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Selling to foreign markets: 5 things to remember


We love the HSBC advert with the little girl selling lemonade: ‘I’m on the phone to my supplier in France!’. It is charming and positively prophetic in its illustration of a) how easy it is for small businesses to deal internationally b) how simple small businesses think it is and will be to sell in a country other than your own. We like the advert, but it is silly.

It is all well and good being able to buy your lemons from France when the rate of exchange enables you to purchase them for less than you might spend in your native country (or anywhere else for that matter), but, what happens when that exchange rate changes, goes against you and you have not spent the time developing your domestic supply chain in such a way as to ensure you have an exit strategy?

To be fair, the two paragraphs above relate more to those importing product and selling it domestically. This post as a whole is about selling your wears in a foreign currency. So it is written with the lemon supplier in mind. He prices his French grown euro priced lemons in US dollars to enable him to sell to this little girl. It’s a wonder she buys from him given the uncertainty about freight leaving France. Shipping is no doubt cheap, but will the product ever arrive I ask you?

Lemons grown in France and sold to a US lemonade producer. Unless the lemon producer is also buying things in from the US or has other forms of expenses in the United States (a sales agent for instance, or a US

office) the total sum of the US he is paid by the little girl need to be converted back into euros, otherwise how is he going to pay his staff, rent etc. Added to which it is fiendishly difficult to open a US dollar bank account in the US for the collection of his USD earnings. So, at the moment our lemon producer is simply getting the little girl to electronically send the US dollars to his french euro account and he is simply taking whatever rate of exchange he gets ‘on the chin’ because he doesn’t know of another way. He is losing about 5% on his margin because he has no control over the timing of the conversion or the spread on the exchange rate. Our lemon producer is having rather a sorry time of it, FX speaking, but he is certainly not alone.


If, like our lemon producer, you don’t know how to open a foreign currency account into which your overseas customer can pay your earnings, or you don’t want to because once funds are in there you don’t know what to do with them from an accountancy perspective, then you can simply use the client trust account facilities of a specialist FX firm. If you’re foreign sales grow then it is only natural that you will evolve into the sort of business that has an understanding of how to receive funds, but, until that time Prime Cap and our nominated Authorised Payment Institution can receive a foreign currency for you from your equivalent of the young lemonade seller in the US. You then get to decide, with the help of Prime Cap's dealers, when you want to convert funds, if you need to convert funds and whether or not the method you are inclined to use is the most competitive way of doing so.


The relationship between the little girl and her french supplier is not uncommon. As touched on in the preface, the profit margin of the little girl is affected positively and/or negatively by the movements in the exchange rate. Conversely the supplier is affected by the rate he can achieve when converting his US dollar earnings back into euros. Now, hopefully you can see that if the girl is paying in euros and the supplier is earning in US dollars, they are both converting currencies. That is not what happens in a conventional import vs export relationship. What would be point. If the girl pays in euros then the supplier receives euros. If the supplier gets paid in US dollars then the girl isnt affected by the rate of exchange because she is paying in the currency that she earns in.

So, what this example boils down to…and who is affected by the rate of exchange, for good or ill, depends on who carries the foreign currency exposure. By exposure I mean who is exposed to those movements in the rate of exchange. Your exposure is the amount you stand to lose should the value of what you hold drop.

There are reasons why the little girl might want to carry the FX exposure and reasons why she might not. Equally the same can be said for the supplier…for instance, is either or both of them are dealing in other ways with foreign currencies they may want to be paid in those foreign currencies. Advantages to taking on FX exposure are that, provided the market is favourable, you can make more margin by locking in better rates using things like forward contracts.

Getting your customer to pay you in the currency you need isn’t too much of a stretch, but, it is worth considering that the foreign currency amount they will have to pay is something over which you won’t have any control and might leave you vulnerable to the possibility that your customer can actually source domestically or in a different currency market for less. If you are selling a product that isn’t produced anywhere else, then you command the upper hand, but, the foreign currency fluctuations and your keenness to protect you margin may push you into uncompetitive territory.


As above, if you are selling a UK made product overseas you may find that being able to price it, with your customer being able to purchase it, in their own currency is what allows you to compete directly with their would-be local suppliers – of course it doesnt have to be a UK made product…and our site stats suggest we have a number of readers from the Far East and the US…so the same applies to you, just in the market local to you.

‘Currency controls’ in your own country may have an effect on the ease with which you can buy and sell currencies on the open market and I will touch on those concerns in a subsequent post.

