Do you want to start a currency exchange business? If YES, here is a complete guide to starting a currency exchange business with NO money and no experience.
Okay, so we have provided you an in-depth sample currency exchange business plan template. We also took it further by analyzing and drafting a sample currency exchange marketing plan backed up by actionable guerrilla marketing ideas for currency exchange businesses. In this article, we will be considering all the requirements for starting a currency exchange business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Currency Exchange Business in Canada?
Currency Exchange also known as Bureau de Change has always been a great way to make money. The business model is pretty simple; you buy currency at a particular price and sell it at another price to make a profit after the official rates are carefully considered. The people that need this service are mostly those travelling or doing business overseas. This is different from other money service businesses in that the commodity being sold and bought here is money.
In Canada, whoever wants to get into such a business would have to register with their regulatory bodies before commencement of operations.
Starting a Currency Exchange Business in Canada – A Complete Guide
- Industry Overview
People are always changing currency from one form to another, and the business of currency exchange began when money was beginning to take its place as the legal tender for transactions. People who are traveling from one country to another would need to convert their money from one currency to another; businesses that deal in import and export of goods will always need to convert their monies.
Businesses that constantly deal outside their countries or send their employees outside their countries would need to convert their monies. It is then safe to say, that as long as there are international relationships going on between individuals and businesses, there would always be need for currency exchange businesses.
The evolution of the currency exchange business in Canada, also known as the bureau de change, began with the invention of the Canadian Dollar in 1867 when Province of Canada, New Brunswick and Nova Scotia united in a federation to form Dominion of Canada.
Ever since then, their currency has seen its fair share of transformations and modifications over the years. The rate at which currency is bought or sold depends on a number of factors, from a national crisis to economical fluctuations, which could prove harmful to certain global businesses.
In as much as these rates can be affected by these factors, the rate at which currency is sold and bought in Canada is regulated by The Investment Industry Regulatory Organization of Canada (IIROC).
You would have to register with the Money Servicing Business (MSB) if you are to operate a currency exchange business in Canada. Although this makes up part of the basic registrations you would have to make, but there are other legal documents and licenses you would have to apply for and secure before you can be allowed to run your business without issues. Some of these legalities are to help keep a close eye on taxes and make accountability possible.
When going into a business like this, there are quite a number of challenges to expect, apart from the obvious presence of competitions which could include the big banks. The rates are very volatile and doing this kind of business successfully will require your full attention.
You can start a foreign exchange account with 1000 dollars; this is considered the best way to start because if you lose some money, you will still have some more money to work with. In fact, the ideal amount to start with is 2000 dollars.
This is a 24 hour business as there are no real closing times because money never sleeps. The truth is, while it is morning in Canada, it could be afternoon in another country, while it is night time in Canada; it could be the evening in another. So as long as people are awake doing business, making transactions and travelling, money will keep being exchanged and rates will keep fluctuating to either cause one in this business to make profits or loss.
Before one enters a business like this, they must do their full research on the industry and know how money works. They should also understudy a professional foreign exchange broker to get a feel of how it is really done, because one could lose lots of money if they do not have an idea what they are doing.
However when you get super used to the trade, you can begin to anticipate the market and work better with your intuition as regards to buying and selling. You would soon begin to sense when rates are moving higher or lower and instinctively know the factors that causes these changes.
This is a very good business to get involved in, but one thing remains the same, you will have to do a thorough research about the business to find out if it is really for you. This kind of business is not the best for every kind of person, but most people who are good with numbers will find it easier to run a business like this, than others.
It requires full attention to details as little mistakes can cost you much more than you think. So, do your research thoroughly and decide if it is worth your while, and once you start, commit to success.
Starting a Currency Exchange Business in Canada – Market Research and Feasibility Studies
- Demographics and Psychographics
Knowing the set of people your business suits is paramount in achieving any level of success. For a currency exchange business, the first set of folks to think about are the ones travelling. You would not believe the number of people going from one country to another on a daily bases. The best places to set up shop so those kinds of people can easily see you are Airports, Big Hotels, tourist attractions, international train stations etc.
Another set of people that need currency exchange services are businesses surrounding import and export. Commodities are constantly coming and going, and these businesses will need to convert money. They are not the only types of businesses that will need these services.
Companies that deal on an international scale also need this money exchange service. They usually have to pay staff in other countries and would need to convert that money into the currency of the receiving end. They may also need to send their workers abroad and need a broker or usually a bank to handle the foreign exchange.
