Conversations on Growing Global Sales with Kyle Sloat!

Welcome to the Global Sales Mentor Podcast for conversations that drive growth.

When you are ready to grow your international sales, join the conversation with your host, Zach Selch. Welcome to Conversations That Drive International Sales. I have Kyle Sloot here who is in the field of foreign exchange, and we're going to talk a little bit about how you leverage foreign currency to drive your international sales. And so, Kyle, maybe you can just introduce yourself and, and talk a little bit about what you do, and then we'll jump right into the interesting questions and all the interesting stories about foreign currency.

Yeah, definitely. Well, first of all, thank you so much for having me, Zach. It's great to be on. So I head up our business development team here at MoneyCorp. So, you know, essentially what we do is we Reach out to people who have international sales, international operations, right? And engage with them, see what kind of solutions we can provide to, you know, the challenges that they're facing around foreign currency. So, you know, in terms of MoneyCorp, we're a leading global FX and payments specialist that specializes in payments and managing risk associated with that foreign currency itself. So it can definitely be pretty interesting in terms of, you know, what's going on in the markets and what's going on with people's businesses. I always love hearing from people like you who have a ton of international business experience and just, you know, seeing what kind of challenges you guys might have faced in the past. And if, you know, at the rate things are developing on, on the, you know, global payments and foreign currency front, you know, what solutions we might be able to offer now that maybe weren't available at the time.

Yeah, great. So let me tell you my favorite foreign currency story. Okay, I'm in a university town and I have a lot of friends who are professors and several of them are econ professors and business professors. Northwestern has a really good MBA program. So I have a lot of friends who were in that field. And a while back, this goes back about 15 years, I was at a party. And I'm talking to somebody and I said, what do you do? And he says, well, I'm an international business professor. I'm a professor of international business at Northwestern. And I said, that's interesting. What exactly do you teach? Because I'm in international business and I sort of wonder what they teach in class. So he starts talking a little bit, and, you know, they have 13-week courses, and it sounds like 90% of what he's teaching is currency fluctuation and hedging against currency fluctuation. So I sort of chuckled. I said, I'll tell you what, I spend about 30 minutes a month dealing with currency issues. There are so many other things that I deal with. I said, I understand how important it is, but it's like your whole course is based on this. And I've never lost a sale because of currency fluctuation. This is what I said. This was about 15 years ago. Now skip forward to, I want to say, 2014. And I don't know if you remember, but the Brazilian real dropped about 60% in a matter of possibly days, no more than about 2 weeks.

Yeah.

So I had a customer Sorry, a distributor partner who got a purchase order for about a $1.5 million deal, and about 3 days later the real dropped. So he's holding a purchase order. But he can't put that— he can't give me that order because now the difference in currency has changed so much that he simply can't afford to give me that order. On the other hand, he's accepted the order from the customer, right? So this poor guy is totally screwed. And he's like, well, Zach, can you, um, you know, can you take some of this damage yourself? And I'm like, I, you know, I don't know how I can handle that, right?

So we're going back and forth. How good of friends are y'all?

Sorry?

I say, how good of friends are you guys?

That's exactly it. It's like, how good a friend am I? So we go back and forth with the customer and the manufacturer, you know, me, I was the manufacturer and the distributor, and we're going back and forth trying to find a solution. And we— it took months to figure out how we were going to solve this problem and get goods out. So, you know, you can go years without having— you know, it's like any type of insurance, right? You go years without having a disaster, but when that disaster hits, you probably want to be in control, you know, have some way of hedging that damage.

Yeah.

So, that's my personal experience with this, right? I've never had anything quite so bad, but since then I've had, you know, you can see the past 7 or 8 years, there have been major currency fluctuations, the Australian dollar, the euro. I think the real is the biggest one, but boy, you get some, you know, and they impact sales, right?

Certainly. And I would say real is one of the trickiest currencies to work with in general. They have so many restrictions on the central bank.

Right.

But with that said, that's kind of where we see one of our biggest growth opportunities right now.

Exactly.

That's because we purchased a bank in Brazil.

Right. Where there's risk, that's where you come in, right?

