Lessons learnt in expanding to the US

For Puma Private Equity, US expansion is a fairly common growth strategy that we help our portfolio companies deploy, and we’ve supported a number of them to test the market then make the leap to establish permanent premises in the US. We talked to two of them – Claus Lindorff, Co-Founder and CEO of premium menswear brand Ron Dorff, and serial entrepreneur and CEO of CameraMatics, Mervyn O’Callaghan – to find out more about some of the lessons they’ve learnt, and advice they’d give other founders looking to make the move.

Claus Lindorff Co-Founder and CEO of Ron Dorff, a premium menswear brand	Mervyn O’Callaghan Co-Founder and CEO of CameraMatics, an IoT fleet and vehicle safety company

If you were both talking to someone now who was thinking about expanding their business into the US, what advice would you give them?

Claus

I think first of all, you don’t just decide to go to the US. I’ve heard so many French fashion brands say, “Oh the US is so big, we must go there.” My view on this, is the grass is always greener at the neighbour’s place. There are always going to be businesses that want to go, because they think it’s this huge opportunity. But the US is first of all not one market. You have the West Coast and the East Coast and they are very different from Middle America and Southern America. So while they all might speak the same language, they are definitely not all the same. It’s less diverse than say Europe, but you don’t just arrive and it’s all hunky-dory and everyone wants the same thing. It’s not like that at all.

Secondly, why would anyone start a business there, when you can do so much online? We all have this fantastic opportunity of trying it out before you actually go there, by being online. Let me tell you that going to the US is expensive – really expensive. And it’s a great market, don’t get me wrong, but you need cash – and lots of it, as it’s very expensive. For our business, it wasn’t like opening up a little hole in the wall and seeing if it works for you, like you can in France. You need something big in the US, and it’s got to be impressive. Americans like that. They have the cash, but they want the success, and they want the quality, and that’s not done with a snap of the fingers.

My advice to anyone, would be to try it out online, the way we decided to go at Ron Dorff. We looked at online sales and we didn’t really understand why sales were increasing month on month to the US. It came to a point where it was such a big market for us, we felt compelled to go. But it’s not easy – for the store in LA there is a nine-hour difference from us here in Paris. When I need to talk to someone, it’s the wrong end of the day. While calls are fine, we are also all still human, and sometimes you just need to get on a plane and go there. But I think overall if you feel your products and services would be attractive in the US, you would be stupid not to try it.

Mervyn

I agree with Claus. Don’t look at it as the US. Look at expanding State by State. So take a look at Florida, or Texas, Richmond or Virginia – all of which are vast. Don’t just look at expanding everywhere all at once. And get a reference customer. No-one wants to be the guinea pig. Until you have a reference, customers are going to be really difficult to get. People might love your product and they’ll love to deal with you, but they don’t want to be the first. So getting that first customer is really important.

I also think you ideally need to be on the ground yourself, to understand the market. Hiring Americans can be very expensive, and culturally they work very differently from Europeans. There are also very high expectations now in terms of salaries, and in our experience people need to be very tightly managed on a constant basis. They also have very different employment laws, with far fewer protections in place than we do. You need to understand how this affects the employer and employee dynamic. Ideally, I would suggest taking people out of your existing organisation and relocating them out there – at least temporarily: people who know you, your product and your business really well. People that you trust.

You are both now leading international businesses, with footprints in a number of countries. How do you and your leadership teams manage this?

Claus

I was in advertising for a long time, and I ran the Air France account for the entire world out of an office here in Paris. I’m not French, I’m Swedish, and I’ve lived in many countries. Back then I lived in France and ran 300 agencies around the world, controlling 105 markets for one brand. I did a lot of travelling over this time and it taught me a lot – most importantly that the casting of your business, particularly the leadership team, is absolutely critical. You need people who can communicate and empathise and adapt.

We just had a global sales meeting two days ago, and we had a guy in from New York, and the store manager from LA. Getting people together was magical. But if you’ve got someone who is too local, who’s never travelled, you’ve got real problems. They might be as American as you want and know the US market inside out. But they need to be open and able to communicate with other people all over the world. For instance, when we are in Paris, many of those assembled are French. Everybody speaks English, but they are all different. You need people that are open to that – they can’t be closed. We might all watch Netflix and Disney films, but our countries are still very different. And even though we all more or less speak English these days, there are still huge culture and cross-cultural differences. Respecting this is extremely important. It’s of huge value to the company, that you have the right people in the right place, who can advise you and take you forward. Ron Dorff can’t afford an HQ in New York for the US, and so we need some very senior, very qualified people on the ground, or this thing wouldn’t fly.

Mervyn

In all honesty, I think this has probably been one of our biggest challenges – and Covid made it so much worse. During the pandemic we ended up hiring a lot of people because we were trying to grow quickly. About half our workforce had never met anyone in the company and everything was done on Teams or email. And people just don’t seem to have those same personal relationships that they did before Covid. They tend to be a little bit sharper maybe in their email communication, and that is quite a big challenge. So last year we spent a lot of money on getting everyone from our offices together. We’ve actually got an office with some software developers in Lisbon, in Portugal. We’ve got three offices in the UK – one in Durham, one in Dartford and one in Macclesfield. We have two offices in Ireland, one in Dublin, one in Waterford, and then in the US we have an office in Richmond, Virginia. We flew everyone to Ireland and we hired a hotel for a week, and we did kind of a company overview – introducing everyone to each other and team-building exercises. We got motivational speakers in and all sorts. It was a really positive kind of company relaunch. It’s really important to create deeper personal relationships between employees, so they are working as one unit – one team.

So talk to me about how you work together as one team. And how do you recruit people who all buy into what you are trying to achieve, even if they are in different countries?

