Should I only sell in pounds or should I be flexible?

Question

We sell software products and bespoke solutions for the non-profit industry. We have clients all over the world. So far we have only charged for our products in pounds. However our US clients see to have a real problem with paying in pounds and I am wondering if others have the same problem. Should I be selling our products in dollars there?

To give you an idea our product prices range from £1500 to £5000 but we also have an annual maintenance of between £300 and £1000 so the largest one organisation would pay is £6000 (unless they buy more than one product in one transaction).

How do other people handle transactions of this size?

No offers from foreign exchange companies please – have already been there and had that discussion.

Thanks

David

Answer

Hi David

Here is a little advice. You should seek the advice of someone who works in the financial markets so that they can guide you as to the medium and long term prospects for the GBPUSD.

Reason is simple, if you think (and your financial advisers) that the USD will strengthen against the GBP then by quoting and selling in USD, when you have to convert the USD back into GBP you will be making money (buying GBP lower ag the USD).The biggest problem you will have are the spreads you are likely to be charged by either the Banks and other FX companies. So what ever you make on the appreciation of the USD vis-a-vis the GBP you could end up “giving back” by way of spreads.

My advice is to make your customers happy and give them the option to pay in USD. That way you make them happy and you hope to at least cover your GBP at acceptable rates. You will need a USD account in the UK and also don’t forget when you do exchange the USD back into GBP your Bank is likely to charge you a transfer fee. Make sure you account for this when you deciding on the best course of action.

I hope that helps a little.

David

Answer

David

This is a question of budgets and risk assessment.

If you have a US company with a US bank account and make it easy for US customers to buy and pay in US$, you create the probability of sales expanding by a factor of between five and ten.

Your risk is an initial investment of about £1,220 with monthly costs of about £156 – say £3,100. For that you can have a US address with mail handling and visitor hosting. Telephone answering and messaging. Fax. Attorney. Incorporation. Registered Agent. CPA. Bank account and banking…

If your gross profit margin in 50 percent (it is amazing how many successful companies in hardware, software, and services are around that figure), given the numbers you quoted, two sales you would not otherwise have achieved will more than cover your costs.

Since an Essex company, Total Lockout, did what is described above, Google Analytics shows web visitors in the US have stopped looking and started inquiring. Tim Hughes of Total Lockout describes it as "turning on a tap."

CallPro CRM, a Wiltshire-based software company, have tweaked their US web presence and have multiplied business opportunities eightfold.

These and many more companies can choose wham, and at what rate, they bring back US$ into GBP.

It is just an opinion, but I believe you will not achieve your US potential in the US until you price in US$, and have a US address and telephone number to give buyers confidence.

Hope this helps. Go to our ExportAction.com web site for more information.

Good luck

Roger

Roger Frampton
ExportAction

Answer

Hi David, we sell a professional service (translation services), and have clients in many parts of the world. Whilst exchange rates are a risk, my general advice would be to make it as easy as possible for people to pay you! We normally price in USD for American customers, as well as for clients in many other parts of the world. Some countries make it difficult to trade in their currency, e.g. China with RMB, but even China is opening up to make trade easier. You can’t eliminate exchange risk, but I think you need sufficient margin to allow for variations in exchange rate. The great thing about software, is that I imagine you are charging at or before time of purchase, this helps mitigate risk. Hope this helps. Regards, Mike

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