How to Tackle the Challenges of a Borderless Business
Deciding to open a business poses many challenges. Choosing the location, the type of clients that one wishes to attract, and the overall message that a business will spread are just a few decisions one must tackle before diving into the world of business. However, with today's abundance of technology starting a traditional business isn't the only option. Borderless businesses are on the rise, and due to the current state of the world, it shouldn't be a surprise. So what if a business decides to go “borderless” and most importantly, what does that mean?
A borderless business lacks a physical location and is nowhere but everywhere all at once. In other words, a borderless business can reach a worldwide audience and can do so because it is not bound by four walls. A borderless business can operate strictly online and can be made available to anyone across the globe. Exactly where the business decides to expand is up to the owner of the business.
Being a borderless business has its advantages. Without a single or multiple physical locations to manage, there is no need to pay the typical overhead fees or countless employees. The business's headquarters can be located in one country while all other business operations can be located in another. This also carries the advantages of lower costs as a business can choose to operate out of a country where the cost of production is lower. Beyond monetary savings, being a borderless business allows a business to find the right talent for the job anywhere. The right team is crucial to the success of any business, so having a worldwide pool of applicants to choose from is another added benefit.
All of this may sound like a business owner’s dream come true, but there are just as many disadvantages to a borderless business that must be considered. Here we will discuss the challenges of a borderless business and how to tackle them. Let’s begin with the most common issues that a borderless business must face.
The Challenges of a Borderless Business
The volatility of Exchange Rates
From a business side of things, the volatility of exchange rates can impact everyone that's involved in the business. From the employees to the producers, and even down to the customers themselves. Exchange rates are different for every country that has its currency. Some countries, such as those in the European Union (EU), share the same currency so expanding a business to the EU countries is a little easier. However, outside of the EU, a business begins to deal with a lot more currencies.
As mentioned previously, exchange rates are unpredictable and constantly changing. These changes are then applied automatically when an employee is paid, causing a discrepancy in what is expected versus what is received. This can leave a bad impression on employees as they are working with the knowledge that they will be paid an agreed amount.
While many individuals don't mind being upfront about their pay, others may find it difficult. Without feeling comfortable having this conversation with employers, employees are likely to face a drastic decrease in their work-life satisfaction. The automatic conversion is a challenge that goes hand in hand with the exchange rates and could be tackled together.
Having multiple employees spread out across the globe certainly has its advantages. However, this also means that a business must open multiple accounts so that each individual can be paid in their currency. Not every bank will support foreign currency so businesses are often left to find multiple banks that will so that their employees can get paid. Though this seems like a solution to a problem, opening up multiple accounts is not a great solution.
Multiple accounts with different banks mean more fees to keep the accounts open and operational. Some minimums must remain in an account to keep it open and oftentimes minimums to even start the account. This results in unnecessary spending, which can be detrimental to new businesses as these extra fees could be used in other areas to better the business.
Just as exchange rates change with each country, foreign taxes are known to do the same. This can impact the cost of production as well as the customers that wish to buy from a borderless business. Not knowing how much the tax is on a product from a production standpoint can mean a drastic difference in production cost. This in turn affects how much a product can be sold for, which directly impacts the customers.
Customers must then also face the taxes that are associated with the country in which they reside when purchasing the final product. This can make certain products inaccessible to some individuals just from the foreign taxes involved in production and purchase.
Now that the challenges have been named, here’s How to Tackle the Challenges of a Borderless Business:
Challenge Solution #1 & #2
Tackling the volatility of exchange rates and their automatic conversions can be a difficult task. But as a borderless business, dealing with this challenge is something that must be done. Exchange rates will continue to be volatile, and there is nothing a business can do to change that. A business can choose to showcase its prices in a single currency regardless of customer location or update it according to the customer's IP address. Whichever way a business chooses to showcase its prices, being transparent and keeping up with the current rate is key to positive revenue and happy customers.
Employees should always be paid in their currency, and it should reflect the amount that is expected, despite the automatic conversions. Some loss may occur, but it may be a necessary expense that should be accounted for to ensure employee satisfaction.
Challenge Solution #3
Multiple accounts can be a headache to deal with but may sometimes be a necessity. As a business, you can try your best to find a bank that will accommodate all of your international payroll needs, but it can be tricky. The bigger the borderless business expands, the harder it can be to manage the business’s accounts. When it comes to your employees, you should consider enlisting the help of companies like Fyorin can help keep accounts managed and under the correct supervision.
Multiple bank accounts are hard to manage and require extra fees to be paid, which is money that could be used to further expand a business. However, having a company that can help manage these accounts can make a borderless business operate smoother and more efficiently.
Challenge Solution #4
Though there aren’t ways to remove or avoid foreign taxes, borderless businesses can “shop around” anywhere in the world to find the best tax rates. One country may offer lower taxes on goods that may be needed for production. This lowers production costs and keeps the business's goods and services at a reasonable price for customers.
Customers will still need to pay their foreign taxes but ensuring transparency through the buying process is essential to securing a new lead. Transparency can be achieved through a borderless business’s eCommerce website, specifically on the checkout page. Being able to accurately and visibly display taxes based on where the customer is located can ensure that no surprise charges show up in a customer's bank statement.
From a business standpoint, going borderless is the way to go. Though there may be some challenges associated with the process, the benefits far outweigh them especially after following the few solutions outlined above. Companies like Fyorin offer simple solutions to the many banking challenges of a borderless business. With their help, your borderless business can focus on other goals like succeeding worldwide.
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