What Does the Dipping Value of the Canadian Dollar Mean to Your Business?

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.

  • This strategy may work if you offer an exclusive (premium) product that caters to upper income buyers. If you increase the price, it will be important for you to ensure your service levels are second to none.
  • If your product is not exclusive and therefore available from others in your market:
    – Keep a close eye on your competitors’ pricing/service strategies and act accordingly, particularly if they also import from the U.S.
    – If your competitors’ don’t source their product from the U.S., get into research mode to find out where they get it. You may be able to find a Canadian supplier. Alternatively, you may be able to save on labour costs if you find an off-shore supplier

Work with your U.S. supplier to lower the product costs. This could include:

  • Lower first cost;
  • Lower freight costs;
  • If your U.S. supplier gets the product from another country, rather than having it shipped to the U.S. and then on to you, have the product sent directly to you from the manufacturer.
  • The lower Canadian dollar may make your product very attractive to U.S. buyers. Look for opportunities to sell your product into the U.S. market.

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