Join the new world

Unless the government intervenes, the value of the CAD versus gold is about to go up once more. This is good news if you are someone who makes a lot of use of the black market but not the best news when it comes to exporters. Unless prices adjust accordingly, it means everything gets relatively more expensive.

The diamond industry has shown itself to be inhospitable to new investors and those without deep pockets to weather the daily pricing changes. What of gifts?

They went from almost obsolete to a prerequisite purchase to maintain wellness as high as possible. The markets have evolved enough that we are nearing a stage where profits are being eroded by greater competition but just how far south has the bottom line gone?

It appears that in manufacturing the two stage of employee hiring works best. Level 3 skill workers for the early goings and development stages of Q1 and Q2, level 6 skill workers for anything above.

Note to the reader: these projections are based on a snapshot of the job market as well as domestic markets for gifts in Canada. It is meant to measure the reasonable prospect each industry has of making a profit. It is not meant to be perceived as a survey of present companies and their well being.

Second note to the reader: while the above note is true, I also had the chance to examine the books of some gifts companies this time around. Some of my readers appreciated my series so far enough to give me a glimpse at their actual numbers. That has shown me that although not 100% accurate, my projections have been very near to reality.



What are you paying for raw materials?

The key for all manufacturers is usually the price they pay for raw materials. In that regard we are very lucky in Canada because of the wealth of resources we possess. In almost all cases, the price we pay for raw compares nicely with the best international prices. At the time of the study on gifts, the difference between the Canadian market for diamonds and the best international market amounted to $0.006 per unit.

The prices of gifts in Canada are somewhat inconsistent. It is not a mature sector in the same way as weapons. Because of this, we see some rather unusual numbers and revenue distributions.

Continuing the trend, Q1 owners have the toughest time establishing themselves. A company run at peak efficiency with workers that know how to maintain their wellness above 90, will still experience some red ink to the tune of $11.88/day. A far cry from the massive losses a similar company would experience in diamonds but still something that would bankrupt most new entrepreneurs.

Forecast, gold.

The prognostic improves rapidly however. In Canada, Q2 owners can reasonably expect to turn a profit. We are talking in the range of $3.44/day. This is very small and means that any shift in raw prices or the loss of wellness of workers can wipe this margin out.

But with due diligence and some luck, the owner could upgrade to Q3 and here the profits amount to around $30/day or almost a full gold.

An important note on workers. The highest skill workers are not always the best fit because of the higher competition and higher salary you may have to pay them. That being said, knowing when to convert to high skill employees and pursuing them aggressively can be a great benefit to the bottom line.

At the time of taking this snapshot, there was a little bit of chaos in the prices of goods at the Q4 and Q5 level. Therefore I release these numbers with the warning that over the course of a week, it is not likely that this numbers bear out.

Q4 owners were sitting on the goose that laid the golden egg. Their profit margins were an outstanding 7 gold a day if they managed to sell all their stocks. We promise to revisit this sector at a later time to confirm these numbers.

It is especially impressive when the Q5 owner could only expect 3.5 gold/day in comparison. This would be the only time so far where we have seen a lower quality company whose potential profits were so much higher.

A final note on manufacturing exports: it is very hard for manufacturers to export to other nations due to our high CAD value. Almost every nation, often because of lack of high land regions, will have an active and productive manufacturing sector. The vast majority of these will have lower overhead costs in wages. If this is not balanced with higher overhead costs for raw material, then the competitive edge they have is not likely to be overcome. Labour in Canada is expensive even if materials are not. So exporting is not always a solution to getting around a lack of a domestic market or one that is saturated.