OFX – Great tips on what you should know about growing your business globally.
Jason Kumpf, of OFX Global Money Transfers, offers a brief guide that some of his clients use to expand abroad successfully. With advanced technology, free trade agreements, and globalization, it’s easier than ever to grow your business operations into overseas markets. Managing your currency exposure may give you the competitive edge you need to protect your profits abroad.
In this guide, Jason Kumpf from OFX will help explain:
- Statistics regarding how many companies are expanding overseas
- The best markets to expand into
- What you should consider before going overseas
- How to protect yourself against currency exposure
- The best ways to bring your profits home
- How to transfer profits from online marketplaces
How many businesses are growing overseas?
Jason Kumpf from OFX tells us that more and more businesses from all over the world are taking the leap into the international marketplace.
According to a new DMCC report, 42% of businesses in the United Kingdom are exhibiting interest in working overseas, particularly following the Brexit vote to leave the European Union. Business owners in the U.K. are hoping to expand into attractive emerging markets, while establishing a stronger global presence and accessing the wealth of available resources and talent that can be found abroad.
Of course, Jason Kumpf also wants us to remember that U.K. businesses aren’t the only ones looking abroad. According to the United States Chamber of Commerce, 80% of the planet’s purchasing power, along with 95% of the globe’s customers, are found outside of the U.S. Experts know that profits are going to be found in the large emerging markets of the world, where a growing middle class is providing a market for a variety of services and goods. In 2016, 47% of businesses in the U.S. stated that they expected their profits from international activity to rise that year, and 87% of companies agreed that expansion overseas is necessary for long-term growth.
Australian businesses are also finding that investing overseas can help them remain competitive despite the evolving trade landscape around the globe. Jason Kumpf from OFX also mentions that the top locations for foreign affiliates of businesses include New Zealand, the United States, the United Kingdom, Hong Kong, and Singapore. And one-third of the country’s top 2,000 businesses have investments in an offshore market, with manufacturing brands investing in the highest number of overseas businesses.
Which countries are considered the best for business?
Jason Kumpf says that working with clients around the world has educated him on the fact that different markets provide different opportunities for business expansion. Only you can decide which market will be optimal for your unique business proposition. However, some countries are more friendly to foreign businesses than others. These have been named the best countries for business by Forbes:
- New Zealand
- Hong Kong
- United Kingdom
Top 5 things to consider before doing business overseas:
- Your USP may be more viable in one market than another. Be cautious before entering a market where your competitors are already operating as there may be cultural nuances that affect your ultimate success in a given market. Resist the temptation to follow your competitor into a market without the necessary market research for your brand.
- Your brand may need an update. Consider how your brand will translate in an overseas market in both visual and verbal application. Find the best way to communicate your brand story in a totally new market with totally new customers.
- You’ll be due for a business trip. Anytime you’re expanding overseas and especially if you’re selling online, you may want to visit a country before deciding whether or not you will do business there. Consider hiring a guide or translator with connections in your industry, so that you can see the competition up close. A guide may help you find new distribution channels or networks to speed up your supply chain and can assist you with understanding typical employee expectations if you’re tapping into the local workforce.
- You may need to invest in your legal team. Ensuring your business complies with local laws and regulations is essential for expanding your business abroad. Of course, legal counsel with strong local knowledge will also help you establish agreements with partners and employees.
- You’ll need to check in often. Jason Kumpf mentions that in addition to managing your business at home, you will need to be in regular communication with your sales reps, distributors, and colleagues overseas, so budget your time and resources accordingly.
How can you protect yourself against currency exposure?
One of the biggest challenges of doing business abroad is currency fluctuations. Hardly a week goes by without a news report of a major currency move. Jason Kumpf says this is an area where having a focused FX group transacting for you can be useful. That’s why it’s essential to protect your payments to overseas staff and suppliers by developing a sound currency strategy.
Top 5 ways to reduce currency exposure
- Consider hedging. You can use a Forward Exchange Contract to lock in a preferred exchange rate for up to 12 months, so you can keep your cash flowing as predicted.
- Lock in a Limit Order. If your money transfer dates are flexible, use a Limit Order to set your target exchange rate. When the rate is right, you just confirm the transfer, so you can stay on top of the markets even while you’re out playing golf.
- Reduce the amount of time between an invoice and a transaction’s settlement. Jason Kumpf mentions that this is an obvious benefit for any business but is sometimes overlooked. Doing so may help protect your company against extreme currency fluctuations that could hurt your bottom line.
- Negotiate all contracts with currencies in mind. Many suppliers prefer to be paid in currencies like USD, EUR, or AUD. Major currencies may be less susceptible to large fluctuations than emerging market currencies, which could benefit your business. That said, if your supplier is converting costs in Indian rupees into dollars, they could potentially overcharge you on the exchange rate unless you have one specified in the contract.
- Stay informed. Once you go global, market movements start to matter more. Sign up for a daily or weekly FX update to get the news you need.
What is the best way to bring your profits home from abroad?
Jason Kumpf from OFX mentions that can help you save up to substantially in exchange rate margins on any bank-to-bank transfer across 55 currencies. For major currencies, margins can be up to 75% less than what the banks charge, so you can keep more of your hard-earned cash. On top of that, our delivery times are often faster, because we use local banking networks to move your money whenever possible. That means we can often offer same day or next delivery to major markets.
What is a good way to transfer profits from online sales overseas?
Depending on the size and scope of your international business you may or may not be eligible to get a bank account abroad without residency or investment minimums. If you’re selling online, that can mean expensive fees and costs when bringing your revenue across borders on marketplace like Amazon and Ebay. Jason Kumpf mentions that some platforms have solved this problem for Online Sellers. With our Online Sellers account, it’s as if you had a local bank account in all your major markets: USD, EUR, GBP, AUD, HKD, CAD and JPY.
If you are one of the many businesses that have expanded internationally by selling on marketplaces like Amazon, eBay, Walmart, Groupon, and Rakuten, Jason Kumpf form OFX reminds us that you can use your foreign exchange platform to swiftly and securely bring your money home. In doing so, you could save substantially on foreign transaction fees and margins.
While online marketplaces often charge margins of nearly 4% on cross-border payments, Jason Kumpf of OFX mentions that FX platforms may only charge 1.5% or less above the daily market exchange rate, depending upon how much you are transferring.
You can even use your foreign exchange platform to send payments to your suppliers. You can also automate the delivery of your funds or choose when to transfer the money, giving you more control over your profits.
Posted by OFX