List of Niche ideas Within the Currency Exchange Business That You Can Specialize in
In this type of business, it is quite challenging to think of how to cut out a niche for yourself. If you were cooking then you would have said specializing in a particular meal would be your niche, like certain eateries that specialize in Pizza.
This is currency, and currency in its idealistic for is constant nature. One cannot say, “Oh I Like this person’s Canadian Dollars compared the other.” Canadian Dollars are what they are, the only real places you can begin to cut out a niche for yourself in the currency exchange business is in the personal fee you charge for the exchange transactions.
You see, as a currency exchange broker, you charge a fee for your service of converting the money from one currency to another. That’s how you make your profits; you buy a currency at a price and sell it at another for profits. Well, if customers get a wind that your fees are less weighty than that of a competitor, they may come running to you instead of them.
And when the news goes out that your fees are accommodating, you will have more patronage, hence making money on the quantity of customers you have.
Another way to carve a niche for yourself is to make it a point of duty to have the interest of the customer at heart. When people know that you are not just out to get their money and that you really care about their monies, they will spread the word about you and more folks will come your way.
Another way to cut out a niche for yourself is to specialize in what set of customers you want to offer your services to. You could choose to focus on travelers or Import/Export businesses or even corporations. Specializing can be a way to stand out in your field of endeavor.
The Level of Competition in the Currency Exchange Industry
The first set of folks you will have are the Big Banks, they are on another level when it comes to currency exchange. They deal with mega accounts and can actually affect the market from time to time.
Another set of competitors you will find are people who are doing exact same business like you. Some of them have already been in the business longer than you and have more experience, clients and money to intimidate you. They have analysts who have been predicting the rate of fluctuations and have become very accurate.
Since going into this business may not require a professional degree from a well-known university, many people with half a sense have gotten into it. Meaning that for every “you” in this business, there are probably another 100 competitors, looking for a business or target individuals to exchange with them.
List of Well – Known Brands in the Industry
Every industry has its set of brands that have made a positive mark on consumers either by a unique approach to service delivery, customer retention or even by simply being in the industry the longest. Some of these attributes resonate positively with consumers and further facilitates patronage.
Below are therefore some of the leading Currency Exchange businesses or brands in Canada;
- Bank of Canada
- Exchange Bank of Canada
- Knightsbrigde Foreign Exchange, Inc
The currency exchange business does not require so much capital to begin. Of course you would have to pay legal fees and other licenses to be an official broker and you will also have to register with certain regulatory boards. Then there is the advisable startup money of One Thousand Dollars.
Apart from all these, it is not really that costly, but the process of getting your business up and running legally in Canada may be a bit of a hassle. This is understandable because you are trading their money against others, and they must institute measures of checking fraud.
Starting Your Own Currency Exchange Business from Scratch versus Buying a Franchise
The advantage of buying a franchise is that they have already gone through the birth pangs you would have gone through if you had chosen to start from scratch. They have paid and applied for all the licenses, they have committed customers. Their names are known in the location where they are situated, and they have even probably built a cordial relationship with influential people of the industry.
When you buy a franchise, this is what you are buying in essence, everything they have built over the years. More importantly, you are also buying their brokers who have made the business successful. In this type of business, experience is key, experience informs intuition, intuition is what anticipates the market.
Knowing when to buy and when to sell most times is not a function of seeing what the regulatory bodies have decided, but anticipating the market. When you buy a franchise, you buy experience, and experience is king in this business.
However buying an already existing business in currency exchange can be very expensive, with all the accounts they handle. But due to their track record you stand to make that money back in the long run, assuming most of the succeeding factors remain the same.
If you decide to start your own company from the scratch, you will need drive and a key ability to work with numbers. You must have a true heart for entrepreneurship because succeeding in this type of business is about being driven and smart. You will have to start building your portfolio and seeking out fresh customers to open their accounts with you.
But the moment you start making profits, that profit is yours and the possibility of growing into something great in a short time is very possible. The thing about the currency exchange business is that there is no cap to how high you can go in your ability to generate profits.
Possible Threats and Challenges You Will Face When Starting a Currency Exchange Business
The major threat you will face in this business is inconsistent fluctuations of the market. As stated in the industry overview, foreign affairs really affect the rate of currency in any country. Something as small as a change in governmental policies in certain sectors can cause the prices of things to either go up or low, this will greatly affect how currency is sold and bought.
We have seen how the rise and fall in oil price affects the currency exchange market, or even the value of Gold. A scarcity of a major consumer commodity or product can also affect this kind of business. One way to be on the good side when most of these things happen is to learn how to read the market.
See the history of what has happened before, how the market responded to it and how it bounced back, speak to professionals, those that know more about the business than you, to help you receive more insight. Economic downturn is one of the major threats to this kind of business.
