We are a family business that manufactures small farmyard equipment. Up to about 10 years ago, most, if not all, of our sales were in Ireland. However, more recently we have been getting a lot of orders from Canada, the UK and America. About one-fifth of our sales are now to the States. We are worried about increased tariffs. Should we take the hit if we are to keep orders coming in from America, or should we keep the price the same and hope for the best?

ANSWER: This is a good question and no doubt one that many Irish businesses will be asking themselves right now. There are a few factors that will determine how you proceed. I recommend that the starting point is to assess your own business set-up and ask yourself:

1. Do you know your margins? Often, businesses consider their gross profit to be the selling price less the cost of the goods. Realistically, businesses need to be factoring in direct employment costs, consultancy, freight and even, customs administration costs. Only then can you make an informed decision regarding your pricing and potential discounts to customers in America.

2. Are you operating your business efficiently? At first, you may think this question does not relate to tariffs.

However, if you are considering changing your prices for customers in the States, it is recommended that you assess how efficient your business is. Efficiencies may be gained in your manufacturing processes by reviewing your employment productivity and the actual processes you have in place in your production facility.

Reviewing your overheads and utilities is also very important. Remember that if your net profit margin is 20% and you identify efficiencies of €15,000 a year, that is worth the same to your business as generating an additional €75,000 in sales.

3. Do you have a reliable shipping partner? Customs can delay delivery to your customers, and there can be many reasons, from partially completed declarations to the non-provision of customer contact information. If the customs authorities cannot reach the customer regarding a customs payment due, it could delay the delivery by weeks and even result in cancelled orders. Having a reliable shipping partner who can provide declaration support and ensure that your customer receives their goods in a timely manner is invaluable.

4. Have you costed your options? You outlined two options in your question – take the hit or keep your prices the same and see what happens. Before you decide what to do, I recommend projecting the outcome of the scenarios.

Impact

The reality is that 20% of your sales go to America. Certain costs in your business are fixed, and if you were to lose those sales, those fixed costs in your business would still have to be paid, ie rent, rates, insurance and so on. It would have a significant impact on your cashflow.

This is crucial if you are going to protect your business.

The aim is not to create fear, quite the opposite. This is an opportunity for you and many Irish businesses to take a step back and take a holistic approach as to how you move forward.

We cannot control the tariffs. They are out of our hands. However, we can control how efficiently our businesses are operated, and we can make better use of our management accounts.

You may not have the resources within your business to find the answers to all the above questions. If you don’t, speak to your accountant.

Knowledge is power and knowing the answers to the above scenarios would enable you to streamline and protect your business and to look at potential new markets that would ultimately mitigate the risk of losing customers in America.

Andrew Brolly is fractional cfo with ifac.

Andrew Brolly is fractional cfo with ifac, which is the professional services firm for farming, food and agribusiness.