While all businesses are there to make profits, some economic indicators can affect a business’s success. Whether they thrive or cease depends on external circumstances as much as internal. Although such factors as economy, politics, legislation and technology are often beyond your control, they have a significant influence on your company’s prosperity and should not be neglected when preparing your business development strategy.
Let’s have a closer look at 5 economic indicators that affect business success.
1. Consumer confidence
Consumer confidence measures the overall consumer optimism about the state of the economy. Confident consumers tend to be more willing to spend money than consumers with low confidence. This means businesses are more likely to prosper.
2. Economic growth and development
Economic development is probably the most significant indicator affecting a business’s success, as a business needs to cater for the demands of an economic environment and a potent society. It indicates the amount of money being invested into channels of long-term degradation, and the finances of the people living in the society at large in a particular country are decreed by the economic growth of a country.
Inflation usually occurs when the supply of money is larger than the availability of goods and services. And is followed by increased costs of raw materials, production and utilities. To sustain a business, the prices of goods have to increase. As a consequence, inflation can reduce the purchasing power of consumers unless employers increase wages based on the level of inflation.
4. Interest rates
The last but not the least essential indicator is interest rates. They represent the amount a lender charges an individual or business to borrow funds. Many small and medium businesses rely on loans from banks and other financial institutions as a source of financing. High-interest rates result in higher total company expenses.
Another crucial economic indicator that affects business success is employment. Again, it has a direct impact on the purchasing power of individuals. When unemployment is low, consumer spending tends to be high because most people have the income to spend, which is good for businesses and helps drive growth.
The above economic indicators are permanent and universal. They will influence any business, small or large, local or international, in any given place and time, no matter what. Normally, these indicators, dominated by domestic and international politics, are pretty steady and predictable for entrepreneurs who do their “homework” regularly.
However, 2020 has reminded us that we should never underestimate the power of global events that may occur unexpectedly. It is safe to say that Brexit and the Covid-19 pandemic have entirely reshaped the global business scene for good.
Of course, it is impossible to forecast a global disease breakout, just as nobody would have thought that common dissatisfaction with European immigration laws and some trading rules would turn into a full-scale alliance collapse resulting in Brexit.
Nonetheless, there are certain ways to “fortify” your enterprise, so it is ready to face more challenges. One of them is utilising Professional Employer Organisation (PEO) and Employer Of Record (EOR) services helping to keep your business agile, flexible and reactive. As well as eliminate some risks caused by economic and political uncertainty.
Are you looking to take your business to the next level? Contact Bradford Jacobs today to discover how our corporate solutions can assist you in conquering new heights.