Dealing with legal and licensing institutions that regulate the business is another challenge, so make sure you are right with these agencies because once you show up as anything less than standard in your requirements, you may risk losing your business or even worse you may end up doing time for malpractice, so before you begin this type of business find out what licenses you must purchase and which legal documents you must have.
Governmental policies are constantly under review and this is another challenge. The Government can make a decision today that can affect your business in a negative way or maybe in a more positive way. Usually when it is in the negative, it tends to frustrate the work of the currency exchange service provider.
The ever changing exchange rates are also a major threat to this kind of business, especially if you are inexperienced in the trade. More seasoned traders are able to turn a bad exchange rate to their own advantage because of experience.
Robbery has been experienced by those in this kind of business, and this also poses a great challenge for those in this kind of business. When they know your office and have watched your schedule, they know how you move the cash to the bank and they pounce.
So this must be taken into account especially if you have an office. Although there is a type of trade that is on the computer but in most cases, this type of business in done at the Airport, or Big Hotels were people come with cash every day to exchange. So theft is another major threat to watch out for.
Starting a Currency Exchange Business in Canada – Legal Matters
- Best legal entity to use for this type of business
In as much as sole proprietorship could be the first way to begin this type of business, there are other legal entities that suit this kind of business like Partnership or Limited liability company. Registering your company and also registering with all the bureau de change regulators in the country will enable you do business legally with banks and other game players.
Also, being registered helps you to be able to pay your taxes and provide accountability for all that money should the situation arise. And it will when the auditors show up to investigate your operation.
Catchy Business Name Ideas Suitable for a Currency Exchange Business
If you are therefore considering what names to use when starting your own catering business, here are some names you should try;
- Minecraft Holdings
- Golink Ventures
- Greenwich Holdings
- Patterson and Patterson Ventures
Anyone deciding to operate a currency exchange business in Canada would definitely have to register with the Securities Commission of whatever city or town they intend to operate from. It is wise to get up to speed about the various insurance platforms that are available to the individual in this type of business. Foreign Exchange Risk Insurance is the first formidable insurance available to the person choosing to enter into this business of currency exchange.
This insurance policy helps protect the trader from most of the regular risks involved in operating this type of business; however it only covers the dealings of currency itself.
Under this kind of insurance you can insure currencies, a list of some of the currencies you can insure are;
- USD-US dollar
- CAD-Canadian dollar
- CHF-Swiss franc
- GBP-British Pound
- AUD – Australian Dollar
- NZD- New Zealand Dollar
- JPY – Japanese Yen
- NOK- Norwegian Krone
- SEK – Swedish Krona
- DKK- Danish Krone
Other “exotic” currencies can be insured as well, these will include those currencies that are pegged to the US dollar and the currencies of certain relatively highly-developed emerging markets. Other “exotic” currencies can be considered on a case by case basis. However Insurance premiums for “exotic” currencies are higher than those for “standard” currencies.
- Intellectual Property Protection/Trademark
Except you plan to develop a new mathematical algorithm that will change the way the trade is done, I don’t think there is any room in this business for the Intellectual Property claim. Currency trading has been happening long before this generation. Most of the systems, policies, rate regulations and mathematical algorithms have already been established.
In the Currency exchange business, we come into a readymade environment and we begin to trade, working our way up to the higher echelons of what the business offers us. There is no real need to re-invent the wheel, except of course you are one out of this world genius.
Is Professional Certification Needed to Start a Currency Exchange Business in Canada?
In as much as anyone can get into the currency exchange business without necessarily going through any formal training, there could be a limit to how high you can go in this trade if you don’t. Many customers would place more trust in one who they believe has received some type of formal training as opposed to another with no professional certification. When you get professional certification, you can legally call yourself a broker, and even be part of a currency exchange company before breaking out on your own.
List of Legal Documents You Need to Run a Currency Exchange Business
Some of the basic legal documents that you should have in place if you intend running your own currency exchange business in Canada include;
- Certificate of Incorporation
- Operating Agreements
- Business License
- Business Plan
- Insurance Policy
- Employment Agreement
Financing Your Currency Exchange Business
There is nothing like having the proper business plan to get a business like this off the table. First of all you are dealing with money and when you start handling other people’s accounts in this trade, you have touched something very sensitive. So you can imagine if you want to receive funding for such a venture, and you do not have a smart strategy of making it profitable for both yourself and your investors. It would be a foolish thing for anyone to get into.
