The discussion group was attended by 25 individuals across different sectors and businesses of varying sizes. The speakers were:
Overseas markets was the theme of the meeting, with the group discussing key markets, new opportunities, how to access these markets and some of the issues to consider.
When considering expanding overseas there are many factors which could dampen your appetite, and these include:
Determining the total cost of your product is vital, otherwise you could easily end up selling your product at a loss. In order to calculate the full cost, you will need to engage with legal and accounting advisors that have connections in the countries that you are considering. They will be able to advise on local laws and taxes which need to be considered as well as costs which might not be immediately apparent such as the cost (both time and monetary) of dealing with HR laws in that country.
During our meeting, WorldFirst also highlighted how they can help their clients with managing currency risks and dealing with international payments. Getting this sorted at an early stage is very important both in terms of ensuring you can get paid, your cashflow cycle is kept as short as possible and that your currency risk is as low as possible in order to ensure you protect your margin.
WorldFirst had helped a client recently who had not previously worked outside of the UK but had a product which was in demand in Australia and were keen to expand into that market. However, their customers wanted to pay in Australian Dollars. In addition an initial investment of $2 million was offered as an intra company loan, to be repaid to the UK entity over the course of two years. This represented two problems:
WorldFirst helped develop a bespoke hedging strategy. This was achieved by a flexible forward contract from two years selling Australian Dollars, buying sterling with zero initial collateral required but with 100% certainty the amount of sterling they would get back at the end of the two year contract. In addition, the client was allocated an Australian Dollar account by WorldFirst, based in Australia which could be managed via an online platform allowing the FD in the UK to keep an eye on the payments and income from his new venture while allowing him to trade like a local in Australia – collecting funds from his customers in Australian Dollars.
The above demonstrates that, with a little thought, international payments and currency risk can be carefully planned to allow trading in new countries, while minimising the additional risk of doing so.
The ease of doing business in a country is often a key consideration and the easier it is to do business will often equate to reduced risk. The DIT has information on which countries are easiest to access.
Interestingly the top 10 countries, in terms of ease of doing business are:
This may surprise some people as countries like France and Germany are notably absent, highlighting the need to fully research countries before committing to them. In the case of France and Germany, their onerous HR laws are the reason why they do not appear on the top 10. A further source of information on potential markets can be found in the CIA Factbook.
The DIT also has many tools available to those exploring overseas markets and it is keen to help UK businesses explore these markets and help those businesses exploit those markets and reduce the risks associated with them. They are able to provide data on potential markets and also to help determine which markets products might be most suitable for.
They can use their tools and expertise to help consider:
Clearly exploring new markets is time consuming, but critical before venturing in to them. There are lots of resources available to help you with this. The DIT has a lot of information and can provide one to one support, help with trade missions and training. Professional firms such as Crowe can also help with advice on VAT, taxes and what to consider when moving employees and Directors across borders. Find the recommendations business owners should consider on their international strategies here Setting up or expanding overseas.
If venturing into a new market will involve employees or directors spending time in those locations, this needs to be considered carefully. This is a highly technical area and should be considered at an early stage with global mobility specialists. If you get this wrong the consequences can be significant including:
Your advisor will be able to advise on whether there is a Double Tax Agreement (DTA) exemption along with the tax implications if this is not available.