Most Founders Are Losing Money Without Realising It

0:00Alex Chisnall:What stops founders from building something meaningful isn't the lack of ideas, it's the fear of getting started. I'm Alex Chisnall and this is Screw It Just Do It, a podcast for people who are ready to stop waiting, take action and make things happen. If somebody's offering to automatically do your currency conversions for you, they're probably taking 4%. Being paid in dollars, putting it back to pounds and then turning back to dollars to pay your supplier in China, getting slammed at both sides. If you think about, you know, you're making a payment to a supplier of$100 ,000, the bank's charging you 2 % to 3%.

0:32It's a couple thousand dollars either there and back, and then it scales in a linear way.

0:37Alex Chisnall:And where have founders, like, maybe kind of alluded to it anyway, unknowingly losing money when they're operating internationally? I mean, the ones like that, they're the ones losing the most money, really. Like, you know, they're the ones, the people who are really great at running a business, they're growing so quickly, they just do not have time to kind of faff around with this stuff. Some businesses have the luxury of being so profitable, they don't care. You've probably just lost 4 % of your sales for the convenience.

1:26Alex Chisnall:They've given us an exclusive offer for podcast listeners to get 50 transactions completely fee-free for 60 days. Head to worldfirst.com forward slash screw it to create a free account and claim now. Now let's jump into the main conversation. Hey Lawrence, welcome to Screw It, Just Do It. For those who don't know you, can you tell them who are you and what is World First, please? Cool. Pleasure to be here. Thanks for having me. Pleasure. I imagine most people probably don't know me. My name is Lawrence. I've been around London, the kind of fintech startup scene for a long time. I've been working in mostly London, but across Europe and the US a little bit in startups for about the last 10, 15 years.

2:09I worked in ventures for the times and for big companies for a while. And most recently, I was at eBay for a long time, actually, as well, doing kind of financial services there. And most recently, I've joined World First in the last year or so. And I head up the UK business for them. So World First, again, for those who don't know, it's been around London for about 20 years. It's kind of one of the original London fintech success stories. It doesn't get quite as much hype as some of the newer, flashier models, but it's been around for about 20 plus years now. It's sold back in 2019 to Ant International, which is part of Ant Group, arguably the biggest fintech group in the world, throughout 700 million.

2:50So it was an original London fintech success story and an exit story and there's a founder story there which is quite interesting and what World First does is it helps hundreds of thousands of businesses from you know small to big to pretty very big all over the world to essentially grow internationally to manage their international operations to expand into new markets to manage multiple currencies and to essentially sell trade buy um as a local business all over the world so it's a it's a brand name that not everybody knows but it is one of the biggest psps in the world just because of the breadth that it has in other markets and as well as what we are in the uk it's good to know as well so if you are

3:37Alex Chisnall:a you know founder of of a business that um you know it's been around for for a couple of years that is growing at the moment, that you're looking to take investment, you're looking to scale the business, et cetera, it's good to know that if you're looking to connect with an organization that's got the kind of reach that World First has got, what kind of things would World First be able to help me with if I was a founder doing those kind of numbers, would you say? So there's usually kind of an inflection point with businesses. And, you know, I've been through, I've been through the process myself of kind of, you know, starting things, growing things.

4:18And then, you know, you run into different stuff along the way. And, you know, payments is usually back of mind. It's usually not the, it's not the thing that anyone actually cares about. It's a thing that helps you do the thing you want to do. Exactly. Yeah. And the typical trajectory will be, you know, you start a business, you have a bank account. And, you know, at some point you will start to do more stuff internationally. You're having to buy stuff from abroad. You start taking a bit of payment, you start selling a few things abroad. and certain new currencies get thrown into the mix and you kind of realize that actually your your bank probably is not great at helping you do that or the whole of the poll things a bit laborious or expensive so you look around and you kind of you know you start speaking to somebody like well first who can help you to you know collect money in different currencies to pay into different into paying to other markets much more quickly much more easily much more cheaply um so that's kind of what that's what we people typically kind of come into us for the first stage when they're doing you know a few hundred thousand or a million or even less um and then when they come with come you know to work with us they typically stay with us through the through the journey where people come into it a little bit later is where they have more complicated needs you know they're trading a bunch of a bunch of currencies they've got money coming in and out they've got a lot of kind of they're pretty heavily exposed to the foreign exchange markets they don't really know what they're doing necessarily because it's not the core business they want somebody to speak to they want someone to work with um and and obviously you know the way the way that we are typically different to a lot of a lot of kind of fintechs is that we have people on the phone here and everywhere else in the world who can help kind of you know guide you through that guide you through what you should be doing help you manage currency risk we've got the kind of the more advanced fx tools and currency management tools that you kind of need as you get a bit bigger yeah but we know we deal with both ends okay good to know um and what are you seeing

