Create Massive Value! - International Sales & Risk Management

Ed Marsh | Oct 3, 2012

Stop fretting & leverage opportunities

There's always a battle between perspectives. And the 'right one' normally is only clear in retrospect - and even then was it right?  lucky?  better executed?

International sales growth and risk management can be cast in two dramatically different perspectives.  If you hew to the 'cup half empty' approach you'll cost your company huge business opportunities.  On the other hand, a 'cup half full' viewpoint will open opportunity vistas that will quicken your pulse.

Payments, currency & risk

I've written often about the tendency of companies with immature export programs to focus on transactional considerations.  (Note that this doesn't only mean new to export - many companies develop a program accidentally which has some important elements, but lacks others.)  Issues of payment and finance are often cited as areas of concern from an international risk management angle.

Right at the top of the list is typically a finance related topic.  Sometimes payment/receivables exposure, sometimes foreign currency and sometimes working capital to support growth.

And always viewed as a potential problem....

Turn the problems into opportunities

Did I really just write that?  Sounds pretty sophomoric.  But seriously!  Stop seeing the risk and seize the related advantage as a growth driver.

Quick examples include:
  • interest rate advantage
  • foreign receivables credit insurance - and desirability as a supplier
  • multi-currency capability and customer preference
How can you parlay these into advantages?

A number of recent announcements from the Ex/Im Bank highlight the opportunity to leverage an interest rate advantage.

Briefly the markets that are growing most quickly (the ones where your export opportunity is greatest) are experiencing inflation.  As more people work, earn more & buy more, prices rise.  That's simple.  In most cases governments respond with higher interest rates as the primary tool to throttle inflation.  So typically, high growth markets have high prevalent local interest rates (18-20%.)  In contrast domestically we have rates which are quite low - and through the Ex/Im Bank you have the opportunity to secure financing for your buyers which let's them finance your product at 1/3rd the cost.

A foreign buyer which purchases USD $200,000 of product at a 6% rate through ExIm Bank guaranteed financing over a 5 year term will pay approximately $232,000 in total.  That contrasts with the cost to finance locally at 18% which will cost $304,720.  The total transaction therefore is 31.5% more expensive if financed locally.  Or conversely, you could help them buy your "Made in America" product for short money.  Talk about 'win / win'!

Willingness, ability and most importantly and open mind to working in multiple currencies makes you a far more valuable supplier - with very little additional risk.  Read more about that topic here.

And why fret about your foreign receivables and obsess over complicated and expensive L/Cs?  Did you realize that you inexpensively insure your foreign receivables?  You can sell on open account to channel partners and certain buyers - and offer preferable down payment terms to others.  Suddenly you are a preferred supplier, you have mitigated risks, and you have a secure asset (insured foreign receivables) which you can use in collateral based lending calculations!  And all that while sidestepping the hassles inherent in letters of credit.

Back to perspective

Here's the thing.  Understanding the mechanics of international sales transactions is the easy part.  That's why so much free assistance is available.  

Business success is driven by insight, though, and very rarely does free and deeply discounted government assistance incorporate business insight.  It lacks perspective.

An entrepreneurial approach, creative and curious mind and owner's perspective are critical to visualizing and leveraging the opportunities which exist.  Much like arbitrage, these avenues to distinguish your company and grow your business accordingly are valuable because they give you an edge over others.  It stands to reason, therefore, that most others aren't seeing them.

So it's your choice.  Are you willing to bring the same sort of rigor to the "R&D" side of your international sales initiative that you do to your own product?

If you're ready to elevate your export program contact Consilium Global Business Advisors.

Wondering what's really in it for you?  Download our free eBook on the impact of global diversification on enterprise valuation.

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