other requirements that should be observed. For example, The American National Standards Institute (ANSI) is a private non-profit organization that oversees the development of voluntary consensus standards for products, services, processes, systems, and personnel in the United States. The organization also coordinates U.S. standards with international standards so that American products can be used worldwide. Procurement & Production • Importing logistics • Owned or contracted production in U.S. • Sources of materials and parts • Regulatory considerations (e.g., Importing; U.S. Occupational Safety and Health Administration) Ordering & Fulfillment • Order processing • Shipment • Installation • Testing • On-site user training • User acceptance • Channel: retailers, wholesalers, distributors, brokers • Financing logistics: internal, letters of credit, factoring, consignment, open accounts, etc. Assurance • Proactive monitoring and repair • Customer support Billing & Collection • Consistent with pricing and other terms and conditions • In-house or 3rd party provided Product Utilization • User documentation (in US standard English; and in Spanish as needed) • Continuous improvement

Infrastructure Management • Systems • Facilities • Vehicles IT platforms can have significant impact on customer and employee experience and performance which translates into business growth. The optimum balance of manual, mechanized (Platform) and outsourced (Partners) Processes is one key to a successful enterprise. Mid-market companies tend to be IT resource limited compared to large businesses and so have different IT-related requirements to consider (e.g., mids cannot afford custom coding for unique applications). Unfortunately, even the best existing commercial off the shelf options for midmarket IT platforms have deficiencies. Allocate sufficient time and resources to optimizing your plans for and selection of IT platforms. Many Providers in the U.S. utilize Agile and Lean methods in their organizations to improve their performance and competitiveness. In general, your Processes are more effective when they are both Agile and Lean. Agile Agile management is an approach under which requirements and solutions evolve through the collaborative effort of self-organizing and cross-functional teams and their customer(s)/end users(s). It includes adaptive planning, evolutionary development, early delivery, and continual improvement, and it encourages rapid and flexible response to change. Emphasize the following: • Individuals and interactions over processes and tools • Working products over comprehensive documentation • Customer collaboration over contract negotiation • Responding to change over following a plan Tools and processes are important, but it is more important to have competent people working together effectively. Good documentation is useful in helping people to understand how the product is built and how to use it, but the main point of development is to create the product, not documentation. A contract is important but is no substitute for working closely with customers to discover what they need.

A project plan is important, but it must not be too rigid to accommodate changes in technology or the environment, stakeholders' priorities, and people's understanding of the problem and its solution. Agile methods focus on: • Customer satisfaction by early and continuous demonstration of progress • Welcome changing requirements, even in late development • Close, daily cooperation between business people and developers • Projects are built around motivated individuals, who are trusted • Face-to-face conversation is the best form of communication • Working product is the primary measure of progress • Sustainable development, able to maintain a constant pace • Continuous attention to technical excellence and good design • Simplicity—the art of maximizing the amount of work not done—is essential • Best requirements and designs emerge from self-organizing teams • Regularly, the team reflects on how to become more effective, and adjusts accordingly Break product development work into small increments that minimize the amount of up-front planning and design. Iterations, or sprints, are short time frames that typically last from one to four weeks. Each iteration involves a cross-functional team working in all functions: planning, analysis, design, production, unit testing, and acceptance testing. At the end of the iteration a working product is demonstrated to stakeholders. This minimizes overall risk and allows the product to adapt to changes quickly. Project information is readily available to the development team. In a brief session, team members report to each other what they did the previous day toward their team's iteration goal, what they intend to do today toward the goal, and any roadblocks or impediments they can see. Lean Lean operation is a systematic method for waste minimization within a Process without sacrificing productivity. Lean also considers waste created through overburden and waste created through unevenness in workloads. Working from the perspective of the client who consumes a product or service, "value" is any action or process that a customer would be willing to pay for. Lean implementation emphasizes the importance of optimizing work flow through strategic operational procedures while minimizing waste and being adaptable. Lean aims to enhance productivity by simplifying the operational structure enough to understand, perform and manage the work environment. Lean operation makes obvious what adds value, by reducing everything else (which is not adding value). Its focus is on reduction of waste to improve overall customer value. Improving the "flow" or smoothness of work is key, thereby steadily eliminating unevenness through the system and not upon 'waste reduction' per se. Two pillar concepts: are Just-in-time (JIT) or "flow", and "autonomation" (smart automation). All work is highly specified as to content, sequence, timing, and outcome. The pathway for every product and service is simple and direct. Every customer-supplier connection is direct, and there is an unambiguous yes or no way to send requests and receive responses.

11. Public Policy

All legal matters in the U.S. should have the advice and counsel of an attorney.

In the U.S., laws exist at the national (federal), state and local government levels.

To do business in the U.S. you will register in one of the 50 states. Your state of registration should

consider registration requirements, established commercial law, taxation, physical locations of your

business, and personal preferences.

If you have intellectual property, it should be protected for application in the U.S.

You will need to understand (with qualified assistance) and comply with laws and regulations (such as

the Uniform Commercial Code – UCC; Contracts for the International Sale of Goods - CISG; antitrust;

property) administered by agencies including:

• Federal Trade Commission (FTC)

• Food and Drug Administration (FDA)

• Customs and Border Patrol (CBP)

Consider each of the following that apply as you plan for doing business in the U.S.

