Happy Canada Day! I’m very proud to live in such a beautiful, diverse, and well respected country.
This year, Canada Day includes all of the usual celebrations, but also a particular action that demonstrates our strength and resolve as a country; newly imposed tariffs on the United States, in response to those that have been in force against Canada and other countries since June 1st. As indicated by both our Prime Minister and Foreign Affairs Minister, Canada had “no choice” in terms of imposing these tariffs, which represent a response in equal measure, not escalation. Our government has also taken various steps to help industries impacted by the tariffs, including export diversification, training, and business liquidity support.
Although there are various complexities around how tariffs work, the expectation is that there will be price increases on some items, for both consumers and companies, making the need to source products that are not subject these measures of particular importance. As there is a lot being said about the implications for consumers, let’s consider some things that Canadian businesses should be thinking about:
- Know your costs: Too often, companies do not have a good understanding of the actual cost to deliver products and services, on a current, comprehensive, and complete basis. Typical shortfalls include not recognizing all of the costs that should be included (such as overhead items or allocation of all labour costs) or not reflecting cost increases and other charges on an ongoing basis. Not only does this provide a false sense of product margins, it also results in a poor basis for establishing prices. The latter can be particularly destructive for companies, with each sale occurring at a price that is too low to support operations.
- Identify supplier options: Although companies might have longstanding supply and other relationships, it’s never been more important to expand the list. Managing risk involves identifying a range of suppliers, including outside of the United States, to ensure that options can quickly be accessed, in the event that pricing or delivery terms become untenable.
- Research market opportunities: Tariffs can create business opportunities for Canadian companies, in situations where US goods become less price competitive. Fulfilling market opportunities requires targeted research, and assuming that new business is no different than a company’s current customers is a recipe for disaster. Take the time to fully understand what’s needed in order to generate success.
- Secure necessary capital: Business leaders don’t always remember that approaching new opportunities and generating growth require capital. Reasons include the need to expand facilities, procure raw materials, increase distribution, hire staff, or conduct the previously mentioned research, often in advance of when sales proceeds are received. In order to ensure a successful outcome, it’s critical to understand capital requirements, as well as the source, before approaching growth opportunities.
- Monitor financial results: As new business opportunities evolve, financial results must be monitored on a timely basis, to ensure that progress is on track. In order to do so, a company must have a strong complement of fundamental systems, processes, and procedures in place, to ensure that good results and information are being generated. This includes ensuring that the person in the senior finance role has the right qualifications, skills, and experience, particularly for a growth related company.
Putting these key areas into place generally takes longer than expected, so business leaders should be doing so now. Advisors can be particularly helpful, including identifying market opportunities, action planning requirements, implementation options, access to partners, and tested solutions that can be fast-tracked, representing a competitive edge. Feel free to contact us for more information during this important time in the Canadian economy.