Dynamic Export | 31 October 2017 | Australia
Australia’s export industries continue to perform strongly. One sector which often flies under the radar, however, is IT services – one in which Australian companies have considerable expertise in.
BroadSource, a company which provides IT solutions and platforms for global telecommunication companies, typifies Australia’s expertise in this area. The company specialises in building and implementing cloud-based telephone systems and developing companion software products.
BroadSource have been exporting since 2013, to diverse markets such as Europe, North America, Hong Kong and the Pacific Islands. In just four years since their first export order, exports now account for approximately 90 per cent of their total sales.
Are you thinking about exporting but not sure how to approach it? Follow these four steps recommended by BroadSource founders Jason Thals and Haydn Faltyn.
1. Identify the right company structure
According to Thals, identifying early the most appropriate company structure for your business, can set you up for a smooth transition to exporting. “We made the decision early on to go with a corporate structure rather than a small business structure. We created a holding company located in Australia, then created BroadSource Europe and BroadSource US,” says Thals.
“This has enabled our business to expand and globalise – and as we grow, we can easily add more resources and entities.”
2. Tailor offering for customer needs
According to Faltyn, it is crucial for any exporter to tailor the product or service being sold to the market you are planning on entering. A common mistake in exporting is assuming that if a product or service works at home, then that will directly translate to international markets.
“When working with our customers to implement the BroadWorks™ platform, we often identify opportunities to design and develop our own software within our customer’s technology environment. This results in a more rounded, end-to-end offering, which these service providers are then able to provide to their own customers.”
3. Prepare for tax compliance and currency exchange
“One of the biggest challenges in exporting is protecting yourself against currency fluctuations and compliance with red tape such as tax procedures in the market you are exporting to,” says Thals.
“We learned early on why Europe wanted to create the EU and a single currency – when you go between currencies, GST, VAT, different taxes and currency exchanges. We had to create different structures to not leak too much of our revenue into foreign trading. Our structure enables us to minimise the number of times we convert. If we don’t, we can lose three-plus percentage points in converting currencies around the world,” says Thals.
4. Plan for long working capital cycles
Many small business exporters struggle with maintaining appropriate cashflow levels in their business to meet export contracts. This is largely because of what is often a long time period between winning an export order and being paid for that order. Small businesses often turn to their relationship bank, but often a lack of security can limit a bank’s availability to help.
“It was actually our accounting firm which referred us to Efic – who were able to provide us with an export line of credit facility,” says Thals.
“Having a line of credit like this in place allows us to act on a commitment from a customer, even though it’s probably 12 months or so before we get paid. It means we can invest resources into a contract earlier, make commitments in terms of growing our headcount and increase our marketing.
“There is help out there for small business exporters – but often people don’t know where to look. New exporters need to be aware of the challenges presented by long working capital cycles, and plan accordingly.”
Andrew Watson is Executive Director, Export Finance, Efic