When a firm designs a project in the United States, they expect that the client will pay its bills in U.S. dollars. Some firms even make this a provision in their contracts for clarity. When doing an international project, that country may choose to pay in their currency. An easy concept to understand on this problem is that the rate of exchange between the U.S. dollar and the foreign currency fluctuates daily. The rate of exchange is a measure of one currency against another as they relate to values. In addition, the exchange rate can be significant depending on what might be happening in this country versus the country you are trying to do business.
An important point in negotiation is thus which currency will be used related to fees and payment. That is something that should be spelled out in the design contract. Naturally a U.S. design firm will want fees and payment to be based on the U.S. dollar, as that is familiar to the firm. Any economic issue—or crisis—that impacts the value of the dollar can result in a major loss for the design firm.
One solution suggested by many experts is to obtain a letter of credit from the client. In this case, a bank investigates the buyer (client) to determine credit worthiness and confirms such to the seller (designer). In international business transactions it is further recommended that the seller obtain an irrevocable letter of credit from the client. “An irrevocable letter of credit cannot be amended or canceled without the agreement of all parties…”2 This provides further protection to the designer that the foreign client will pay the bill.
The financial health of the client is another point of research. Similar to trying to judge a domestic client, the design firm would like to be made aware of the financial standing of the firm/client. This is not as easy in the international arena as would be in the United States. The design firm could engage a U.S. bank with foreign connections to investigate the client. The U.S. Department of Commerce (www.commerce.gov) can also be contacted to obtain assistance. Dun and Bradstreet (www.dbn.com) can also be contacted for credit information on commercial international clients. Note that Dun and Bradstreet is also discussed in Chapter 20.
A final issue in this brief discussion (though in no way does this discussion constitute the complete range of issues) is taxes. The tax regulations on international monies leaving a country will vary and can be significant. Some countries have very strict legal restraints on how much money can be paid out to any other foreign country. The design firm is likely to also have to pay taxes on the monies it earns in the foreign country to that government. Obviously, this impacts the potential profitability of doing a design project in some international countries.
Monies earned out of the United States are also subject to taxes to the U.S. Internal Revenue Service on the firm's income tax reporting forms. This is also true of an individual designer who might do a project out of the United States that earns payments from out of the country. That income will be taxable in the United States.
Political Considerations
The stability or viability of a country politically can create different risks when seeking work or actually doing work in a foreign country. Political instability can also create risk to an individual designer traveling to do a project in an international market. Understanding the risks at the time a project is contemplated as well as what might happen during the life of the project are important considerations.
If the country has a stable political system, it will likely embrace the designer. Countries with strong political systems will likely put fewer restrictions in the way of working in the country and doing business with a U.S. firm. They may even have trade agreements that encourage these efforts.
It seems obvious that traveling to a country with political unrest would not be a good idea. And politics can change abruptly because of natural disasters, internal upheaval and actions of one country against another. Information about this topic can be obtained from the U.S. Department of State www.state.gov. The Department of State Consular Information Program www.travel.state.gov Web site will also be able to provide information on travel restrictions and safety.
A design business looking to enter the global business world must keep an eye on the ebbs and flows of the global political situation. Included in this is understanding what impacts the United States federal government may have (does have) on trade across borders. While some trade agreements have long‐lasting effects, others seem to be fluctuating based on political control. Thus, it is suggested that the reader research U.S. Trade agreements on the Internet to determine which are most favorable at the present.
One last comment related to politics. The perspective on global business will change based on who is doing the reporting and on what they are reporting. An economist in favor of open borders to trade will say the sky is bright and sunny. While someone who only marginally favors global trade will say the sky is grey. A new entrant into global business must really understand what is happening in the segment of the market in which she is venturing before making the plunge to going global.
Finding Clients
Simply designing a Web site that includes information that the designer is interested in international work is not the best solution to finding clients. Of course, a Web site can attract international clients. Project portfolios, text descriptions of projects, and explanations of experience will attract some clients. Design firms with a specialty‐focused practice are also attractive to international clients as local firms in a country may not have extensive expertise in, for example, healthcare or hospitality design.
TABLE 3‐1. Ways to attract international projects
| Here are some other ways that a firm can attract projects on the international scene.Investigate if your current clients have projects outside the United States. Talk to them about your interest in working with them in projects outside the United States in the future.Seek out joint venture projects with U.S. firms already doing design work internationally.Research on the Internet design firms in foreign countries and make a contact to them about your firm and interest in working with them.To begin, focus on projects and clients in countries that are somewhat similar to cultural and political experiences of the design firm owners.Networking at professional meetings and social media may lead to contacts with a foreign national in the United States who might be looking for a designer.Direct marketing campaigns to businesses in foreign markets could result in a contact.A strong brand communicated via the firm's Web site might interest prospective clients.Research international design competitions that can allow the firm to enter projects designed in the United States.Major trade shows like NeoCon attract numerous industry‐related individuals who work for companies that sell/export goods and thus might also be looking for people to work with their companies.However, when you make contacts with international clients, be sure you can explain how you will bring value to them.An experienced firm may choose to open a branch office in an international city and market in that city/country. |
Building a reputation at home for best practices and excellent design work is critical to being considered for foreign work. For example, a design firm in the United States might obtain international project overseas when a project done in the United States belongs to clients who have an international presence. Excellent design work for this type of client is a great way to open the door for international projects. “Maintaining a solid reputation and level of trust with established clients who are expanding into foreign markets can bring global opportunities.”3
