Dollar starts to bite

The decision by Lonely Plant to make up to 70 workers redundant or shift them to the company’s London office is perhaps the first sign of how the strong Australian dollar is not only hitting our big manufacturers and exporters, but medium-sized companies too.

While Lonely Planet is now owned by the British Government’s media company BBC, the company is very much an Australian success story.

Its founders, Tony and Maureen Wheelers, are proudly Australian and the company is still officially headquartered in Melbourne, where it has about 350 staff.

But the business has always had a very global outlook, with the vast majority of its sales coming from overseas.

Three years ago, when the GFC smashed the Australian dollar down to 63c, that revenue mix was a great advantage.

But as CEO Matt Goldberg said yesterday, it is now poison.

“Despite the fact that we’ve delivered on everything we set out to achieve this past year, the devastating impact of foreign currency exchange shaved over $13 million off our 2010-11 revenues,” he said in a note to staff.

“And at the moment, we have more than 80% of our revenues coming from outside of Australia & New Zealand with more than 70% of our costs located in Australia,” he said.

“We are a good business with talented people deeply committed to Lonely Planet, but this imbalance is not sustainable in the current environment.”

Goldberg is one of many entrepreneurs battling the awful problem of being whacked by something that is really out of their control.

They get their team right, they close deals, they complete projects, the meet targets – and still their revenue slides and their profits crumble.

Unfortunately, it cannot be long before we see more SMEs forced to take these steps.

A lot of our fast-growing, technology-focused companies have built strong product development bases in Australia, while building sales forces overseas.

This has worked brilliantly for years, as high-quality Australian workers were generally much cheaper than similar workers in America and Europe.

But with the dollar hovering just under $US1.10, that’s not the case anymore.

Unfortunately, we should expect to see more fast-growth, globally-focused companies forced to shift the workforces offshore if the dollar remains high.