James Butland, VP Global Banking, Airwallex considers why overseas business is more important in the year of the global pandemic and onwards.
Financial institutions are predicting a global recession as a result of social disruption and the downturn in trade in 2020. However challenging the circumstances, there are activities for businesses to squeeze opportunity from adversity, and securing overseas business is one key area. In 2018, 232,000 SMEs exported goods to overseas markets, 10% of Britain’s small and medium-sized businesses.
There are a few areas that businesses might consider around the possibilities inherent from looking beyond the UK market for sourcing all kinds of opportunities:
Finding customers beyond your primary markets.
If you sell online, consider opening up your goods and services to overseas markets. It will require patience and dedication to ensure you meet the appropriate customs, postage, and legal requirements – but if it’s possible to offer your services at the right price in the right place (wherever that is) you’ll be able to make sales where before there were none.
If, after testing the market, you find good levels of demand, it might be sensible to look into bulk shipping, warehousing and local distribution if those will help drive down margins and grow opportunities beyond the UK.
Take care with making new partners or spending money on advertising if you don’t know the market, the regulatory landscape, and the reputations of those you’re looking to do business with. Business support agencies are there to help you and it’s always worth asking mentors and peers about their experiences before taking the plunge.
Hiring talent from anywhere, not just in around existing office locations.
In the same way that customers might be out beyond the English Channel, so too might be your new hires. These could be whatever your business needs to help you access new markets or hard to find skills – illustrators, customer support, and multilingual staff for example. Given the world is not in the same place it was at the end of last year it’s worth thinking of new ways to accomplish your business goals. Many firms have moved to remote working and are finding their productivity remains high. Using staff based in different countries may help raise that further so that the business can function around the clock.
Expanding the catchment of suppliers offering goods and services.
It’s not only customers and staff to look for beyond our borders. When sourcing your own materials or the services your business consumes it could save money, or even time, to use suppliers from other markets. As part of any efficiency or cost review, it’s worth checking regularly what you are paying for as a business. Technologies change, new and better ways of working are found, and uncritically sticking with a supplier isn’t the best move.
And if your business does hire from, or sell more abroad, it may be that some of the supporting services will naturally grow up in those markets – from advertising to shipping.
To take advantage of opportunities overseas it’s vital not to lose out on the basics – like making the most of currency fluctuations and conversion rates. Fear of losing out might have stopped many from really raising their game, but we are lucky to live in the digital age where many fintech providers have been founded to reduce costs on the exchange rate whilst opening up new market opportunities for businesses.
Go beyond the banks to save margin
More so now than ever, get into the habit of checking the mid-market rate found on Google or Reuters if possible delay non-urgent payments for when the pound is stronger. If your bank is offering you a rate significantly under than the real rate, shop around! Some multicurrency payment providers allow you to lock in the rate on a given day and transfer funds at a time when you’re ready. This ensures you know exactly how much an international payment will cost and eradicates the need to worry about the pound dropping.
No longer are companies stuck with the conversion rates offered by the banks. Cross-border payments have long been the victim of high-transaction fees, slow, manual processes and reluctance from banks or FX traders to do things differently. But things are changing.
Platforms such as Airwallex help firms manage their margins through better visibility of the FX rates they pay, without any hidden costs. For example, a UK business can set-up a local collection account in Australia (with local bank details); buy a product from a Chinese warehouse in CNY, or transfer revenue from the US back to its British based account in GBP – all within the same day, just by looking beyond your high street bank or provider for a better deal.
It’s through such platforms that firms are able to access the real interbank exchange rate, with completely transparent and low-cost fees. Having a virtual bank account within other markets – such as the Eurozone – also means you’re able to act like a local, reducing the need for other overheads such as establishing your own operations within the market. This is particularly important with Brexit on the horizon. Potential economic turmoil usually impacts SMEs the hardest, and this is why it’s so important for businesses to equip themselves with the means to weather any storm. Innovations within payments have unlocked considerable value, meaning you can mind your margins and continue to thrive whilst finding opportunities in new markets to grow.