Claus
I think it’s extremely important to create a sense of unity. If you can imagine somebody’s a store manager in Los Angeles, and when he gets into the store in the morning we might have already closed our office in Paris. It’s difficult, and it can be very lonely for somebody to report to someone they hardly see. We try with Zoom calls every week, which have all the store managers from each country talking to our people at HQ. And we fly them in – which is very costly once again for a small company like ours – twice a year. So that as we’re launching a new collection and so on, we get them all in, so they can see the collection and meet people at HQ. It’s so important.

We do, of course, have all these calls and Zooms and whatever we started with during Covid, which is great, but physically meeting people is very important. I try to be in the various countries as much as I can. I also think it’s very important that it’s not just me, but also includes other people below me, who are running things and actually directly responsible for the countries. As the founder, when there is someone new on a senior level, I always interview them. It’s a pain in the neck at times, but I’ve done it for 30 years, and it’s so worthwhile – so important.

Mervyn

You can’t communicate enough. We now do monthly all-company Teams calls. And we have team nights – different teams all getting together in different countries. We’ve also tried to change the structure, so the people are kind of working by country team, rather than by function. So if you’re working in the UK, you’re part of the overall UK team. We’ve now tried to regionalise it a bit more, so that there’s more interaction and teams are working together.

During Covid we were very much focused on hiring people, no matter where they were, but now we are focused on hiring people where they are within commuting distance of an office, so they are able to get in a couple of days a week, rather than being fully remote. I think there is still an expectation among people that they will be able to work from anywhere – we are particularly finding that with software developers; now they just assume they will be fully remote. And because those skills are in high demand and a lot of the work is autonomous, we have tended to allow people to work remotely. But for the rest of the business we believe it’s necessary to come in and interact with others and work together. So unless you’ve got some completely unique skillset that we require, then you’re probably not the right person for the role, if you are demanding to work from home all the time. I also think that things wouldn’t become issues if people were in the office. It could be dealt with in a couple of seconds, because one person would overhear another and they’d know how to fix something. Whereas now there’s a Teams call and there’s a follow-up Teams call, and then the wrong person’s not on there, and suddenly then it just escalates and escalates, and you spend hours and hours on something that should take a couple of minutes.

We’ve also learnt with the US especially, that we need to be able to flex our workforce, so we use a lot of subcontractors. At the moment we’ve got about five projects rolling out across probably nine or ten different States in the in the US market, and we’ve essentially only got one internal person that’s focused on that, with probably another 20 subcontractors. This allows us to flex up and down, depending on the requirements of the business at any one time. The issue with the US is that it’s so big, that chances are if you recruit, you’re recruiting in the wrong State from where you need boots on the ground, and then you have to spend a fortune getting them to where they need to be. And they spend loads of time travelling. Hiring flexible workers allows you to have the right amount of resource locally, where you need it for that particular project. We’ve actually turned it into a bit of a selling point, because all our engineers can be just down the road, so if there are any issues they can be onsite with the customer very quickly. It’s not like we’re sending someone from New York down to Dallas, or from Florida to Dallas, and they have to get on a plane and it’s going to take them a day to get to you. So you kind of sell it as an upside or a benefit to them.

So do you think it’s important that when you’re considering the US, you position yourself as offering a localised service from an international company?

Claus

I think it depends very much on what you’re offering, and to whom. We’ve talked to a number of investors over the years, and one of the things we know makes us different, is that we are not typically all about French style. A lot of fashion brands are simply not exportable to other countries: the brand positioning is not exportable, or the product is not cut in a way that will appeal to people in certain countries. At Ron Dorff, we have come up with a brand image and a product that have a broad appeal. It works across markets. Very few brands can do this, because in appealing to everyone, they just become bland and then appeal to no-one. And I think the brand has shown pretty early that whether we are in the US, Sweden, Denmark, France, the UK, even Japan – what the brand stands for works, and what the product offers, works. I mean our products aren’t crazy – they aren’t pink with diamonds on them. They are very low-key, very functional, Scandinavian design that appeals to all markets. We offer a very global concept without actually having designed it in that sense. Because if you “do global” – and I’ve worked for a number of big global brands – so often it comes down to the lowest common denominator, and that means basically the product becomes very boring, because it has to sell everywhere. We came up with something we wanted to do for ourselves. It just turned out that it also had a lot of appeal to others in lots of different markets, which is great. And whenever a customer buys something from us – whether it’s in New York or Amsterdam – they know what they are getting is good quality. That’s key to our positioning.

Mervyn

We operate in the business-to-business space, and our contracts in the US are for a lot of money. We’ve found that our customers are reluctant to spend that kind of money with an organisation that’s thousands of miles away. They also want to ensure that you are going to stick around when things go wrong, so being able to be referenced in the US is also a really big thing.

No-one wants to sign up to a company that’s testing the waters. The fact that you have local people doing the installations, and you have local people that they’re interacting with, it just gives them that level of comfort that you’ve actually in their eyes invested heavily – even though you haven’t really. We just say our engineers are coming on site, and that helps with giving our customers confidence that we’re here to stay.

Puma Private Equity invests into scaling businesses that are looking for transformational growth. We invest up to £10 million in companies across a broad range of sectors – from media to industrials – and invested £7.6 million to support CameraMatics’ expansion in 2021, and £5.5 million investment to help Ron Dorff’s global expansion in 2020. For both organisations, Puma Private Equity has been able to offer not only capital, but deep expertise of overcoming the scale-up difficulties that growing companies face. To find out more about how Puma Private Equity might be able to help your scaling business, please email [email protected] or call 020 7468 7979.