6:05Alex Chisnall:right now yourself like is it easier than ever to scale internationally or is it more complex than ever to scale internationally i mean brexit didn't help right there's uh there's this this this goes it goes back a while now i think in some ways in some ways it's much much easier um you know whether it's marketplaces like walmart which are you know enabling businesses which are trying to acquire sellers in the uk to sell in the us on their marketplaces there so So you've got the kind of global marketplaces which are looking for sellers in different parts of the world. And the same thing is true for a bunch of others as well.

6:41So there are ways in which tech platforms and marketplaces are kind of enabling access into different markets like the U.S. And, you know, we work closely with Walmart to help them kind of find sellers here and to onboard them to their marketplace. And so things like that are great. Yeah. But in some ways, you know, it is more complicated. navigating the kind of post-Brexit stuff, especially in certain industries, has undoubtedly been a bit of a nightmare. I think the reality is that the ways in which the most businesses in the UK engage with kind of international is usually from buying, right?

7:14We know we do a lot more buying from abroad than we do selling to abroad, especially at SMB level. So if you are a company of a decent size, it's very unlikely that you are wholly domestic. You're probably buying stuff from somewhere in the world, whether it's supplies or services or something like that so what we're typically solving for is is helping people to sell abroad but also helping people to buy abroad um and the fact that we're owned by for those who turn out our own ian group which is you know the owners of alipay and you know a a very large number of kind of financial institutions across the world but especially in asia our ability to help companies pay into you know far reaches the world especially in china is pretty unparalleled yeah that's that's

7:58Alex Chisnall:the massive usp right with working with with somebody like you um what do you think is maybe you know what you've seen like pattern wise maybe like the biggest mistakes founders make when they start buying and selling internationally i think when they start buying internationally what the biggest mistakes they'll typically make is that they will very often do it they will do things that inherently are supposed to make it easier but typically just make it incredibly expensive and actually that works on buying and selling as well. So if somebody is offering to automatically do your currency conversions for you, they're probably taking 4%.

8:34That's a general rule of thumb. And that works with marketplaces who offer you convenient abilities to sell internationally. Like, oh, don't worry, we'll just pay you out in pounds. You don't worry, you know, just keep your Barclays account, keep your local bank account, we'll pay you out in pounds. You probably just lost 4 % of your sales for the convenience. And that works in both directions as well. So I think there's the biggest mistake people make is by saying, you know, this isn't my core business. I don't really understand what FX spread is or what fees should be or what they look like.

9:03And so I'll just go for, you know, I'll go for the convenience, convenience option and keep it all in local currency. That's typically the thing which will cost you a significant chunk of your margin. Um, so that's a big one. And the other one I guess is, is not paying attention to the risk that it brings into your business. When you start having a bunch of currencies knocking around, like you're buying from China in dollars, you're selling locally in pounds, you're selling, you've got some stuff in euros coming in now as well. These things don't always move in sync. And suddenly, the way that they start moving against each other, depending on how much you're buying from one market and selling from another.

9:38And if you're not looking at it closely, you could end up in a situation where your profit gets tanned, you've done nothing. And actually, how you balance and manage those things is important. And typically, and it's when you're really big, for sure. But even actually, when you're not huge that's something people really should start paying attention to a lot

9:57Alex Chisnall:a lot of than they typically do at what stage do you think uh founder of a business should start paying attention to this and start thinking about international payments properly whatever properly means obviously i think yeah exactly i mean there's no reason why you wouldn't have at least the ability to to kind of collect and pay internationally from super early stage right Like companies like World First, we don't position ourselves as an alternative necessarily to a bank account. Almost all of our, not all, but most of our customers will also have a bank account that they use to kind of do their domestic day-to-day bits and pieces.

