The 10 biggest issues facing start-ups in 2013: #8 the Aussie dollar

What are the main issues Australian start-ups are grappling with? Accountancy and business advisor network DFK recently conducted a survey of its clients and staff to identify the top 10.

We’ve already highlighted number 10 – cloud computing and number nine – exit strategies. The beefy Australian dollar is in at number eight.

This week’s interest rate cut has helped take some of the wind from the sails of the Australian dollar, which has been formidably strong in recent times.

The dollar has slipped back to near-parity with its US counterpart today, with investors confident of a turnaround in the American economy.

But this will be of little comfort to the businesses – especially exporters – that have suffered from the strong dollar, helping it to eighth place in DFK’s rankings of the top 10 start-up bugbears.

When Holden and Ford recently announced job cuts, they referred to customers not buying domestic cars any longer.

When the dollar is high people are able to buy a Mazda or maybe a Mercedes, which they could not afford before. Loyalty and exclusivity are no longer high ranked. It’s about the cost.

A high Australian dollar is nothing new. It’s been the case for the last two and a half years, but what does it mean for start-ups? Simply expressed, exporters are suffering and importers are booming.

Texet is an importer and wholesaler of high quality European clothing, mainly sportswear, outdoor adventure clothing and wilderness wear. Many retailers are selling their stock.

“Every month, I wonder how long the high Australian dollar will last. We don’t dare to lower our prices, because when the dollar comes down, we can’t increase our prices,” says Birger Junghus, owner of Texet.

Indirectly he has lowered the prices since the costs have increased for cotton and transports, so the profit margin has shrunk.

“From my experience it’s really wholesalers who are taking the punch, particular those who are having a few large clients. They dictate the prices and the wholesalers just have to follow if they want to stay in business,” says Cheree Woolcock, partner of DFK Australia New Zealand in Melbourne.

So what do you see ahead for the export market?

Business has slowed down and I can’t see that changing in the nearest future. I think it’s unlikely that the dollar will drop dramatically, unless the US interest suddenly increase.

Competition from overseas at our domestic market will probably continue to increase.

Therefore, I think the pressure on exporters will increase, which will affect Australian employment.

History shows that exchange rates will always fluctuate over time, short and long term. So there will at some stage be a change.

“Depending when the business started, if it is less than three years, then the high dollar is the norm, but if four years then they have felt the change. Some might already have gone out of business and others have adjusted,” says Woolcock.

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