A recent study found that nearly 75 percent of Australian business owners plan to expand into global markets within the next two years. Over 82 percent of Australian businesses already doing business internationally report that their profit margins seem to grow with each passing year. With these stats in mind, it’s clear that this creates a huge incentive for many small business owners to take steps to expand their existing operations overseas.
However, in order to do business abroad, there are certain challenges that must be met head-on. Strategic planning is a must if a business wants to succeed. From the document legalisation to dealing with foreign currency, the issues of doing business overseas are vast and often complex.
Keep reading to learn how to ensure your expansion overseas is successful.
Be Mindful When Expanding
There are many cases when a business decides to expand internationally before doing the necessary research. When this happens, these businesses often put their resources in all the wrong places. If you want to make sure you can avoid this all-too-common blunder, then you need to take a strategic and proactive approach to your growth when you begin pursuing any new foreign market.
Determine What Currency to Use When Conducting Business
When conducting any business overseas, you need to figure out the actual currency preferences of your specific industry. Take time to get to know the norms before you set a product price or negotiate a contract.
Take some time to figure out what markets have the most potential, look at the market’s size, the competitiveness, and what type of access you have to various distribution channels. There are some situations where using the local currency is going to give a business somewhat of a competitive edge. However, in other cases, using Australian dollars is the best option.
When trying to figure out what currency you need to use, you have to think about what your potential customers like and what the competition is using. For example, if you are deadset on doing all your billing in native currency, but all your customers prefer to use the local currency, then you may lose quite a bit of business to your competition who is appealing to the local preferences.
Currency Fluctuation Considerations
Yes, using the local currency can offer you many advantages. However, it will also present you with a few challenges you must overcome. For example, the ever-changing exchange rates.
The value of currency is constantly in motion. It’s crucial that you stay aware that the value of the local currency of where you are operating can change in a single day. To help protect your bottom line against these changes, you need to implement a few strategies.
One option is hedging. This lets your company actually lock in a specific exchange rate for future transactions, and in some cases, use a rate that’s more favorable. Another option is to minimize the amount of time between when the invoice is sent, and when it must be paid. The shorter the period of time, the less likely there will be a significant currency fluctuation.
There is no one secret or method that will ensure doing business overseas is successful. Instead, you have to plan, make the right choices, and learn from mistakes. By doing your research first, you can set your new international business up for the best chance of success possible.
If you have plans to expand your business internationally, then keeping the tips and information here in mind will help you get started with the process and help you set yourself up to be successful now and in the future.