We are often asked by online retailers who might take orders through something like shopify how best to manage the FX side of things if their customers are not paying in the currency the retailer operates in. Whilst that in itself warrants is own post, Being unafraid to price in your customers’ currency will add massively to you marketing collateral. There are rudimentary tools already around that can assist you in receiving payments in different currencies, but, from what we have seen these are mass-market solutions that prioritise convenience over actual competition on cost. You’re paying a premium for something that is perceived as easier to operate; but, our assertion is that tailored solutions are no less easy to use. They come with a built in safety mechanism – someone who is looking out for your objectives – and they are far more scale-able than the DIY platforms out there because they can change as your business changes.

If you are using something like Paypal to collect payments from online sales, whilst admittedly appealing because it allows you as the customer to have oversight of what you’re selling and earning, you are losing out hugely on the margin and perhaps missing a trick because of the limited tools available to you. With both compromise and reason you can arrive at certain concrete rates the achievement of which inform you forecasts and behavior over the longer term.

You should be reviewing your FX exposure and operating rates as regularly as you review your pricing strategy. The rate of exchange is no longer something that just happens to be a part of your business functions. It is both a tool and a threat to your ongoing stability and so speaking with someone with more experience than you, especially someone who isnt going to charge you a bean until you actually buy something from them in hard currency, is eminently sensible.


We're starting to notice that all these points could be tied up in one uber-post as they kind of feed into each other. Separately though they could be read and, if acted upon, can bring different things to the table.

One of the hardest things to do, when you’re a deliverable currency dealer, is to convince a customer to favour ‘the known’ and avoid speculation about the rates. Thousands of people are paid millions annually to provide informed and actionable guidance on exchange rate movements. They get it wrong all the time. Yes, they might get it right more than they get it wrong, but, they have cutting edge software, data collection, research and whatnot at their finger tips. Sadly you do not. So, when a whole dealing team of brokers with some 70 years’ of collective experience suggest that you work out the terms of a transaction based on the rate in front of you rather than some rate that has yet to materialise,

We're amazed that you/one/clients think it reasonable to say ‘I think I will wait and see’. If we said to you ‘I

will sell you this watch for £10 today. If you ask me to sell it to you tomorrow it may or may not cost you £150’ how would you approach the decision you have to make? Lets assume that you have £10. In fact you have £50. Would you try and bet that I’ll sell you the watch for £5 or would you want to avoid paying £150? Based on no other information than the fact that you could see the outcome you are hoping for, are you actually prepared to risk the cost going up many multiples? If not with the watch then why with currency?

A business that sells tools is not a business that should be trading in currencies for gain. It is a business that converts currencies because it has to and it’s priority should be ensuring the bottom line does not increase. Yes, if the bottom line goes down then whoop-dee-doo, but it is totally reckless to simply bet on that one way or t’other.

What is more, we know of many deliverable currency brokers who, contrary to what is permitted by the FCA, actually outright advise customers on when to buy currency, when to sell and where they think the market will go. This is a big no no. If you currency broker does this, have 850kg of salt delivered to their office because its not a pinch that you should take what they say with…


This concluding point is the accumulation of all the others. Margin, both in terms of the margin applied to the rate by your bank or currency dealer and in terms of your profit margin as a business are the two most important aspects of any foreign exchange transaction for bodies corporate. Do not compromise on these two things unless what you are giving away is simply too good to refuse and, for the conscientious FD I would argue that nothing is more valuable than profit margin.

We totally appreciate that it is efficient and easier for the team in accounts payable to log in to an online FX platform and select which beneficiary they want to pay without having to confirm it with anyone by email. But if that convenience comes at the cost of visibility on your margin then I am always going to say it is not worth it, especially when a real person can throw in the benefit of years of experience about whether or not the payment mechanism is the best and most economical one going.

Forget the specifics, but a colleague of mine was recently in discussion with a high up in the FX division of a one of the big UK High street banks. This high-up conceded that although he and his team could anticipate what rates it would take to beat smaller brokers like Prime Cap, there would always be a proportion of customers for whom his rather expensive and very flashy online FX platform simply wouldn’t be appealing to.

Big banks like big FX firms need bums on seats to sustain a tight margin. If they don’t have sufficient volume then their margin widens because their bills still need to be paid. Their margin widens either in the rate or by reducing costs; moving customers online is a cost reducing exercise. One person can effectively service many hundreds of clients without ever actually speaking with them. This is a shame because the clients’ experience is then one dimensional.

Price, or rather cost, isn’t the only thing that induces people to work with a supplier. A price can be higher with one firm that the other and in our experience that the more ‘expensive’ firm is still in business because their customer is happy to pay for the excellent service and the holistic improvement to their margin. If there weren’t such benefits then we doubt the client would still work with that broker…and it is the same the world over, regardless of industry.


If you fall into the camp of any of the businesses outlined above or even if you don't about would like to talk to us about your unique challenges then do ring our dealing team on


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