How best to deal with a rising Canadian dollar value for a software company?

A direct way to insure against currency fluctuation risk is to buy currency options. It's too late for this approach to help the 20% hit you've already taken, but you can purchase options now to protect against further deflation relative to the USD and the Euro.

Your question is not completely clear if you are trying to only improve you predictability of revenue via insulation from currency moves, or are trying to compensate for the effective price degrease you are seeing due to the advance of the Canadian dollar. The issues are somewhat separable and the only way to correct for the latter is to raise prices (one way or the other).

Personally, I would be in favor of basing your prices in your local currency, which, when properly adjusted fixes both problems. This could be presented in various ways on your web-site where either you always bill in Canadian, but for convenience offer conversion prices on the web-site based on current exchange rates. Alternatively, you can actually charge in local currencies for the buyer if you feel that overcomes some sort of purchase barrier, but I still think the prices should be equivalent when accounting for the exchange rate.

PS: I am guessing if you were in the market back when the US dollar was higher, you were not nearly as worried about this "problem". ;-)

If the majority of your sales are in the US, you may want to increase your team in the US, to limit this problem, but the best way to deal with this is to accept that currency rates will change, and when the currency changes to favor you, ensure you are saving some of the excess, to help insulate you when things change.

You may also want to look at your Canadian sales and see how to increase that, as the best bet is to not have all your sales be in a foreign country, as you pay money to exchange the currency, so you take a loss there also, in addition to the poor exchange rate, for going from USD to CDN.

You have a currency mismatch problem! Your assets are in USD and your liabilities are in CAD. Over the short term, you could try to hedge your exposure by purchasing currency options. Depending on the size of your company, though, you may be required to purchase options that give you far too much coverage. The other downsides are that options are expensive (options are always priced with a premium), and that they are only a temporary solution (options have an expiry date).

The best way for international companies to balance their currency exposure is to try to match their assets and liabilities as closely as possible. Have you thought about creative ways to increase your mix of USD liabilities? Moving your team from Canada would be tough, but what about shifting your hosting company? Are there are other intermediate goods your company uses that could be purchased on a continuing basis in USD?