10:31But, you know, you can set up a World First account super easily. Then you can kind of, you know, you can collect and pay in international currencies and you can hold stuff in different currencies. You don't need to necessarily engage with like complex FX strategies and you probably shouldn't waste a bunch of your time doing that when you're small. but like there's no reason why you wouldn't add that string to your bow really early on in the business so you're not having to you know so you at least have that optionality um and you can start testing in paying you know selling into europe a little bit there's no world in which it ever makes sense to to kind of eat the costs of automatically you know getting getting that paid out in pounds um and you know if you're and if you're paying suppliers in china maybe they'll take the money but they'll take a premium for doing it um yeah of course um and where have founders like maybe

11:19Alex Chisnall:kind of alluded to it anyway unknowingly losing money when when they're operating internationally when they kind of come in without um and again you know they you know what it's like these days again you've just seen uh you know a couple of businesses where where the number of employees you can count on one hand yet they're doing like you know eight nine figures etc so coming to somebody like yourself like you say who've got you know actual human beings you can actually have a conversation with and guide you through this process um yeah what what do you think that unknowingly losing money when when operating internationally looks like i mean the one the ones like that they're the ones losing the most money really like you know they're the ones the people who are really great running a business they're growing so quickly they just do not have time to to kind of to faff around with this stuff they don't they don't necessarily see it as a priority like and maybe it's not but like it's not as big of a lift as you might think to to kind of pay a little bit of attention to this i mean the big one is the kind of you call it the double conversion trap it's the the silent profit killer for any cross-border business especially you get to scale it's where like it's where a customer will pay you in their local currency so you know you get you're paid in euros and i've kind of talked about a bit and the bank will kind of auto converge back to your base currency so pounds at a at a god-awful rate plus a fee probably and again under the guise of convenience you then pay the supplier in in in their currency which might be dollars or cny if they're in china or whatever it is and you're paying you're then converting back at another poor rate and another fee yeah or even worse if actually you're just moving it from you know you're getting paid in dollars putting back to pounds then turning back to dollars to pay your supplier in china getting slammed at both sides and i mean yeah some businesses have the luxury of being so profitable they don't care but it's not many and if you're paying like four percent both times like how big is your profit margin yeah it's brutal right yeah that sounds brutal um and i guess yeah you know how big can the problem get i mean we're talking tens of thousands i guess at scale right that you could be you could be losing on a on a it gets big right i think if you think about if you think about you know you're making us you know a payment into a supplier of, you know, of$100 ,000, you know, at a low rate and your bank's charging you 2 % to 3%, you know, it's a couple thousand dollars either there and back and, you know, and then it scales in a linear way.

13:43Yeah, yeah. The fees are a big one, but I guess the way it gets really kind of, it goes interesting a little bit more complicated is where you start thinking about the link between like the volatility in the markets and the world generally and what that actually, how that translates to to your bottom line if you think about if you've got if you're if you're selling him if you're selling everything in pounds but you're buying everything in dollars you're kind of super exposed to that to that corridor and ultimately if the if the dot say for example the dollar moves 10 against you against the pound you're you are then paying essentially you've got to you've been going to increase in your cost of goods obviously 10 yeah and that and then if got say you know a 50 cost of goods to gross margin then you've got that's a five percent hit on your on your bottom line probability your business so like it's the fact that these moves in the fx world they're not even if you manage the cost which is like you know there's lots of companies that can manage cost managing risk is actually the more interesting i say interesting it's the more it's the one that people don't necessarily pay attention to as much because Because lots of companies can help do a job to move money for cheaper than your bank.

14:55But this thing of how do you manage currency risk and the fact that it's not abstract, it directly impacts your profitability. That's interesting. And that is one which people really don't necessarily address. And that's a lot of what we do. And it's a lot of what very few people, very few fintechs do actually get involved in.

