A currency exchange business is a business that is involved in the exchange of one country’s currency for another by executing buy and sell transactions. Currency exchange businesses, both physical and online, make money by modifying the rate by a certain percentage to ensure that it makes a profit on the transaction.
Available statistics have it that there are 150 Foreign Currency Exchange businesses in Canada as of 2022, an increase of 0.1 percent from 2021. The number of businesses in the Foreign Currency Exchange Services industry in Canada has grown 0.1 percent per year on average over the five years between 2017 – 2022. The industry is projected to grow by 9.5 percent in 2023 with market size of $227 million CAD.
Steps on How to Start a Currency Exchange Business in Canada
Table of Contents
Conduct Market Research
If you are considering starting a currency exchange business in Canada, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process for your currency exchange business in Canada should be to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source for information that will help you maximize your business, give you reliable data and of course hint of what your potential market will be looking out for from a currency exchange business and also help you operate your currency exchange business in Canada with less stress and of course, build the business to profitability.
a. Who is the Target Market for a Currency Exchange Business?
- Exporters and importers
- International students
- Financial institutions
- International Tourists and visitors
- Corporate organizations.
b. Is Currency Exchange a Profitable Business?
Yes, the currency exchange business in Canada is very profitable business. As a matter of fact, the industry is worth an estimated $227 million CAD.
c. Are There Existing Niches in the Industry?
Yes, there are existing niches when it comes to currency exchange business in Canada. Here are some of them;
- Online currency exchange business
- Physical currency exchange business
d. Who are the Major Competitors?
- International Currency Exchange Ltd.
- Currency Exchange International Corp.
- Wise (formerly Transferwise)
- Key Currency
- Currencies Direct
e. Are There County or Provincial Regulations or Zoning Laws for Currency Exchange Business in Canada?
Yes, there are county and provincial regulations and zoning laws for currency exchange businesses in Canada and all types of financial companies must obtain specific approvals depending on the province where they will operate.
But please note that all financial service providers in Canada are supervised by multiple regulators, with the Office of the Superintendent of Financial Institutions (OSFI) responsible for prudential regulation and financial stability, and the Financial Consumer Agency of Canada (FCAC) responsible for consumer protection and market conduct.
f. Is There a Franchise for Currency Exchange Business?
No, there are no franchise opportunities for currency exchange business in Canada.
g. What Do You Need to Start a Currency Exchange Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A Good Office facility
- Goods and Services Tax/ Harmonized Sales Tax (GST/HST)
- A Corporate Bank Account
- Supplies of different currencies
- Startup Capital
Memorable Currency Exchange Business Names
- Pro Currency©, Inc.
- Nordic® Currency Exchange Ltd.
- All Nations© Currency Exchange Corp.
- Go Currency®, Inc.
- Wise Move™ Currency Exchange, Inc.
- Money Now™ Currency Exchange Ltd.
- Passports© Currency Exchange, Ltd.
- Giant Stripes® Currency Exchange, Inc.
- Blue Strides© Currency Exchange, Inc.
- D Wallet© Currency Exchange, Inc.
- Reid® Currency Exchange, Ltd.
- Yale® Currency Exchange, Ltd.
- Dennis Montreal™ Currency Exchange, Ltd.
- Fin Pro© Currency Exchange, Inc.
- The Books® Currency Exchange, Inc.
- Jason Wildfred™ Currency Exchange, Inc.
- Sol Money™ Currency Exchange, Inc.
- Jerry Kent© Currency Exchange, Inc.
- Green Money® Currency Exchange, Inc.
- The Tides™ Currency Exchange, Inc.
Register Your Business
a. What Type of Business Structure is Best for This?
When it comes to starting a currency exchange business in Canada, you have four options (business structure) to choose from, bu, the one that most players in this line of business consider is a corporation. It is common to consider a corporation because it comes with limited liability – owners are not responsible for company debts or obligations.
It is easier to raise capital from investors or financial institutions. Besides, being incorporated is often a requirement when doing business with governments or other businesses and business income can be paid out in the form of salary or dividends, allowing you to optimize your tax situation.
