How small businesses survive global market shocks

When Sherene Headley examined the invoice from her manufacturer in China this past autumn, she discovered a significant surprise.

In order to sell to clients, the founder and CEO of the London-based company Mokkah, which creates shoes in huge sizes for women, had bought 57 pairs of black suede boots.

However, Ms. Headley was surprised to find that the manufacturer’s invoice, which was expressed in US dollars, was around 20% more expensive.

Her startup company’s international purchasing power decreased in September when the British pound hit a record low against the US dollar. The decline of the pound increases the cost of purchasing things with a dollar price tag.

That might come as a shock to any business; for a startup, it can be crippling.

When small enterprises are seeking to establish themselves, Ms. Headley notes that their margins are frequently fairly slim. Because we just lack the capacity to do so, I was aware from the start that I could never compete with the High Street [on price].

Mokkah has always operated as a lean, bootstrapped business. Ms. Headley launched the company in June 2020 after raising £13,000 using the fundraising platform Crowdfunder.

Ms. Headley is able to set the price of her goods high enough to guard against unforeseen price increases thanks to advice from her business mentor.

Ms. Headley is able to set the price of her goods high enough to guard against unforeseen price increases thanks to advice from her business mentor.

Fortunately for me, a novice in business, I was able to put some precautions in place to ensure that my selling rate for the UK would still be profitable despite the higher conversion, according to Ms. Headley.

The area would still be there for me to say, “This is what I could plug back in to get another pair of shoes or another sample manufactured.”

Despite stabilising since September, the pound remains historically low in relation to the US dollar.

Global Trade

More of the series by the BBC that examines trade from a global viewpoint.

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Given that Ms. Headley’s shoes cost less in dollars than they would if the pound were higher, you could assume that this would promote her exports to the US. The cost of international shipping has, however, increased significantly for UK exporters as a result of the weak pound.

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When the time comes, Ms. Headley adds that growing her business overseas will be her biggest difficulty. “At the moment, I do have a good number of American consumers, but most of my sales are here in the UK,” the seller said.

Due to the strong dollar, small US firms find it more difficult to secure export orders because their products are more expensive for clients abroad.

The CEO of Red Clay Hot Sauce in South Carolina, Molly Fienning, says she still hopes to grow the company’s international sales in the coming years.

She continues, “We need to locate the right [overseas] partner. “We want to truly own our neighborhood, the South, the US, and then think globally.”

In addition to the currency issue, Ms. Fienning claims that since she assumed the position of CEO in 2018, she has witnessed critical business expenses, like the cost of cardboard boxes and the amount she must pay freight companies, rise to their greatest levels.

Red Clay only uses products from the US to protect the company from currency fluctuations. These include white wine vinegar, raw honey, and sweet peppers.

We began with only Southern products, but as we expanded, we required additional peppers and honey, according to Ms. Fienning.

The business now purchases peppers from producers all along the US east coast, from Florida to New York, and uses honey producers in Georgia and Colorado.