Exactly.

You're like working with somebody who does any type of insurance. I mean, I know it's different from insurance, but essentially, that's what it is. We are, you know, people like me are paying you a piece To take the risk away, right? Is that fair to say?

I would say it's reasonably fair to say. And, you know, there are kind of a few different approaches, right, when people are looking at these currencies and putting together a strategy, right? It's, you know, I don't want any risk, take me all the way out, not interested, no thank you, right? You have the people who are, you know, trying to squeeze out every little you know, few pips in their favor, right?

Right.

Really maximize that. And then you have people in between. But kind of the way that I always look at it is protecting risk, yes, but more importantly, kind of protecting margins, right? And thinking about it in that perspective, I think you can go a lot farther. And, you know, exactly like the situation where you mentioned, you know, huge fluctuations can totally wipe out a deal.

Right.

Or, you know, especially with people in some of these other countries like Brazil, you know, Colombia, you know, parts of Asia, parts of Africa, you know, even if, you know, the currency is doing well, sometimes it's difficult for them to get their hands on, you know, the US dollars, right?

Oh yeah. I'll tell you what, I don't know if you've heard stories like this, but I've gotten paid for goods in Argentina by a wine company.

Yeah.

And what was going on was I was shipping goods to my partner in Argentina who was a medical, medical company, a distribution company, and he was making a deal with a friend of his or somebody he knew who exported wine. So he was essentially— I was shipping him goods He was selling those goods, buying wine, exporting the wine. Somebody was selling the wine for dollars, and then I would get paid by, you know, somebody who had sold Argentinian wine in the US because he had dollars. And I can only imagine how difficult it was for this poor guy to manage this whole way of paying me. you know, what I needed to get paid, right? So, you know, it's a wild world out there sometimes, right?

Well, not only is it difficult just figuring that out, it's also difficult figuring out, okay, how much am I even gonna make on this deal when all is said and done?

Oh yeah, yeah, right.

So, it could be wild. I've, you know, the latest one recently has been Venezuela, and, you know, I've heard some horror stories there. People trying to do transactions by literally shipping gold or using cryptocurrency or barrels of oil, all kinds of— I guess currency is a commodity. Exactly.

You try and figure it out. Yeah, I haven't done business with Venezuela in probably 5 or 6 years. And there are a couple of countries I don't want to touch with a 10-foot pole right now. But I guess, look, They need to buy stuff, right? So, so my not being able to solve that problem is probably costing me some revenue, right? So, so there you go.

Yeah. And just another interesting one recently was, you know, somebody in the, you know, plane manufacturing industry, not Boeing or anything like that, but somebody who's doing, you know, more mid-sized models, and they're working with airlines based out of Nigeria, which, you know, far as Africa goes, it's, you know, pretty good. But, uh, their banks, they don't have liquidity to provide them, you know, millions and millions of US dollars.

Yeah.

We ended up working, or we're in the process of working on a deal around South African rand, right, which is the dominant currency there. So it's, it's definitely, at least my approach is always like, let's put our kind of heads together See what kind of—

Be a little creative, yeah. So why don't you tell me some stories you've heard about some challenges, how different small manufacturers or mid-sized manufacturers— because we're not all Boeing, we're not all IBM, you know, they have people on board, they can hire their own economists to figure this out— but if you're a mid-sized manufacturer, what are some of the challenges and, and some of the answers that you're seeing people facing?

Yeah, so, you know, as people are doing more and more, you know, sales overseas, right, you know, not only can just finding a way to be able to, you know, receive that revenue, right, be difficult within itself, right? Do I need to open up local accounts, right?

Right.

You know, I would say just taking it a step further, most people don't have a good idea of how foreign currency is actually priced. Right. So, they'll call their bank, they'll get a rate of the day, they'll say, sounds good enough, and we'll go from there. And, you know, a lot of these deals, you're leaving 3% to 5% on the table just to the— Which is—

and I'll tell you what, you work so hard, you know, to negotiate up your margins, and then you're leaving money on the table because you're being a little sloppy with one of the logistical aspects, right?

