Why We Sometimes Tell Clients Not to Expand to the US (Yet)

Expanding to the USA. It is the "American Dream" for almost every British brand I speak to. The population is five times the size of the UK, the consumer spending power is massive, and scaling on Amazon.com or TikTok Shop US feels like the golden ticket to an eight-figure exit.

But as an ecommerce accountant UK sellers rely on for honest advice, I often find myself being the one to pull the handbrake.

Don't get me wrong—we want you to grow. But we have seen too many solid UK businesses burn through their cash reserves trying to crack America before they were financially or operationally ready. The US market isn't just "the UK but bigger." It is a completely different beast with different tax laws, higher costs, and logistical nightmares.

Here is why we sometimes advise our clients to hit pause on their transatlantic plans.

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Have You Really Conquered the UK Market Yet?

Before looking across the pond, look at your P&L here at home.

The most common mistake we see is brands using international expansion to fix a stalling UK business. If your sales have plateaued here, throwing money at the US rarely fixes the underlying issue—whether that is product-market fit, retention, or ad creative fatigue.

The "Rule of Thumb" for Expansion: If you aren't generating a consistent, healthy net profit margin (15%+) in the UK, you likely cannot afford the initial losses the US will inflict.

You need a war chest. The US will bleed cash for the first 6–12 months. If your UK operations aren't printing enough cash to subsidise that growth, you put the whole company at risk.

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US Sales Tax Nexus vs. UK VAT: Why It’s More Complex Than You Think

In the UK, we deal with HMRC and a standard 20% VAT rate (mostly). It is centralised and relatively predictable.

In the US, there is no federal sales tax. Instead, there are over 10,000 different sales tax jurisdictions.

What is "Nexus"?

Definition: Nexus is the connection between a seller and a state that requires the seller to collect and remit sales tax.

In the past, you needed a physical presence (like a warehouse) to trigger this. Now, almost every state has Economic Nexus laws. This means if you hit a certain revenue threshold (often $100,000) or transaction count (often 200 orders) in a specific state, you must register and pay tax there.

What this means for you:

• You might hit Nexus in California and New York within a month.
• You need software (like TaxJar or Avalara) immediately.
• Filing returns isn't a quarterly job like UK VAT; it can be monthly, across 30+ states.

If you ignore this, the penalties are aggressive. Unlike HMRC, US states do not play nice with foreign entities ignoring their tax laws.

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Marketing in the USA: Why Your Customer Acquisition Cost (CAC) Will Double

The US ecommerce market is the most competitive advertising landscape on earth.

When you run Meta Ads or TikTok Shop campaigns in the UK, you are bidding against domestic competition. In the US, you are bidding against venture-backed giants with millions in ad spend.

The Reality Check:

• CPMs are higher: It simply costs more to put an impression in front of an American consumer.
• Conversion rates may dip: American consumers have endless choices. Unless your brand offer is incredibly strong, they will stick to Prime delivery from a domestic competitor.

We often see UK brands forecasting based on their UK ROAS (Return on Ad Spend). That is dangerous. If your UK ROAS is 4.0, expect a US ROAS of 2.0 or lower during launch. Can your margins sustain that?

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Logistics and Fulfillment: How Much Does it Actually Cost to Set Up a US 3PL?

Shipping individual orders from the UK to the US is dead. The customer won't wait 7 days, and the shipping costs will destroy your unit economics. You need a 3PL (Third Party Logistics) partner on the ground.

However, geography works against you. The US is massive. A warehouse in New Jersey means 5-day shipping times to customers in California. To compete with Amazon Prime speeds, you eventually need two fulfilment centres (East Coast and West Coast).

The Hidden Costs of US Logistics:

• Stock splitting: You now have inventory trapped in two countries. This hurts your cash flow as you need double the stock levels to prevent stockouts.
• Customs & Duties: Getting bulk stock into US ports requires a customs broker and payment of import duties, eating further into your gross margin.

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Legal Hurdles: Do You Need a US LLC to Sell Cross-Border?

This is the question we get asked most often. Strictly speaking, you can sell on Amazon US or Shopify as a UK Ltd company. However, in practice, it becomes difficult quickly.

Why you might need a US entity:

1. Liability Insurance: Most US insurers won't cover a foreign entity.
2. Retail Partnerships: If you want to sell wholesale to US retailers, they will demand a US W-9 tax form.

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The Creator/Affiliate Software Gap

Here is a specific pain point for our influencer and creator clients that nobody talks about.

If you are a UK creator launching a brand, you likely rely on specific integration software for affiliate payouts or influencer management. The integration software for creators/affiliates doesn't really exist yet for seamless cross-border operations.

Many of the US-centric platforms do not play nice with UK banking or UK Ltd legal structures, and vice versa. We often see clients stuck in "admin hell," trying to manually reconcile payouts because the tech stack for global creator-commerce is simply broken right now.

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The Hidden Fees of Selling in Dollars: Managing Currency Risk and Cash Flow

When you sell in the US, you earn USD ($). Your suppliers and staff are likely paid in GBP (£).

If you let Amazon or Shopify convert that money for you, you are losing 1.5% to 4% on every transfer. On a turnover of £100k, that is £4,000 given away for nothing.

The Solution: You must set up multi-currency accounts (like Wise, Airwallex, or WorldFirst). This allows you to:

1. Receive USD without conversion.
2. Pay US suppliers (ads, 3PL, tax) directly in USD.
3. Convert to GBP only when the exchange rate is favourable.

As an experienced ecommerce accountant UK businesses trust, we set these workflows up as standard. If you aren't hedging your currency risk, you are leaking profit.

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The "Go" Signal: Financial Benchmarks You Should Hit in the UK First

So, when should you expand? We generally look for these "Green Light" signals in your accounts:

• Stable UK Cash Flow: You have 3–6 months of operating expenses in the bank.
• Domestic Saturation: You are seeing diminishing returns on UK ad spend (you've maxed out the audience).
• High Gross Margins: Your product has at least a 70% gross margin to absorb the extra US shipping and tax costs.
• Data Validation: You already have organic US traffic or orders coming to your UK site.

What Next?

Expanding to the US is exciting, but it requires a forensic look at your finances first. If you want to review your numbers and see if you are truly ready to make the leap, let’s look at your P&L together.

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About the Author

Sam Hoye is the founder of Social Commerce Accountants, a specialist firm supporting modern ecommerce brands, TikTok Shop sellers, and influencers. With a deep understanding of the digital economy, Sam helps business owners navigate the complexities of VAT, global expansion, and cloud accounting to build profitable, scalable assets.

This guide is not financial advice. All content is for educational purposes only. Please consult a qualified accountant or financial advisor to discuss how these strategies apply to your specific business circumstances before making any financial decisions.

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