Please note that all businesses in Canada must register their business names in their respective provinces or territories except for sole proprietorships that use only the owner’s legal name with no additions (except in Newfoundland and Labrador where no sole proprietorships or partnerships need to register their names).
b. Steps to Form a Business in Canada
- Choose a Name for Your Business.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Currency Exchange Business?
- General Business License
- MSB (“Money Services Business”) License
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections.
d. What Type of Certification is Needed to Open a Currency Exchange Business in Canada?
You don’t need any certifications to open a currency exchange business in Canada.
e. What Documents are Needed to Open a Currency Exchange?
These are some of the basic legal documents you are expected to have if you want to legally run a currency exchange business in Canada;
- Certificate of Incorporation
- Goods and Services Tax/ Harmonized Sales Tax (GST/HST)
- Business and liability insurance
- Council Permit and Building Approval
- Business License
- Membership of the Canada Deposit and Insurance Corporation
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering opening a currency exchange business in Canada, usually you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Currency Exchange Business in Canada?
The cost required to open a currency exchange business in Canada may vary significantly. But a medium scale, standard currency exchange business typically costs between 150,000 CAD and 500,000 CAD to set up.
b. What are the Costs Involved in Starting a Currency Exchange Business
- Business Registration Fees – $7,500 CAD
- Legal expenses for obtaining licenses and permits – $3,300 CAD
- Marketing, Branding and Promotions – $1,000 CAD
- Business Consultant Fee – $2,500 CAD
- Insurance – $2,400 CAD
- Rent/Lease – $75,000 CAD
- Other start-up expenses include, stationery ($500), and phone and utility deposits ($1,800).
- Operational Cost (salaries of employees, payments of bills et al) – $30,000 CAD
- Working Capital – $50,000 CAD
- Store Equipment (cash register, receipt issuing machines, POS, security, ventilation, signage) – $5,750 CAD
- Website: $750 CAD
- Opening party: $3,000 CAD
- Miscellaneous: $2,000 CAD
c. What Factors Determine the Cost of Opening a Currency Exchange Business in Canada?
- The size of currency exchange business (the working capital)
- The choice of location
- The required licenses and permits
- The type of facility
- The type of currencies available and additional services offerings
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the currency exchange business
- The cost for furnishing and equipping the facility
- The cost for insurance policy covers
- The cost for registering the business
- Source of your supplies (different currencies and ongoing expenses)
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the currency exchange business in Canada
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
In fact, it is not compulsory to build a new facility for your currency exchange business in Canada, but if you have the required finance, it will pay you to build your own facility. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.
e. What are the Ongoing Expenses of a Currency Exchange Business in Canada?
- Supplies (different currencies)
- Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
- Salaries of employees
f. What is the Average Salary of your Staff?
- Chief Executive Officer – $70,000 CAD Per Year
- Manager – $45,000 CAD Per Year
- Cashier – $30,630,000 CAD Per Year
g. How Do You Get Funding to Start a Currency Exchange Business in Canada
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations, and angel investors
- Source for soft loans from your family members and friends.
Write a Business Plan
a. Executive Summary
Giant Stripes® Currency Exchange, Inc. is a registered and licensed currency exchange company that will be located in the heart of Vancouver, British Columbia. The company will be involved in dealing in currencies from leading countries of the world whose currencies are traded in Canada. We will serve as a currency exchange services provider for businesses and individuals who want to buy or sell foreign currencies.
b. Products and Service
- Providing foreign currency exchange services for consumers
- Providing currency exchange services for businesses
- Providing bulk foreign currency exchange to banks.
c. Mission Statement
Our mission is to provide professional, reliable, and trusted foreign exchange services that assist individuals, start-ups, corporate organizations, manufacturing companies, and non-profit organizations in sorting out their foreign exchange and financial related concerns.