It would also help if you have gone through some type of training for this type of business. People want to make money; lots of others are looking for where to invest and what better way to invest that to invest in one of the money service ventures. Money will always be needed, required or demanded; when you are one of the authorities in the market, it could prove very lucrative for both you and your investors.
Another thing that will help you secure investors is when you have done a thorough work of researching the industry. Your business plan might be excellently put together, but you will need to face these potential investors face to face. You must sound knowledgeable about the subject to stir up a sense of confidence in your investors to part with their monies and trust that you would handle it well.
Some of the financing options you can explore when seeking for start-up capital for your catering business include;
- Raising money from your personal savings and sale of stock
- Market your ideas for business grants and seed funding from angel investors and donor organizations
- Getting soft loan from your family members and friends
- Sale of personal properties
- Applying for loan from the bank
- Getting the required capital from private investors and business partners
Choosing a Suitable Location for your Currency Exchange Business in Canada
The Location for your Currency Exchange business matters, for example if you are dealing strictly with crypto currency, then the major place where you would be working is in the digital world, all you would need is your laptop and access to the internet. So you can basically set up shop at home. However you must make sure that your home is secure, because anyone who has access to your computer has access to your source of income.
But if on the other hand you are into other expressions of currency exchange, then you would want to locate yourself in a place where most people would want to change currency. A big hotel with lots of people lodging from out of the country is a very good place to be, because they would always come looking for currency changers.
An international train station is a good location too, there will be a lot of people passing by every single day and more than half of them would need to change their monies. What better place to find those in need of changing money than at one of the busiest travel hot spots in any country, you will definitely fine large volumes of people in need of your services at an airport terminal.
Tourists are also your good friends in the business of currency exchange as lots of them will be looking for how to change currency from time to time. Seaports are also a good place to find potential customers. These places have a great number of people passing through looking for how to change their money.
What you would also notice about this business is that you don’t really need a large space to operate from. A small kiosk or office will do, somewhere your customers can sit comfortably to carry out their transactions with you. However the place must be secure and you must have a safe to put all that cash. Security is a major concern with this type of business.
These are some of the key factors that you should consider before choosing a location for your currency exchange business;
- The local laws and regulations in the community/state
- Kiosk or office space
- The demography of the location
- The number of currency exchange businesses in the location
- The demand for Currency Exchange businesses
- The purchasing power and business activities in the location
- Accessibility and road network of the location
- Traffic, Parking and Security
Starting a Currency Exchange Business in Canada – Technical and Manpower Details
This type of business does not require so much in the area of equipment to operate. What you need is your laptop which could be optional depending on how you operate, a calculator and a safe for all the cash you will have at hand.
You can choose to run like a one man business, or hire just a few hands to help you from time to time. But this kind of business in its simplest form does not require a whole lot of people. Now if you want to run like a partnership or limited liability company and you want to deal with the currency exchange of large businesses, then simply being a one man business may not be the smart thing to do.
When it comes to man power, below are a few offices and people you may want to employ in your currency exchange business;
- Chief Executive Officer
- Admin and Personnel Manager
- Sales and Marketing Officer
- Front Desk Officer
- Chief Accountant
- Foreign Exchange Brokers
- Financial Advisors
The Service Delivery Process of Currency Exchange Business
Usually after the rates, terms and conditions are agreed by both parties, the transaction is made. The broker receives the money in question and gives the consumer the currency equivalent of the money they took. Usually the broker’s fee is inside of the money he collects with the standard exchange rate included.
Starting a Currency Exchange Business in Canada – The Marketing Plan
- Marketing ideas and strategies
Below are some platforms you can use to market your currency exchange business.
- Advertise your business in relevant financial magazines, radio and TV stations
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, households, startups, small and medium scale businesses
- List your business in the local directories
- List your business in the yellow pages
- Attend international financial service expos, seminars and business fairs.
- Engage the services of marketing executives and business developers to carry out direct marketing
- Utilize the internet to promote your business
- Create different packages for different categories of clients in order to be more specific in meeting their currency needs
Strategies to Boost Your Brand Awareness and Create Your Corporate Identity
Below are platforms you can leverage on to boost your brand and advertise your business.
- Ensure that you position your banners and billboards in strategic positions in your city
- Advertise on TV and Radio by Sponsoring programs
- Ensure that all your staff wear your branded items at regular intervals
- Advertise your business on your website; develop strategies that will pull traffic your way.
- Use direct approach by calling households, start-ups, small and medium scale businesses and the likes, informing them of what you do.
- Share Fliers and handbills around the target areas where you have deduced that your business will do well.
- Encourage the use of word of mouth among your loyal consumers.