Like many Americans, you probably gave only passing thought to the UK referendum on independence from the EU, only to wake up to news of volatile markets and a plunging British pound. But while Brexit will have an undeniable impact on global markets, it’s not all bad news, especially for small business owners in the US. Remember to keep your ear to the ground, protect your company and jump on opportunities Brexit may create.
Brexit is ultimately a legal divorce that involves pulling apart dense legislation that’s been in place for many years. Invariably, it will have some effect on private contacts. US exporters should consult with legal counsel about whether their agreements around licensing and distribution and provisions for currency should be re-drafted.
Exporters who use the UK as a single entry point into the EU may now require at least two entry points into the European and British markets. This could increase shipping and tariff costs and pose logistical problems. In the coming months, investigate your options for alternative distribution channels and build up a cash cushion against potentially higher expenses down the road.
Some say it may take months for the markets to normalise, which can affect your sales volume depending on who your customer is. If you run a consumer-facing business, you may have little to worry about, as the US economy is still strong. A dip in the US markets in January 2016 had no impact on stateside consumer behaviour. Nonetheless, it’s always wise to regularly monitor consumer trends and make sure there’s still an appetite for what you’re selling.
But business-to-business companies have to guard against a more immediate risk. Larger corporations are generally more closely tied into global trends and adopt a more conservative growth and expansion strategy. If your customers are tightening their budgets, you may see a declining demand for your services or an interest in obtaining more value from existing contracts. Consider some regular “check-in” conversations with your customers during the Brexit uncertainty to assess whether they seem spooked by the market. Discuss within your company how to respond to your customers’ new attitudes.
The Brexit vote has created uncertainty on global markets. Britain has up to two years to negotiate its exit after the country gives official notice to the European Council, which hasn’t happened yet. Since no country has ever left the European Union, no one knows what will happen, and investors are flocking to traditionally safe havens like the US dollar.
Uncertainty usually leads to a decline in global investment. But this could be a prime time for startups to get new partnerships. Venture capitalists who seek high returns in the long run may opt to take a chance on small businesses. If you’re planning to bring on new shareholders, demonstrate your business is a good investment and has the ability to weather the Brexit market storm.
Prior to the Brexit vote, the Federal Reserve declined to raise interest rates. Many expect this trend to continue. Opinions on whether this is good or bad are split. Low interest rates mean higher rates of borrowing but can also lead to high corporate debt. For small business owners, this can be a good time to take out a new loan, especially if you think your revenue streams will grow despite the Brexit wave.
As an entrepreneur, you know the path to success is never smooth. Brexit may turn out to be a time of opportunity for your enterprise. Smart business owners always stay up to date on the global economic environment so they can remain flexible when big changes occur. With good sense and strong strategy, your business can thrive despite the uncertainty of post-Brexit market conditions.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here.