Why should Business start-ups consider going international?
With so many of us online these days, it can be argued that it has never been easier for a business to go international rather than just stay local or national.
Keeping your business local or even national can limit its profit potential. It’s like the old saying about not keeping ‘all your eggs in one basket’. Taking your business international gives you the opportunity to diversify your markets and revenue which should help the stability of your business.
Six reasons why a startup business should consider going global: –
By extending your business overseas you gain access to a whole new audience and thus more sales.
More options. By taking your business abroad you may attract international investment and you can benefit from opportunities that may not exist in the UK. Many governments offer incentives to foreign companies to do business in their country.
You diversify your business markets thus creating a safety net for your revenue stream. If sales go down in your domestic market, you can lean on the profit from sales in your overseas markets and vice versa.
You gain access to a larger talent pool. For example, by employing a local workforce with native language skills and diverse professional backgrounds, your business will have the local expertise and experience needed to serve your new overseas customer base.
If you can cater to an overseas as well as a local and national audience, you could gain a competitive advantage by leaving a saturated market for somewhere your competitors don’t operate.
By establishing your business internationally, you not only attract new customers, but nourish your company reputation and gain greater credibility.
All fine and dandy I hear you say but what about all the costs; dealing with local laws and bureaucracy; international tax and banking.
I will leave the question of local laws; export and import licenses, international tax and so forth to the experts in those areas.
And it’s true to say that the banking system really has not evolved all that much so there are still numerous potential pain points in either making foreign exchange payments to overseas suppliers of goods and services, overseas offices and outlets of your business and your overseas workforce as there are in repatriating payments from your overseas clients.
However, like most things in life, there are always solutions and workarounds to get past the many pain points when dealing with the international banking system.
Tips & Tricks
If you use the traditional banking options, you will need to go to your bank and open a separate currency account every time you start to either make or receive payments in a particular currency. That is possible with the major UK banks but of course, there will be fees and charges to set up your US Dollar or Euro account plus monthly management charges, let alone all the form filling every time you start to deal with a new currency.
You can get around this by using an online broker or app. There are lots of them about and they do use newer technology than the banks so there are benefits. However, most do all of their banking in the UK which will cause your overseas client’s extra costs and hassle in wiring currency payments to a UK based collection account.
An even bigger issue is that the vast majority of these online brokers and payment apps provide technology only answers. In fact some of the biggest providers do not even have a telephone number so you, the client are on your own in dealing with the movement of your funds in and out of the country. These automated systems also mean that the point of conversion is done automatically with no thought as to the timing of the transaction. As exchange rates change every 3 seconds night and day, that could seriously add to the cost of you making a payment in another currency or diminish the return in Pounds Sterling from a currency payment made to you by your overseas client.
Make sure any broker you use can offer these options:
Register on a no cost, no obligation basis.
Access to accounts based in the UK, USA: Canada and the European Union so you don’t need to open your own currency accounts.
100% safe and in full accordance with FCA (Financial Conduct Authority) rules and regulations.
The option of doing a free of charge online banking payment into US Dollar and Canadian Dollar local collection accounts respectively instead of clients in the USA or Canada physically having to go to their bank and paying fees for the bank to do a global SWIFT transfer of funds to a US Dollar or a Canadian Dollar account based in the UK.
Active monitoring of the currency markets within a clients stipulated time frame to alert clients to opportunities that arise in the markets to minimise the cost of making a currency payment or maximise the Pound Sterling return from the repatriation of a foreign exchange payment from your clients.
Forward contracts. In return for a security deposit, they can secure an exchange rate for a registered client up to 2 years ahead of time. That means you do not run the risk of having your paper profit wiped out by adverse rate movements in the intervening period.
flexible forward contracts meaning you the client can settle at any time within the contract period with no penalty costs.
Wholly independent which means they can review each and every case on its own merits. The benefit to you? Unless you are dealing with a country on the sanctions list, they should be able to find a payment solution for you including making and receiving payments to the vast majority of countries in Africa, the Middle East, South-East Asia, and South America.
All client funds held in fully protected client safeguarding bank accounts so they can amalgamate various payments to an overseas supplier for you that will gain you additional purchasing power and further reduce transfer costs.
Don’t forget to check the fees! For example, you end up with clients based within the EU. Pre-Brexit, repatriating Euro funds back from a bank account in Spain or Italy for example would normally cost a flat €20 transfer fee plus the conversion itself. Post-Brexit with the UK out of the single market, local banks within the EU are now usually charging a transfer fee of 1.5% plus the conversion costs. That is not an inconsiderable €1,500 for every €100,000 of funds bought back to the UK. If the broker has a Euro client collection account, it can have EU bank details on its invoice so it is seen by the EU banking system as a domestic transfer and should be free of charge if done online or done for a nominal fee (€20) if the bank does it on behalf of your client.
Access to all major payment systems: dealing with the EU banking system has got more expensive in these post-Brexit days. Let’s say you need to make a payment to an individual or a company in any one of the EU-27 countries. Most banks, online brokers and payments apps use the global SWIFT payment system. In these post-Brexit days, this will incur the receiver a landing or receiving charge. They invoice you €10,000. You buy, pay for, and send €10,000 and they only receive €9,975. Not a good way to foster a relationship.
Access to all of the major payment systems around the globe including the EUs SEPA payment system as well as the ACH payment system in the USA and EFT payment system in Canada mean they will always choose the most appropriate cost-efficient payment solution. For example, any Euro payment to an EU-27 country will always be made via the EUs SEPA payment system to ensure that when you send €10,000 to a supplier or employee, they receive €10,000. Simples!
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