• Entity Selection, Formation and Operation

• Taxation of United States Operations

• Regulation of Foreign Companies

• Sales Representatives and Agents

• Labor & Employment Law (Federal and State)

• Immigration Law

• Contracts

• United States Business Acquisitions

• United States Joint Ventures

• Customs, Duty and Tariffs

• Protection of Intellectual Property

• Antitrust

• Owning and Leasing Facilities in the U.S.

• Parties to the Convention on Contracts for the International Sale of Goods

• Advertising Laws and Regulations

Appendix A provides an outline of the steps required to form a Corporation legal entity or a Limited Liability Corporation (LLC) legal entity in the U.S.

12. People

Establish and organization in the U.S. that understands the local culture and can operate with the independence to be flexible and effective while maintaining good communications with your main headquarters. Decide if you want to initiate operation in the U.S. with permanent employees, contractors, representatives, consultants, professional services firms, etc.. Understand your legal obligations for each type of team member. Determine your compensation plan including any incentives (commissions, bonuses, equity, stock options, etc.) Engage recruiters and/or on-line employment resources as early as possible to begin assembling a group of good candidates for your U.S. team. U.S. worker typically are responsible and hard-working; in return, they want to feel they are a full member of your team. Outline your actions to keep them informed and recognize them for their contributions to your enterprise. Most employees in the U.S. should speak understandable English and, in some cases, Spanish. People in the U.S. tend to be very tolerant of non-standard accents but less tolerant of speech that is difficult to understand. Your sales team is vital for your success. Following are general criteria for hiring and nurturing your highperformance sales team. • Hire slow, fire fast: Most sales candidates look like aces on their resumes; after all, selling is what they do. Look for people who are experienced but coachable, listen well, work hard, can demonstrate their selling ability, have a track record you can verify, and have some product knowledge. People buy from people they like and trust (trust in the broadest sense). Would you buy something from your candidate? Not all sales hires work out. if you know, you know … do it now. It won’t get better. And it helps the morale of other team members. • Provide tools to succeed: CRM, lead lists, administrative support (so they can sell, not do paperwork), continuous training, a very few crystal clear KPIs with daily, weekly and monthly reporting that the entire team sees.  • Compensate effectively 4-month sales ramp up, a base salary with commission, incentives and bonuses to give the top “20%” the motivation to sell even more. • Over communicate: fix issues fast, create urgency and competition. Sales people are your frontline radar … talk with them early and often.

12. Performance

Plan and establish reporting of performance for your U.S. operations including: • Financial • Marketing and Sales effectiveness • Operations metrics (supply, production, fulfillment, support, quality) • Customer, employee, supplier, partner satisfaction (e.g.Net Promoter Scores)

12. Portfolio, Programs, Projects

Establish the activities that deliver your strategy and plans • Portfolio – the optimizes collections Programs and Projects in priority • Programs – major on-going efforts that support your enterprise (e.g., Channel Partners) • Projects – activities with specific deliverables, budgets and schedules Assign an individual to lead your Portfolio planning as well as each Program and Project within the Portfolio. Have frequent reviews of each and deliberately adjust them as needed.

Appendix: Legal Entity Check Lists

Steps required to form a Corporation legal entity or a Limited Liability Corporation (LLC) legal entity in the U.S.

Corporation Formation Steps 1. Name and address of registered office of the corporation 2. Name and address of incorporator 3. File incorporation documents with applicable state agency 4. Appointment of Board of Directors 5. Written Consent of Incorporator 6. Initial Action of Board of Directors 7. Total amount and classes of stock the corporation is authorized to issue 8. Adoption of Bylaws 9. Name of the corporation 10. Do not have to be U.S. nationals or residents, but must be an individual, and no alternates permitted 11. Minimum of one Director 12. Ratify and confirm actions of Incorporator, including adoption of Bylaws 13. Authorize opening of bank account and 14. Approve initial significant contracts 15. Issuance of stock to subscribers 16. Elect Officers Do not have to be U.S. nationals or residents 17. Minimum of one Shareholder Do not have to be U.S. nationals or residents 18. At least one Officer; suggest 2 or more better 19. Issue Stock Does not have to be U.S. national or resident 20. No mandatory minimum level of capitalization Execution of shareholders’ agreement when more than one shareholder and shareholders are not under common control 21. Obtain Taxpayer Identification Number from Internal Revenue Service 22. File “Certificate of Assumed Name,” if applicable 23. File “Certificates of Authority” in states (other than the state of incorporation) where the corporation will transact business 24. Obtain state and local licenses and permits, as applicable (varies based on state)

LLC Formation Steps 1. File organization documents with applicable state agency 2. Name and address of registered office of the company 3. Name and address of organizer 4. Name of the company 5. Designation as member-managed or manager-managed 6. Execution of Operating Agreement by Members and, if applicable, Managers 7. Does not have to be U.S. national or resident If Manager-managed, 8. Minimum of one Member minimum of one Manager 9. Does not have to be U.S. national or resident 10. Obtain Taxpayer Identification Number from Internal Revenue Service 11. File “Certificate of Assumed Name,” if applicable 12. File “Certificates of Authority” in states (other than the state of organization) where the company will transact business 13. Consider “check the box” election 14. Obtain state and local licenses and permits, as applicable (varies based on type of business)

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