Over the last few weeks the news has been full of reports about stock market losses and the declining value of the Canadian dollar. While this may cause anxiety for people thinking about their personal investments, the dipping dollar is also worrisome for business owners who purchase supplies from the U.S.
One business axiom suggests that no more than 20% of your business should come from a single customer. Another adage similarly suggests that no more than 20% of your products should be purchased from a single supplier. In the current situation with the Canadian dollar, this advice could also apply to the country of origin.
Those businesses that are currently purchasing supplies in the U.S. are seeing an erosion of their gross profit. The Women’s Enterprise Centre of Manitoba team is always encouraging our clients to pay close attention to the financial condition of their business for situations just like this. The health of your business may just be preserved if you are able to address these issues quickly and effectively.
As a business owner, there are some steps you can take to weather the current currency storm:
Raise your selling price to maintain or exceed your gross profit targets.
Work with your U.S. supplier to lower the product costs. This could include:
The moral of the story: it is important to keep a very close eye on the financial performance of your business. Understanding the impact of a significant change such as the decrease (or increase) in the value of the Canadian dollar, will help you spot opportunities and mitigate risks. In order to maintain the ongoing viability and flexibility of your business, don’t lose sight of its operational (day-to-day) aspect or ignore your medium and long term plans.
– Maurice McCarthy