Exactly. And I— the kind of way that I like to sometimes think about it is like if you hire a new head of sales, right, and he increases your global sales by, you know, 2-3%, it's a pretty good outcome.

You know, that's pretty happy, right?

Yeah. Why would you leave that same amount on the table? So, you know, kind of one of the big benefits with us and with some other, other providers is that, you know, we can offer receivable capabilities. So you don't need to Open those costly accounts with your bank, right?

Right.

You can just receive the funds directly into a segregated account of your own in whatever currency, exchange your currencies between, and kind of manage your currency from that perspective. And, you know, kind of the traditional model in terms of price for the more price-savvy people is let me get as many banks as I can, call them up individually, right? Say, what rate are you going to give me? Oh, well, my guy at Wells Fargo says he'll give me this rate.

Right.

Oh, my guy here says he'll give me this rate, right? And kind of playing that game. We automatically do that with 20 banks all electronically. So in terms of price, we're really able to kind of beat anyone. So those are kind of the 2 main problems, right? Just not understanding what's on the table and then just having the logistics to be even able to work with the Right. So once, once you get there, right, then let's say, how do I protect myself from this risk? And there's a few different strategies, right? You know, some of the larger manufacturers that are having, you know, larger orders, right, machines, whatever it might be, right, maybe it makes sense to do a forward hedge on, you know, individual purchase orders.

And just say, I've done that. You know, when you're dealing with a purchase order of a quarter of a million bucks or so, makes sense, you know.

Exactly. So you, you don't— you have a desired margin, and a lot of these companies can have pretty tight margins, right? And you can easily have your entire margin wiped out. So just locking it in ahead of time, which is all the forward is really doing, can definitely be beneficial. But I would say forwards are kind of You know, probably still in the States, the main way people do it, right? And I would say the States is a little bit behind in terms of foreign currency and how they deal deal with it. But what more and more people are starting to do are using you know option and derivative products, which you know still give you the same protection benefit, but allow you to you know take advantage of those swings in your favor. So you're not missing out and being No overhead, right? Right. So you know there's the per purchase order approach. There's a full-on comprehensive portfolio approach. You know the eye of the market view that the dollar is going to keep getting stronger approach. Eye of the market view that dollars can get weaker approach. And our job is to tell you your market view. Our job is to give you the info to help you figure it out, and then put together a policy around that market.

Right. No, that's, that's, that's great. And that's, that's very helpful. So I have this argument with— or discussion with a lot of people.

Okay.

I typically try to avoid putting out price lists in other currencies. Now, what do I mean by that? I, you know, sometimes I'll do price lists in euros and dollars. I really don't like doing a lot more than that because then I'm taking the risk on myself. But I know You know, I've, I've been with companies, I've joined a company and they have a price list in 12 currencies, right? And then what I'll do is I'll say, okay, I'd like to phase this out over the next year and not, you know, not do it next year and simplify. But I know people do it and it can be very effective for them. So why don't we talk about the pros and cons of that, of do you want to put out a price list in multiple currencies for— and what, what are the, the benefits of that and what are the dangers of that?

Yeah, definitely. So a few things. I mean, I'll, I'll say just straight up, there are some jurisdictions where it's just not going to make sense to really offer a price in that currency just because it's going to be too difficult to collect, you know, too costly for you. And some countries just, you know, have incentives around, you know, working with dollars, right? Whether it's tax incentives or whatever it might be.

Right.

So it's not always going to be the case that You know, I'm not gonna lie to you and say you're always gonna want to send it out in currency, but, you know, what I would say is if we maybe think a little bit about the converse, right? Somebody who is sending you, you know, an invoice in dollars, right? What are they doing with that invoice? They're building in a cost of their exchange, so some additional margin for themselves, which is usually pretty significant because they're not getting good rates from their bank. Yep. And what are they— what else are they doing? They're building in a little bit more margin because what happens during this?

They're taking safety on top of safety on top of safety.

Exactly. And then plus just a little extra for the hassle. So, you know, I think offering a price in the local currency, right, it's fair to build in that extra margin. It makes it more attractive for your buyers overseas, significantly. And it can solve some of these issues where difficulty getting your hands on the currency, whatever it might be. And then if you have a good partner and at least somebody who's going to be honest with you about, hey, how they're pricing your currency and what kind of margin that they're making.

