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Q&A: Incorporating Your Business Overseas
From the day TeamLauncher.com opened for business with four full-time employees, it was a global operation, says CEO Tadd Rosenfeld. This division of four-year-old, Miami-based Dual Eagle LLC recruits and manages international employees in India and the Philippines for clients primarily located in the United States. Today, it has 10 employees who oversee all the marketing, recruiting, management and bookkeeping. This team also negotiates contracts involving foreign currency and develops payment strategies to minimize the impact of exchange rates on TeamLauncher.com and its clients.
Here, Rosenfeld shares some of what he’s learned about hedging currency risks and managing cash flow through negotiations and banking overseas.
When you first got started, did you understand the currency risks and other financial issues you faced doing business overseas?
Rosenfeld: No. We fumbled through it at first. It’s a tricky thing to know how to manage a business when you are working with multiple currencies.
When we first started, we were doing business in the Philippines and making most payments via wire money transfer. We paid employees and vendors in their local currency on the day the payments were due. At that time, we benefited from the exchange rate because the dollar was strong against the Philippine peso. But then the exchange rate briefly moved against us and we started considering other options.
At the same time, the business was growing and the amount of [business transactions] grew, so we decided to incorporate locally in the Philippines where we do the most business. That made life a lot easier.
How did incorporating make life easier for your international business?
Rosenfeld: We opened bank accounts in the country and now we transfer money there to pay employees and vendors in local currency. Because we can secure an exchange rate when we transfer the funds, we can hedge our currency risk. Our employees and vendors get paid in their currency, which makes life easier for them. Incorporating isn’t the right approach for every company, but it works well for us.
Do you accept payments from clients in local currency?
Rosenfeld: We prefer not to. When we negotiate deals, we do it in dollars whenever we can. We actually include a line in every contract that says the client will assume any currency fluctuation risk beyond 10 percent, which means if the currency moves, the client helps us absorb that difference.
Sometimes they negotiate it out and sometimes we agree to share equally in the risk, but it’s an important area to set expectations.
Live Cross Rates
| INR | CAD | GBP | PHP | USD | EUR | |
|---|---|---|---|---|---|---|
| USD | 67.3260 | 1.3174 | 0.7531 | 53.3170 | 1.0000 | 0.8622 |
| CAD | 51.0760 | 1.0000 | 0.5715 | 40.4530 | 0.7584 | 0.6542 |
| AUD | 50.1360 | 0.9811 | 0.5609 | 39.7080 | 0.7443 | 0.6421 |
| EUR | 78.0390 | 1.5272 | 0.8731 | 61.8080 | 1.1587 | 1.0000 |
| GBP | 89.3390 | 1.7483 | 1.0000 | 70.7570 | 1.3264 | 1.1443 |
Example: 1USD = xx INR
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