15:17Alex Chisnall:and as a founder you know my founder head on is there like a simple way that that you can you know sense check if you're getting a bad deal from fx i mean a bad a bad a bad deal is relative right i mean i think there's there's the thing of there's the rate that you're there's the there's the fees that you're kind of your bank will very often be charging you and maybe you know not always but very often they're not great and so And then there's lots of fintechs who will move money for cheaper than that. And obviously, we're one of them. We're not the only one. So there's a bunch within that. And within the kind of cheaper than banks section, like, fine, we're cheaper than most.

16:00But you're in a much better band there. So I think the main thing is taking a view for, like, are you working with somebody who is, yes, is it a good deal? But is it somebody you can kind of grow with? um is definitely part of it are they you know is that are they able to help you beyond just you know being cheaper i think is a is another big part of it and i and like i said on the on the seller side be wary of anything where anyone is like offering to manage currency stuff for you for convenience because it's probably making an absolute fortune um yeah would be my only other tip on that okay um and if you are scaling internationally then what should you

16:43Alex Chisnall:what should in your experience what should you actually be doing to to protect yourself

16:50so i think a big one will be keep keep an eye on keep an eye on from a currency point of view keep an eye on what what you are buying in what you're selling in how balanced are they what kind of currency corridors are you super exposed to? And actually, is there a way that you can rebalance that? So for example, if you are doing 100 % of your buying in pounds and 100 % of your selling in sterling, there's a risk there in your business that you maybe aren't able to manage for. You simply can't control what is going to happen there. And if that moves drastically, it might be the end of your business overnight if you're not properly managing it.

17:33So there's a couple of ways you can, you can work on that. You can, you know, work with someone like us to fix rates and that kind of stuff. But equally you can avoid the need to convert. You could say, okay, well, actually if I'm having to buy all my stuff in dollars, is a way I can get my hands on more dollars.

17:49Alex Chisnall:Yeah. So actually does that then move up the priority list, your view of like, okay, fine. Can I start selling into the U S a little bit? If I start selling into the U S a little bit, I get paid in dollars. I hold that in dollars. I don't need to convert as much. and so you know you're then rebalancing this kind of it's almost like a supply demand balancing in a way um and this is not something which i don't know i don't know how many people have kind of glazed over at this point but like this is not the top of the list of somebody who is trying to build a you know a brand selling you know fitness wear none of this conversation is top of their to-do list and but it you know but it is it's not just this is important it's existential at a certain point you know you're really talking about the survivability of a business longer term.

18:30Alex Chisnall:So I wanted to let you know about something that I see trip founders up all the time. If you're running a business with international payments, one of the biggest hidden costs is often foreign exchange. World First is built specifically for businesses operating across borders, helping you manage payments, hold multiple currencies and reduce unnecessary FX costs. They're not a high street bank trying to do everything. They focus purely on international business payments and currency exchange. That's their thing. Switching providers is a commitment, which is why they're giving our listeners 50 fee-free business transactions to properly test their service.

19:07Alex Chisnall:Plus, signing up for an account is completely free and there are no ongoing monthly fees. You've got 60 days from sign up to use them. Head to worldfirst.com forward slash screw it and get your 50 fee-free business transactions. Now back to the podcast. Yeah. Yeah. And again, from your experience, you know, what do founders think is complicated here? But in reality, with your experience, well, first and before that actually isn't. I think the big one is the view around like fixing rates. So like, you know, to afford contracts and hedging and like, you know, it's not complicated at all. It's really not.

19:47And it is really important. like the ability to like managing a bit of managing a bit of the rates managing the rates you're paying like this is something which all big businesses will take really seriously and and do put a lot of time and energy and resource into doing but a lot of like fast growing businesses that are in their own right quite big businesses so prime just to just to kind of say glaze over and ignore this and it's really not that complicated you know you can have have a conversation well with with us with someone who can who can help with this up it probably does need to be a conversation you're unlikely to kind of log on to an app and and do it and 100 % there start to finish and you can but you maybe you can but um it's worth having that kind of conversation probably sooner you might think it's really not that hard and it's it is super important

20:37Alex Chisnall:and what separates founders who who scale well globally for those who struggle because you must to saying every side of the coin right yeah i think the ones that the ones that scale globally i guess they're the ones i suppose have that mentality they have the mentality of that that's you know they they have the mentality of that's where they want to end up but they have a systematic way in which they want to get there so you know the ones that have the ones that have kind of done a really good job with scaling internationally have kind of done the the view of picking the markets, entering it, learning, you know, picking up, taking those learnings to pick another market, entering it, learning, doing the same thing and doing it in a more systematic way.