Right.

You can definitely come out with a situation where your overall margin is increased.

So, so I don't like— I don't know, I honestly haven't given this a lot of thought, and I'm guessing you have more. But let's say I'm a $100 million exporter and I'm exporting to 25 countries right now. But you know how it is, it's probably 60 to 70% is going to be the 3 countries, right? And then the rest are all small countries. Would you say this is the line you should draw, this percentage of your overall sales or this much money If I wanted to offer— because let's say the euro is an easy call, right?

Yeah.

You're dealing with 27 countries. It's typically the big— you know, depending on what your product is like, your biggest currency after dollars is probably going to be euros, right? Depending on it. So the question is, okay, how do you decide which currencies are— you're going to offer a price in that currency and which currencies you're going to say, Hey, suck it up and pay me in dollars, right?

Yeah. So that's a good question. I would say, you know, anything like euro, Canadian, pound, right? Super safe. We call them the fiat currencies.

So you're not even thinking— sorry to interrupt you, but the way you're looking at it, you're not even thinking about percentage of sales. You're saying this is just a no-brainer because it's not going to change that much, right?

I would say, yeah, I would say maybe by country is where it makes the most sense. But I guess if it's a percentage of overall sales, right, I would say, I would say maybe do the math yourself, right? Think about an additional few percentage on your overall volumes of sale. And that's what I always encourage people to say, is this worth it to me, right?

Right.

Is an extra, you know, $10,000, $20,000, $30,000, $50,000, $100,000 on these sales, does that move the needle for me?

No, that makes perfect sense because I think you're taking a look at it and you're saying, okay, is this going to get me another $50K, you know, is it going to get me another $50K or $80K worth of sales? And if the cost is only going to be $1,000 for, you know, the hedging, then yeah, it's worth it for me, right? So I think that's where you got— I think you're right. I was just looking to see if anybody had ever talked to you in terms of that, about how to make that decision.

That's an interesting approach, certainly. And I would say our kind of first approach is always, you know, let's have a conversation, but then let's figure out what numbers we can put on it, and then is this worth it to you? And another thing I would say is with, you know, the more flexible hedges, right, the option derivative products, not only is it no longer just about protecting your margins, right? You'll still, you'll still do that, but you can also create some positive variance, right, that wouldn't have been there before if you were just working with US dollars.

Well, that, that makes perfect sense. And then, like you said, in the end of the day, it either pays for itself or it doesn't pay for itself, right? So if you're taking a look at it and go, you know, I'm gonna make a little bit more money, and that little bit more money can add up, like you said, maybe the cost of another salesperson, right? You know, so, or trade show, like that little bit of money you're saving by working with somebody like you and hedging on that currency fluctuation, that could be another trade show, that could be another regional sales manager's salary, right?

So, and it could just be an interesting way to look at it. It could just mean, you know, it's just straight up significantly, you know, more sales for a specific country. I would, you know, I would say the worst rate I've ever seen was somebody's distributor in Pakistan, which is granted a pretty difficult currency, they were paying close to 30% to exchange US dollars, which is by far the most astronomical, terrible margin I've ever seen.

Right.

I would say 5% is still a pretty bad margin, right? Maybe depending on the country, right, you'll get a little bit higher than that, but You know, once, once they were able to fix that, it was, it was just a huge boost because they— that, that distributor was having to build that in. Yeah, cost structure.

So exactly. And that's, that's basically purely wasted money, right? When somebody is building in safety margin because they don't— they're insecure, that's wasted money, right? Yeah, that's it. So what, what else can I do to protect myself as a manufacturer when I'm doing business internationally? From a currency perspective?

I would say just obviously hedging is the biggest one, but I would say just considering, okay, what's going on with this currency? What's going on with this country? Is this a safe currency to be operating with? Are there restriction liquidities? Are there significant considerations to be made on the political situation. But, you know, I would say obviously we'll help talk you through whatever country you might be working with and whatever currency you might be working with. And it might be a case like with the naira where, hey, you know what, maybe let's think about using South African rand instead.

