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European Pharmaceutical Contractor

The American Dream

Life sciences companies often look to North America as an opportunity to expand their business. After all, it is the largest market in the world – unmatched in its economic diversity and the source of more life sciences activity than any other country. Many successful European firms generate as much as 30-40% of their revenue in North America. However, while life sciences executives see tremendous potential in the US market, most also recognise that it can be an expensive and risky place to do business, causing delays, or even leading to the decision to not enter the market at all.

For the intrepid leaders willing to make the long-term investment, here are some potential strategies to enter and succeed in the US market.

Available Options

1. Do Nothing
Success can take many forms, and each individual organisation has a significantly different risk appetite. If a company has not adequately penetrated its own market yet, or is happy with the domestic revenue it has already garnered, it may well be satisfied to simply stay put and not subject future earnings to a risky proposition.

2. Appoint an Internal Business Development Manager

This option lets a company dip its toe in the water without committing substantial financial and/or human resources. An in-office business development manager who is responsible for identifying US prospects and moving them through the sales cycle must try to fit this responsibility into their day, often while still overseeing local accounts. This individual must also work US hours if they are to make any significant progress. The opportunity with this option is to maintain lower overheads, but the goal is typically offset by the difficulty of building a strong sales pipeline beyond email lists, and calling on people met at tradeshows and conferences.

3. Hire an External American Business Development Executive

Having a Business Development Executive (BDE) on the ground in the US is an appealing approach. This employee could have an existing in-county network that a European organisation can tap into to open doors and drive sales. The salary required to engage an individual to serve as the company representative is typically around $125,000 – plus expenses such as travel, which can run between $25,000 and $50,000 per annum. Considering trade shows and conferences, marketing, travel and lodging, and other market development costs, a European company should expect to spend roughly $250,000 a year on an external representative.

The high salary is usually prohibitive enough to not provide any additional support. As such, the American BDE is often required to manage many administrative tasks on top of their business development activities.

This could include booking travel; managing their phone and IT infrastructure; designing and writing their own English sales support brochures; Americanising the company website; and registering and managing all the logistics for trade shows. Because of their urgent nature, these activities will prevent the BDE from spending a significant amount of their time selling, thus slowing sales revenue and return on investment (ROI). This is an often-made mistake and one to be very wary of. Outsourcing the work should be considered, but the BDE should not be required to manage the vendor, thereby allowing him/her to focus on selling.

Furthermore, since the BDE will be independent, they must be extremely well-trained and have the trust of senior staff. This person will also require management by an executive in Europe, which seldom works well due to conflicting time zones, cultural differences and the work load of the European supervisor. Therefore, it is a plus if a company has a manager who has lived in the US and understands the culture.

4. Periodically Send an Employee to the US
A current member of staff will know the company, its products and services better than anyone – so, on the surface, this may seem like a solid strategy. However, for a number of reasons, deploying out to North America is usually a categorical mistake. Moving staff to the US is costly by nature; for instance, relocated individuals need an apartment, a car and a home office, which have to be set up and maintained. They also have to deal with immigration and administration issues, and be fluent in spoken and written American English. Lastly, arguably the most crucial problem is that the designated employee usually does not have an already-existing network of US connections.

For these reasons, more often than not, the staff member will return home empty-handed after a short period of time – or at least with limited results – following the expensive experiment.

5. Open a US Office with a Current Employee
Initiating an entirely new office in the US offers similar challenges to option four, but with the additional cost of more personnel, combined with office expenses – including furniture, rent, utilities, internet, phone and supplies.

Occasionally, companies hire an administrator to help with mail and administrative issues, which helps, but drives up cost further and delays any ROI. This is an ideal option if the European company requires engineering, inventory and warehouse logistics support, repair facilities, or another type of value-added service for existing US customers.

6. Hire a Specialist, Outsourced Business Development Organisation
Revenue is the overarching objective for those entering the US market. Because the economy there is so diverse, one of the fastest and timetested approaches to entering North America is to outsource the sales and business development responsibilities to a professional organisation that specialises in the company’s specific industry. This type of expert usually has an existing database and established, trusted relationships with industry contacts. They will share all overhead expenses – employee salaries, office rent and IT infrastructure, for instance – between multiple clients, which typically provides a lower cost solution. This strategy will usually bring faster market penetration and ROI because the outsourced group can engage their network quickly, introducing the product or service to target accounts and generating purchase orders. However, as with the other approaches, there are risks and caveats. For example, the outsourced organisation may not be supported well by the foreign client, as some US companies do not like operating with a third party – no matter how closely the business development team works with the foreign entity. Furthermore, relationships that are established will stay with the outsourced group and not belong to the client. This issue can be mitigated by working closely with the representative, travelling with them, and building company-to-company relationships that will bring long-term benefits to the European business.

Steps to Success

Different-sized firms will adopt different strategies: small firms are best off hiring an outsourced business development team; medium-sized companies may do the same, and then transition their own people into the market when it gets going; and larger organisations with deeper pockets will hire their own teams and set up a US office.

Regardless of the chosen approach, all businesses should adhere to the following key tips when approaching the market:
  • Have a firm strategy – pick a niche in the market and go after it. Focused is better
  • Concentrate on sales and not on administrative processes
  • Have a budget in place – plan for two years to get momentum, and add 20-30% to the budget for unforeseen items
  • Invest in a database and customer relationship management system
  • Hire locals with existing contacts in the market
  • Be patient – building success takes time
  • Appoint a public relations agency to publicise the company
  • Outsource the marketing programme to alleviate the burden on the business development manager
  • Insist on weekly reports from the BDE, regardless of which option you select – knowing what they are doing at all times is vital
  • Assign an executive in the home office to be solely responsible for coordination and support of the US representative
  • Make frequent trips to call on US accounts and work with the BDE
  • Translate all literature into American English
With the right amount of patience, a willingness to invest and some smart decision-making, European life sciences companies can be very successful in the US market. However, organisations making the move should not expect a ROI in the first year; coming close to breaking even would be doing well. Like any major market, it takes time and dedication to build a solid business base. This will likely begin to develop in four to six months, but not gain enough momentum until the second or third year. Those who hang in there, and continue to invest and innovate, should be on their way to generating 30-40% of total revenue in North America.

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Jim Worrell is Chief Executive Officer of AmeriStart, a sales and marketing company specialising in the life sciences industry. He has a degree in International Marketing from Miami University, US, and has held management and marketing positions in Ghana, the Caribbean, the Netherlands and the US. Jim specialises in sales, marketing and distribution strategies. He founded AmeriStart in 2003, and the company now has clients in more than 20 countries.
Jim Worrell
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