Greenback's Woes Can Be Good for Founders

We’re written several times now about why the prospects for the U.S. economy suggest today’s founders might want to establish a global perspective for their startups. We’ve considered rising oil prices, the housing market collapse, the credit crisis, and the strength of emerging consumer bases in countries like India and China. (Sample posts here and here.)

One issue of a prospective “global play” that we’ve not yet addressed is the weak U.S. dollar. Today the dollar fell to a record low for the year against the euro: $1.00 = € 0.67. (See chart.) But a weak Greenback isn’t all bad for U. S. companies.

For one thing, a weak dollar means U.S. goods and services are cheaper to foreign consumers, and that is good for exports. What’s more, if your goods and services are still built or created stateside, your production costs remain the same, regardless of the currency exchange rate. For companies, already selling goods and services abroad, this means they’re getting more dollars for every euro they’re generating in revenues — and that equates to higher margins.

The inverse is true if you manufacture overseas because the weak dollar means it will now cost you more, in dollars, than it once did to source your goods abroad, compensate your foreign laborers, etc. (In other words, your COGS will be proportionally higher, as well as your revenues, so no margin upside.)

I listened to a good program about this today on National Public Radio’s Morning Edition: “Weak Dollar Can Bode Well for Manufacturers” ,produced by NPR‘s crack-economics reporter, Jim Zarroli.

screenshot.png

Check out Jim’s piece to learn more about how the weak Greenback can help you if you sell your goods and services overseas. (Hint: just don’t manufacture your goods and services in France!)

Comments have been disabled for this post