An interview with Jason Storsley, Chief of Small Business for the Royal Bank of Canada.
Why and how should SMEs expand outside Canada?
Good reasons abound: Canada accounts for just over 2% of global GDP, and not all countries are at the same level of economic development. Thus, your company could have a product that sells well not only here, but also in other countries or regions of the world in view of their economic maturity.
The key is to have a solid business plan. You need to know the market and the customer base, and understand how they will react to your product. Outside our borders, nothing is the same.
How many of your customers export?
We are seeing more and more, especially online providers. Thanks to the Amazon and Alibaba of this world, it is easier than ever to go international.
Who can help my SME in its efforts?
You will need an accountant who has experience with all the transnational dimension. Ditto for your legal counsel. Some countries, like China, require a local presence – so you will have to create a physically active subsidiary there. It will take the advice of a law firm with the necessary expertise to establish and conduct your business in your new expansion territories.
What about currency risk?
Imagine that you manufacture your product here in Canada, but sell it abroad and pay in another currency. If the exchange rate moves in the wrong direction, not only could you come out losing the deal, but the whole exercise could go awry. It is therefore crucial to be aware of the currency risk, and to have a strategy in this regard.
This is an excellent point of discussion to present to your banker, as well as to your accountant and your lawyer.
My choice of banker becomes important if I start foreign trade?
When it comes to foreign trade, it’s important to centralize your banking – your local currency account, your foreign currency account, your credit cards (which will likely be in Canadian and US dollars) – on a single platform. online banking. You want a portal as integrated as possible, because sometimes you will make transfers, sometimes you will buy currencies, sometimes you will transfer funds between your accounts …
Is it complicated to establish a banking relationship abroad?
Watch out for deadlines when you enter new markets outside the country. You probably have a habit of opening bank accounts; if it’s a personal account, the transaction can often be done online, and if it’s a business account, it can take just one day.
But in some parts of the world, it might take you three to six months. In addition, you may need to establish a local presence. We are not talking here about registering a name with local authorities, but about maintaining offices and staff. You may need to form a joint venture.
We must never neglect the time dimension in foreign trade, because the time will be longer than in Canada: advisors will need time to answer you, the options available to you will be complex, and you will need to help to guide you.
What will take more time than here?
There will be ongoing paperwork. For example, foreign authorities will want to understand your ownership structure of your business (who owns equity, owns equity investments). As a result, they will often require various documents before you can do business on their territory, and in many cases you will have to produce other documents periodically to continue your activities.
Are there places recognized for their bureaucratic heaviness?
Some less developed countries have very few regulatory requirements, but others on the contrary have more than here. It is up to the owner of the company to be well informed on the subject.
What surprises most your customers who have started exporting?
There are two comments I hear often. The first: “I did not imagine how different it would be to simply start a business in Canada.” The second: “I would never have left it alone. The advice of my banker and the expertise I have had on accounting and legal issues have been crucial to the start-up and success of my transnational activities. “