21:19You know, you can test markets using Amazon, but like not viewing that as the be all and end all strategy, actually going into markets, localizing, trying to, you know, build, build a proper strategy there. You know, one of our, one of our clients who is building a kind of a fitness, a fitness brand growing really quickly um there's kind of adjustable weights um really really interesting brand um but they've been entering into the european european market recently they're a uk founded business they've entered into the european markets they've and i already think germany is now twice the size of their uk business or three times the size of their uk business um but they've been through a journey there of like learning you know how to represent yourself as a german business rather than a uk business and then doing it in france and america and then germany then how to enter into america and you know all the kind of capital requirements of doing so like it's people who have a really clear view of like i want to be a global brand but do it in a systematic

22:14Alex Chisnall:structured and methodical way yeah and i remember hosting you know a bunch of these conversations before um with an organization that used to help uh british businesses in in america and vice versa and you know a lot of those conversations we used to have like in a round table format were around about actually having people you know on the ground in those countries that you were looking to actually go into rather than just you know a british brand for example expanding into germany and just hiring british people and setting setting up an office over there um how much of your business would would be british entrepreneurs um expanding internationally and how many would be say like chinese entrepreneurs looking to grow in the uk of interest it really varies and you know i it's really interesting you ask actually just reminded me we had a kind of a delegation of I think maybe 20 or 30 Chinese sellers come to the UK office just yesterday.

23:09And I kind of gave a little spiel about, you know, the UK and, you know, and how to be here. What always blows my mind with the kind of the Chinese businesses is just that there's so many absolutely colossal businesses there that you just, you know, these are, there was 20, 30 of them in the room yesterday. They were all kind of people in their 20s, 30s. All of them were kind of eight figure, nine figure kind of e-commerce sellers. like all of them were just like colossal businesses in their own right. And there's dozens and dozens and dozens of them. And it always blows my mind when I'm over there.

23:41You go to Shenzhen and kind of speak to businesses, meet them. And then everyone, you know, everyone's kind of super keen and hungry to share and talk. And, you know, these are massive businesses in volumes, in sales volumes. Absolutely massive. And we do both sides. You know, we've obviously got, I think we're the biggest PSP in China. and you know we've got a huge kind of cut through there but you know been here for 20 years as well so we've kind of got that and you know we're in lots of other markets as well but yeah undoubtedly the the Chinese market is really quite amazing when it comes to you know growth of e-commerce businesses or kind of businesses generally.