Right.

It might just be the case of, yeah, it's pretty risky. There's not a big risk of them doing non-payment, right? You have a good relationship with them. Why don't we just put a hedge on the back of this? So even if the currency tanks, right, they're still paying you the same amount of currency, you're still getting the same margin. So great, great.

And of course, it's always cool to hear funny stories. So can you tell me any funny stories about how people have totally screwed this up? Well, and you don't have to name names, of course.

They're always funny after the fact, not so funny at the time.

Oh yeah, oh yeah.

But I mean, if we're thinking, thinking recently, right, with the Swiss, Swiss franc being unpegged, I had a friend who worked at a previous country where he had a client that had a bunch of revenue, sales revenue, sitting in a Swiss, Swiss account that basically I think it tripled. Yeah, but there was so much fluctuation and so much You know, activity in the market, he couldn't even get it out.

Right, right.

And ultimately he ended up taking a big loss. So he wasn't happy at the time, but, you know, he saw— him and, you know, thousands of other people saw, you know, millions of dollars, free millions of dollars sitting here right now. So there's definitely been things like that. And, you know, we've seen people get You know, and that's the other thing about hedging, right? Is if you're doing just a simple forward, like we talked about, you know, if you're not doing an option, you can easily miss out on those moves in your favor. So we've seen some people who opted to do that and, you know, left $100 grand on the table. And it's always frustrating, but, you know, it's life lessons, live and learn. And We'll help put together the policy that's going to be right for you and try to keep you informed on what's going on with the markets. Nobody has a crystal ball. If we did, we wouldn't be talking to you. We'd just be trading the market all day.

Right.

But yeah, so—

And that's the thing. I think when you take a look at it that way and you talk about what you could earn, if by taking control of this element of the risk you can, you know, make 2 more percent margin, 3 more percent margin over the course of a year. That's, that's significant money, you know. If, if you're selling— so, so that's $30K on a million bucks, right? If you're looking at 3%. So if you're selling, uh, $10 million bucks, right, that's $300K right there. That's not bad, you know, just in terms of a little bit of money to do a little bit more work, because the work involved isn't that much, right? That's A couple of hours. I mean, from the manufacturer's perspective, I'm thinking that's a couple of hours a month to call somebody like you, talk it through, do the pay, you know, get an assistant to do the paperwork. That, that's pretty good return on investment if you can do that. So that's not a bad way of, of dealing with it.

Yeah, and I'll say the one thing about our approach which is maybe a little bit different is, you know, we came over from the UK We're processing about $70 billion in total FX transactions. So we have a fairly substantial global infrastructure.

Right.

And our approach is essentially, we'll make it available to you. There's not gonna be any cost, there's not gonna be any obligation, right?

Right.

And if you take advantage of it, it's because you're getting a good rate and it's more beneficial for you. And then we'll make our money when you execute through us. So from that perspective, it's definitely a win-win. You know, the other thing I'll say is on, you know, as people grow internationally, you know, you get more and more payments going out internationally as well in foreign currency.

Oh yeah.

And, you know, there's definitely a benefit to requesting, you know, invoices in the local currency from them as well.

Right.

You think about the margin they're building in is not going to be there. And you think about, hey, if we see, you know, the 90-day terms of my invoice, we see a 5% move, maybe it's still better for me to pay a dollar and I'll just pay a dollar then. Right, right. Those considerations are definitely something, you know, that we can kind of help businesses talk through. And I think it's always an interesting conversation, at the very least.

I can't, can't argue with that, Kyle. Cool. All right, well, thanks a lot. Anything you want to say to plug your company, uh, and your— and what you do before we, uh, we part? part ways today?

Yeah, definitely. We can include my contact information in this.

I'll do that. Yep.

Yeah. And then, you know, if anybody has a particular question about a specific country or currency, whether it's, you know, something that you've already started, you know, doing business in or just considering it, I would take the call, spend a few minutes seeing if there's a solution here for you, and take it from there.

