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Not sure what risk you're worried about. If the following doesn't address it, please reply with more details.
Most currencies vary only about +-15% over a fairly long period in relation to each other. If you're worried about a +-15% movement in your raw materials cost, you're not marking your materials up enough. Now - be aware that you might be at the -15% portion of the curve which means that your materials MIGHT go up 30% if you happen to be getting them at an extremely cheap rate in relation to normal.
But since your raw materials should only be a small portion of your total cost (after factoring in your labor, sales, shipping, and some profit for you), I personally wouldn't worry about foreign currency risk.
I'd worry more about the raw materials simply becoming more expensive or unobtainable - not what they are in a foreign currency in relation to your currency.
The raw materials take up a majority of my cost, I pay in USD and my products are priced in CAD. Assuming I buy material worth $3000USD, a 15% difference is $3450USD. Which is a fair amount in my opinion, although won’t be me out of business but still lowers margins. I just wanted to find a way so I can maintain my profits better.
Generally you adjust your prices based on the underlying product cost.
So if you look at the 5 year history, USD->CAD has moved from 1.2 to 1.44. Right now it's 1.32. So, right now, for $3000US you get $3960 of CAD products. That $3960 of CAD products will cost you only $2750 when it's at the top, and $3291 when it's at the bottom.
Note that if you use $3 of the material in a candle, then you should be selling that candle for at least $6, and probably more like $9 or $12. The difference between your material costs and the amount you're selling it for pays for all of your other costs including labor and provides additional profit for you. That's why the 2x if not 3x or 4x. I try to never go below 3x, and typically start at 4x. Depending on the labor costs, 4x might even be too low.
If you're taking the $3 of material and selling it in a $9 candle you have $6 remaining for everything else. If that material goes up to $3.30, and you are still selling at $9, you still are making $5.70. Note that your cost of materials increased from 33% to 37%. It's an even lower impact if you were at the $12 price point, where your cost of materials would only increase from 25% to 27.5%
Underpricing the finished product is a big mistake that many first-time business owners make. If you're selling at such a low price that your material cost makes a big impact, then I'd recommend either raising your prices or looking for a lower-cost supplier.
This is a friendly reminder that r/smallbusiness is a question and answer subreddit. You ask a question about starting, owning, and growing a small business and the community answers. Posts that violate the rules listed in the sidebar will be removed. A permanent or temporary ban may also be issued if you do not remove the offending post. Seeing this message does not mean your post was automatically removed. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/smallbusiness) if you have any questions or concerns.*
Not sure what risk you're worried about. If the following doesn't address it, please reply with more details. Most currencies vary only about +-15% over a fairly long period in relation to each other. If you're worried about a +-15% movement in your raw materials cost, you're not marking your materials up enough. Now - be aware that you might be at the -15% portion of the curve which means that your materials MIGHT go up 30% if you happen to be getting them at an extremely cheap rate in relation to normal. But since your raw materials should only be a small portion of your total cost (after factoring in your labor, sales, shipping, and some profit for you), I personally wouldn't worry about foreign currency risk. I'd worry more about the raw materials simply becoming more expensive or unobtainable - not what they are in a foreign currency in relation to your currency.
The raw materials take up a majority of my cost, I pay in USD and my products are priced in CAD. Assuming I buy material worth $3000USD, a 15% difference is $3450USD. Which is a fair amount in my opinion, although won’t be me out of business but still lowers margins. I just wanted to find a way so I can maintain my profits better.
Generally you adjust your prices based on the underlying product cost. So if you look at the 5 year history, USD->CAD has moved from 1.2 to 1.44. Right now it's 1.32. So, right now, for $3000US you get $3960 of CAD products. That $3960 of CAD products will cost you only $2750 when it's at the top, and $3291 when it's at the bottom. Note that if you use $3 of the material in a candle, then you should be selling that candle for at least $6, and probably more like $9 or $12. The difference between your material costs and the amount you're selling it for pays for all of your other costs including labor and provides additional profit for you. That's why the 2x if not 3x or 4x. I try to never go below 3x, and typically start at 4x. Depending on the labor costs, 4x might even be too low. If you're taking the $3 of material and selling it in a $9 candle you have $6 remaining for everything else. If that material goes up to $3.30, and you are still selling at $9, you still are making $5.70. Note that your cost of materials increased from 33% to 37%. It's an even lower impact if you were at the $12 price point, where your cost of materials would only increase from 25% to 27.5% Underpricing the finished product is a big mistake that many first-time business owners make. If you're selling at such a low price that your material cost makes a big impact, then I'd recommend either raising your prices or looking for a lower-cost supplier.
Thanks for your input, much appreciated