24:19And is there are you you know sector agnostic I know

24:24Alex Chisnall:like fmcg and like beauty space um you have a lot of brands you help in that space but yeah can you expand on that a little bit for because you know we're gonna have listeners viewers from every single sector you could imagine i mean it's really broad right we you know without wanting to cop out the answer like we we kind of we said we're doing we work with kind of service industries service industries goods of every for goods of every kind businesses of every different kind of size and shape you know we manage payroll for you know into the global payroll for big international companies because the same things international payments yeah yeah risk manufacturers like dozens of kind of small to medium to high growth kind of brands so like there's a there's a big old there's a big old mix but i guess anyone who is anyone who is buying or selling internationally or moving money internationally or you know like there's really i don't want to say it's a commoditized product but like the question that the question is not whether or not you can do it because there's a bunch of people who can do it i guess the question is like how are you good at it can you do it quickly seamlessly cheaply reliably do you know do you have somebody i can speak to like all these are the kind of questions the ability to move money internationally is not is not a rarity anymore um yeah and do you think um as uk founders we're thinking globally early enough or do you think we're still too domestically focused I do think I don't say we're too domestically focused in a way we're kind of forced to be quite domestically focused I mean I think that I don't want to I think I've said Brexit once already but like it didn't help with our ability to you know go beyond our borders so you know we're lucky that we do have a decent sized domestic market and we've got a kind of super vibrant you know entrepreneurial communities here and we build we build great businesses here but the we are inherently going to be capped by the fact that we're just not that big of a country and the economy is just nowhere near as big as some of the you know the big the big two and so you know the demand to be bigger is there we do kind of run into structural limitations it feels like sometimes as a country yeah and people always you know conversations that i have you know u.s founders are often further ahead than we are what would you say with regards to chinese founders certainly from what you were saying before um that they're equally further ahead and they're not necessarily household names to us right yeah and i it's funny i i always the the us the us comparison is just you know it's it always gets it's always talked about right you know the whole thing of like who's better at doing startups why can't we build massive stuff but like it kind of goes back to my last point which is it's almost like why is it why is it easier to to grow whales in an ocean than it is in like a swimming pool yeah of course it is structurally it is and it's the same so it's almost like it's honestly it's a redundant argument but like of course it is what it is like you know it's going to be past a certain point you need to move to bigger waters and the u.s is just fundamentally bigger waters so like there's a reason why they build bigger companies it's just a bigger a space so it doesn't massively surprise me and china is kind of the same right there's the you if you if you go there and look around there'll be brand names you won't have seen which will be you know the same size as like sony or whatever like yeah yeah because the waters there run deep enough that you can build colossal businesses without leaving but at the same time they are incredibly outwardly focused you know selling to the world to to that to that kind of culture to their way of approaching business is absolutely fundamental um and it's a really easy when i was at ebay before this i spent you know a lot of my time in the us and obviously now with what first i'm kind of going back and spending more time in china and like there are parallels but like they're very very different but it both super interesting in their own way yeah we can't we can't let this conversation go without mentioning your own um foray with the with the peanut butter brand right

28:38Yeah, I guess one of my, one of my, one of the things that I've tried to do over the years, this was a lockdown business that went on for a little bit too long. Yeah, I think it actually started with, it might have started with listening to one of your podcasts with Pippa. I think you did a really long time ago when you were talking about, you know, the launching of Pippa nuts.

28:55Alex Chisnall:Yeah. And I was spending a lot of time in the US at the time and, you know, they had obsessed with peanut butter there and all the funky flavors. So I tried doing a Pippa nut for like different kind of natural natural flavors and ended up doing that for for a few years and it got it was it was fun learned a lot but realized actually it's really quite hard to make a lot of money out of peanut butter so i'm fascinated to uh to meet to meet pippa soon and find out how she did it because it's easy yeah i look forward to making that intro um and look if you're you know for people listening and they're thinking um this is me right now with with my business um what are kind of like next steps people should take who are, you know, at that stage that they've started to grow the business, buy, sell internationally.

29:45Alex Chisnall:They haven't really thought about this. If they leave it much longer, they could be leaving themselves open to, you know, a bunch of these mistakes that we talked about and getting absolutely, you know, smashed with the, you know, 4 % each way. um yeah what would what would you suggest they they do next like practically like this week what's what's maybe you know a couple of actions they could take this week to keep it nice and simple i would it doesn't need to be the pen and paper but i would say take take a have a think about you know what you're collecting money what what currencies you're collecting money and what currencies you're collecting you're paying out you know you're paying out you know where it like how you see that changing, you know, are you currently all UK or domestic?

30:29Do you see bringing new currencies? Are you currently GBP pounds? Do you want to launch in the US? I guess take a view for, do you think there is, is there an element of risk here? Like are you, one, foundational hygiene, like are you kind of getting screwed over anywhere in the costs? Like who are you paying what when you're moving stuff in and out between countries? And so like there's probably an easy way to not if you it's an easy point there to look at that and understand you know am i am i losing three four percent of my margin for no reason whatsoever that would be number one um number two would be i guess speak to speak to world first speak to someone like us to mean that you know you don't you don't have to you have to you don't have as an ability the functional ability to hold and pay in multiple currencies whenever you want um but i'd ultimately take a view for is there a significant currency risk in your business and and if so you know maybe that's the point to pick up a phone and actually have a conversation with with us and and exploring okay fine how might you mitigate that or reach out to me on linkedin and you know i'll tell you but um what one of those two things but the first thing i'd say is just take a look at take a look at who you're paying for what and you know is it worth the convenience it's probably not yeah yeah no it makes sense i