Industry Perspective: Four keys to a prosperous FX business, and a clear exit strategy

The foreign exchange industry continues to see the emergence of new brokers, technology companies, and market structure innovation. Finance Feeds spoke recently with principals at Shift Forex about the important ingredients brokers, banks, venues, exchanges and technology providers must consider when entering or seeking to expand in the foreign exchange markets. Shift Forex is a New York based consultancy that works with companies at any stage of their lifecycle, from their inception until sale.

Effectively starting up, fostering growth and eventually exiting a forex business requires a thorough knowledge of how the market operates. Here are four tips for prospering an FX business.

Start with a Solid Strategy

Forex brokerage and technology are highly saturated segments of the market. For that reason it is crucial for emerging companies to differentiate themselves significantly from competitors. Developing a robust value proposition and implementing it through an entire product offering can put a new company ahead of competitors, enabling them to get an initial jump on legacy providers and increasing the chances of success and growth.

“In the brokerage segment, clients find value in our turn-key solution,” says Ian McAfee, CEO of Shift Forex. “In addition to being a single point of contact for legal, technology, finance, and marketing services, we naturally build strong relationships with our clients to help them with less known aspects of the industry and optimize for success.”

Avoid Common Mistakes

Companies who are successful in forex have the foresight to anticipate industry challenges. “Many people coming into the industry do not have experience running a broker, so they run into questions about things they have never had to deal with. We’re there to help them when those issues arise,” says McAfee.

The companies that fail tend to do so in one of these three areas: they don’t handle their risk properly, they don’t pick the right marketing strategy to attract new clients, or they try something on the technology side that is too costly to maintain. In order for companies to avoid mistakes, it is crucial for them to think long term when making preliminary decisions in these areas.

Maintain a Strategic Perspective

At various stages of development, companies will either look toward expansion into new market segments, geographies or products. They also face strategic business questions around acquisitions. Whether driving expansion through strategic acquisitions or seeking offers to sell the company, important decisions will need to be made, such as whether to take the company public or sell it outright.

Mergers, acquisitions and initial public offerings are related strategies, but each is fraught with extensive financial, regulatory, and cultural considerations that will determine the future of a company. “The FX industry has unique characteristics that mean many traditional capital sources are not available,” says Director of Strategy and Valuation at Shift Forex, Greg Berman, “so anyone considering expansion via investment must seek advisors who truly understand the landscape.”

Plan a Comprehensive Exit Strategy

When companies look to exit the market, it is crucial to find an acquirer that understands the full value of the target company’s products, services, and market position enabling them to expand the acquired business to new levels of success.

“Valuing a company goes beyond comparisons, numbers, and multiples,” says Matthew Miller, Chief Operations Officer at Shift Forex, “it’s about going to the market and finding out what someone is actually willing to pay for a company. We can utilize our network to get an informed and accurate sense of a company’s worth in the market.” This 360-degree analysis is as important to the success of a transaction as the financial valuation and deal terms that define an acquisition.

The key to a successful forex business begins and ends with an in depth understanding of the foreign exchange industry. “There are plenty of top-tier consulting firms out there,” says Miller, “however, without a FX specialization, these firms are often unable to provide deep, industry-specific insights, which can spell the difference between success and failure to a company entering this space.”

Shift Forex offers full-service, market entry consultation, marketing strategies, and mergers and acquisitions services to companies at any stage of growth. The firm is headquartered in New York with offices in London and Shanghai.