Where is Waldo? … On export markets … Yes, but…
Who has not ever played “Where is Waldo?» You know, this game is to find a character named Waldo inside a colorful page of drawings surrounded by people and various colored objects.
According to a recent survey from the European Central Bank1 this is exactly what European companies are doing. Of course, they’re not looking for Waldo but for customers. According to this survey, this quest for customers is proving more complicated than beating the competition, access to finance, or the reduction of production costs. From small to big business, the challenge is the same and it concernes all markets, from Germany to France, via the Netherlands, Austria and Belgium.
What are the consequences for Canadian companies? We can expect increased competition on the domestic market but also abroad. What can be done about this? Develop your strategic benefits. It is obvious that at this time the Canadian dollar favour Canadian companies over companies operating with the euro or the US dollar. But you cannot rely solely on this single advantage. You will need to do more.
Offer open terms of sale.
Credit insurance can help you stand out from the competition by allowing you to offer open sales terms to your customers. You can then replace letters of credit or other means of restrictive payment terms by offering net 30, net 60 or net 90 days payment mechanism. Insurers may, in certain circumstances, insure sales up to 360 days. By offering the possibility to your customers to pay your products and services on a longer term, you improve their working capital.
Increase sales to global markets
In addition, with the help and expertise of the credit insurer, you can offer your customers to buy more of your products. How? By offering them a higher credit limit than you would without the help of an insurer. The insurer often has privileged information about your customers which allows them to support your business sales strategy. So you will be able to offer more credit to your customers. If he buys more from you, he should, in theory, buy less from your competitors!
Get the necessary funding
You will need to finance the longer terms of payment and the larger credit limits. With credit insurance that proves to be easy. As soon as your bank knows that you insure your receivables, your bank will be able to margin those receivables up to 90%. This is much better than the 0% to 50% normally offered on export accounts.
Like Waldo, new customers are hard to find. Especially when the whole world is seeking the same customers as you are. You must therefore enjoy all the benefits a credit insurance program can provide. By reaching out to a good broker, you will be able to find new customers and especially keep them for long.
Allow me to take this opportunity to wish you a happy holiday season … and may you find Waldo.
1- Survey on the access to finance of entreprises in the euro area – April to September 2015. This study published 2th December 2015 is available on the European Central Bank (ecb.europa.eu) website in the publication page.