Great. Well, thanks a lot for your time, Kyle. And again, this is Conversations That Drive International Sales. We talk about different ways to help you as an exporter grow your international sales. So thanks for joining us.

Oh, one last thing. We do have a partnership with the Ex-Im Bank. So if you're a member of the Ex-Im Bank, we'd love to talk.

Of course. So Ex-Im Bank is going to be a whole other subject. And I love the Ex-Im Bank because again, when you're dealing with risk, You gotta— this is also a whole different area of risk, but, you know, people will come back and they'll say, ooh, this looks a little risky. I don't want to do business. And a lot of companies walk away from deals, especially— and I'll tell you what my personal experience is. You'll be dealing with a government and the government will say, look, I can't pay you upfront. It's like, we just don't have the methodology to do it. Right.

Mm-hmm.

It's the government of Colombia. In the end of the day, you're going to get paid, right? So, you go to Ex-Im Bank, you give them 3 points or 2 points and change, and you know you're going to get this deal. And I've done multimillion-dollar deals that way with government. Actually, I think I've only used the Ex-Im Bank for governments, but you could use them for other people.

Yeah.

But again, these are people, they come and they say, hey, I can't pay you upfront, right? I'm not going to give you cash in advance. Deal with it. And Ex-Im Bank is a great way to do that because very often, if you're a smaller or mid-sized company, your board is going to say, hey, I'm not going to ship $4 million to Saudi Arabia or Colombia without getting paid for it. And on the other side, the Ministry of Health or the government is saying, Well, we don't pay in advance. I can't, you know, I'm buying a whole bunch of stuff this year. I'm not going to pay one vendor in advance, you know, suck it up. And XM Bank is the right choice, right? So there you go.

I did—

you know what, I didn't realize you guys were also partnership partners with XM Bank. So there you go, learn something new every day.

And if you want, we can, you know, have the person that set up that partnership join the next, uh, the XM podcast. But one last note, if if you're not dealing with the government, right, but it's somebody else and you are using the Ex-Im Bank, it can definitely be attractive to let them know we have a hedge in place, we'll accept local currency. You're not— you know, part of the reason they're worried about paying is they don't know where their currency is going to be at versus the dollar. So giving them that assurance can help as well.

And I'll tell you what, some of these big deals, you know, the companies just have trouble getting together enough money or even getting to get— I've Look, I've had distributors I've worked with put a mortgage on their house to give me an LLC, right? And I felt bad about it.

Yeah.

But, you know, sometimes that's where you end up. And working with XM Bank, sometimes you can save that problem. You know, the biggest— I'll tell you what the biggest problem, and this you might have heard this before, the biggest problem I find with being in my shoes, right? You're the VP of international sales of a company that, you know, does a few hundred million dollars. And you go to the board or you go to the CFO and you say, I want to work with Ex-Im Bank, or I want to hedge my risks because I want to make sure that we're going to get paid. And he's like, whoa, whoa, Zach, what do you mean you're not sure you're going to get paid? And I'm like, well, I know I'm going to get paid, but I'm more confident if I get a partner involved. And he's like, well, you shouldn't be dealing with customers if you don't think you're going to get paid. And, you know, so once you raise the word risk with your CFO, very often in American manufacturers, they're like, well, I want zero risk. If you, if you, if you have a question about that customer, then don't do business with them, right?

Yeah.

And I'm like, you know, there are customers you're going to have a risk You have to find a way to hedge the risk. You can't just walk away from deals because there's an element of risk involved, right? And that's where you guys come in.

So yeah, and what I will, you know, additionally say that, you know, we find with these CFOs is if you get an extra, you know, $100 grand in foreign currency fluctuations in your favor on your balance sheet, right, you might get a pat on the back, right? You Yeah, but, you know, conversely, if you get the same amount as a loss, that's how people lose their jobs. So having those conversations about risk is definitely—

That is exactly right, Kyle. Well, again, thanks a lot for coming on board with us. I appreciate it. And again, this is Zach Selch, Conversations That Drive International Sales. Join us every week for more information about how to drive your international sales.

Great talking with you, Zach.

Thanks a lot, Kyle.