Our vision is to build a currency exchange business in Canada that will be a global player in the country.
d. Goals and Objectives
The goal and objective of a currency exchange business in Canada is to exchange different types of currencies for clients.
e. Organizational Structure
- Chief Executive Officer
a. SWOT Analysis
- Ideal location for a currency exchange business in Canada
- Highly experienced and qualified employees and management
- Access to different currencies from different countries.
- Financial constraints may restrict the publicity and branding of the business
- A new business that will be competing with well-established currency exchange companies and even banks in the city.
- Inability to retain our highly experienced and qualified employees longer than we want during the teething stage of the business.
- Increase in the number of immigrants, students, and international businessmen and women within our market space
- Online market, new services, new technology, and of course the opening of new markets.
- The arrival of a new currency exchange company within our market space
- Economic uncertainty
- Liability problems
- The government could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses like ours.
b. How Do Currency Exchange Business Make Money?
Currency exchange businesses make money by exchanging different currencies for clients and of course, adding commission for every transaction. They buy currency at a lower price and sell at a higher price.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your currency exchange business by sending introductory letters alongside your brochure to corporate organizations, schools with international students, players in the manufacturing sector, importers and exporters, international tourists, and other key stakeholders throughout the city where your currency exchange business is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business so as to give your business an online presence
- Advertise our business in financial-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Service?
There is no uniform price for currency exchange because different currencies come with their own buying and selling price.
b. How Much Profit Do Currency Exchange Business Owners Make a Year?
It depends, but available reports show that on average, currency exchange business owners make anywhere from $50,000 CAD and up to $120,000 CAD or more.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the currency exchange business
- The types of currencies available
- The location of the currency exchange business
- The management style of the currency exchange business
- The business approach of the currency exchange business
- The advertising and marketing strategies adopted by the currency exchange business.
- The number of years the currency exchange business is in business
d. What is the Profit Margin of a Currency Exchange Business?
The profit margin on currency exchange is not fixed due to the volatility of the forex market.
e. What is the Sales Forecast?
Below is the sales forecast for a currency exchange business. It is based on the location of the business and other factors as it relates to such startups in Canada;
- First Fiscal Year: $350,000 CAD
- Second Fiscal Year: $550,000 CAD
- Third Fiscal Year: $1 million CAD
Set Up your Office
a. How Do You Choose a Perfect Location for a Currency Exchange Business?
- The demography of the location as it relates to the number of international students, tourists, importers, exporters et al
- The demand for forex in the location
- Accessibility of the location
- The number of currency exchange businesses, and banks in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What Province and City is Best to Open a Currency Exchange Business?
- Nova Scotia, Halifax
- Manitoba, Winnipeg
- Toronto, Ontario
- British Columbia, Vancouver
- Calgary, Alberta
- Quebec City, Quebec
- Charlottetown, Prince Edward Island
- Saskatoon, Saskatchewan
c. What Equipment is Needed to Operate a Currency Exchange Business?
You will need computers and receipt issuing machines, and Point of Sale Machines (POS Machines).
When it comes to hiring employees for a standard currency exchange business, you should make plans to hire a competent chief executive officer (you can occupy this position), manager, and account clerk or cashier.
Launch the Business Proper
No currency exchange business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can go for a grand opening party.
The bottom line is that with a proper launching of the currency exchange business, you will officially inform people in your city that your currency exchange is open for business.
a. What Makes a Currency Exchange Business in Canada Successful?
- Choose a good location and office facility to launch the business
- Make sure your deal in a wide range of currencies (give your customers options)
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your currency exchange business
- Leverage on all available online and offline platforms to promote your currency exchange business
b. What Happens During a Typical Day at a Currency Exchange Business?
- The office is open for the day’s work
- The available currencies are counted and recorded
- Walk-in customers are attended to
- Stocks are taken and reports are written and submitted to superior officers
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Currency Exchange Business in Canada?
- Excellent accounting and bookkeeping skills
- Excellent sales and marketing skills
- Excellent customer services skills
- Interpersonal skill
- Business management skills
- Bargaining skill
- Work experience in a forex exchange business environment
- Experience in managing people
- Experience in business administration.