Exporting can be a risky business for SMEs. Yet as one business already selling abroad has discovered, there is one challenge that easily stands out as the biggest.
According to Scott Boocock, of South Australia-based HEGS Australia, the one thing that dominates his strategy as an exporter is currency.
“Currency is a continuous risk for us as a small business. You can benefit from it, and it can go the other way,” Scott tells My Business.
“We're always looking at that as a challenge, because at the end of the day it's dollars in the pocket.”
One recent example highlights the sudden and dramatic ramifications that movements in exchange rates can have on an Aussie exporter.
“We had containers organised for England, and Brexit happened, and currencies changed. You suddenly lose a certain dollar value in the currency, so you have to then decide whether you're going to ship now or ship in six weeks’ time when the currency is back to where it was,” explains Scott.
HEGS Australia, which developed the HEGS clothes peg to minimise marks and damage to clothes and has since branched out into other products, currently exports to 18 countries worldwide, including North America, the UK and Ireland, Mexico, China and Japan.
As such, Scott says the company has had to look closely at currency to minimise any adverse impacts on its bottom line.
“We sell in the local currency of choice, or Australian dollars. For example, by selling in Australian dollars, we know that whether the currency changes up or down, we don't lose. We might not win, but we won't lose, we actually end up with the dollar value that we have,” he says.
“We [also] sell in certain currencies in certain countries … so we hedge our bets both ways.”
The benefit of this, says Scott, is that you can play the currency game to try and turbo-charge your profits when things move in your favour.
“With hedging our bets and currency exchange rates differing, we actually make more exporting [than we do selling in Australia],” he says.
“A dollar in Australia is a dollar in Australia, and a pound in England is a pound in England. But you can sell … at a normal or higher rate.”
In other words, the numbers on the price tag may be virtually identical, but because of the currency differences it can be much more profitable to sell in other currencies rather than in Aussie dollars.
“We're selling at a great rate exporting because we're sending to countries where those dollars or those pounds or that euro is higher and worth more.”
Too many SMEs are making this mistake
By Adam Joy
Taking digitisation out of the ‘too hard’ basket for SMEs
By Jason Brouwers
The insanity of consumer expectations
By Jason Dooris