Many small businesses are impacted by a host of global factors, having a telescopic view is vital to success
Between your neighborhood customers, family-like workforce, and local vendor relationships, it may seem like your small business operates on an island — far removed from the tumultuous ocean of the global economy.
But in reality, not only is your small business directly affected by global economic waters, it’s a small boat floating on them. That makes it even more susceptible to the inevitable ebbs and flows. The trick is to stay ahead of both storms and sunny days to make sure your vessel is fit to float — no matter the forecast.
As a small business owner, it’s especially vital that you keep your thumb on the pulse of global economic trends. Just as a wave appears much larger in shallower water, the ebbs and flows of the global economy will be more compounded in your small business than your corporate counterparts. You’ll feel the changes faster and more powerfully.
To stay ahead, you need to maintain a telescopic view of the state of the global economy. Start by identifying observable trends — such as an increased focus on tighter fiscal policies that still allow for robust infrastructure — and use them to found your strategic business plan.
By diving deep into these patterns, you can capitalize on a myriad of opportunities and continue creating new ones for your business.
Ride the Economic Waves
When the weather is good, the waves are calm and consistent. As the global economy strengthens, your business will most likely be more profitable due to higher rates of disposable income and customer spending confidence.
As the global economy grows, it also tends to bolster middle-class growth around the world. This can make exporting a lucrative option for small businesses. No matter what you’re selling, there’s a buyer somewhere in the world looking for your exact product — it’s just a matter of finding him.
To match this growth, you’ll most likely need to expand your space, hire more employees, or build out your product line. Just be careful not to overextend yourself. When the waves get rough again, you don’t want to be stuck with too many people on board.
Manage the Economic Troughs
When the weather is bad, the beach — or marketplace — is the last place people want to be. In a global economic slowdown, uncertain consumers keep a tighter hold on their wallets, which can hurt your business’s bottom line.
As developed nations become less creditworthy, banks around the world become more selective, meaning it could be more difficult for your small business to acquire a loan when the global economy is down. Plus, because the U.S. dollar is still the world’s reserve currency, it’s more plugged into the rise and fall of the global economy than other currencies.
Cash flow concerns are already at a record high for small businesses (66 percent), and with less income, it only becomes more of a struggle. Between paying bills, managing accounts receivable, funding new business, and maintaining payroll, your business won’t stay afloat long without proper cash flow.
On the other hand, if you’re in a stable financial position and are prepared for economic flux, you’ll be better able to identify the opportunities it presents. Perhaps your competitors are struggling. It makes financial sense for you to buy them out when their price tag is cheap. Or maybe economic conditions have fully driven your competition out of business. You have a clear opportunity to absorb that customer base.
The good thing about being a small business is that you’re already a good swimmer. When the global economy gets stormy, you have the advantage of not only your inherent determination, but also a smaller decision-making base. Rather than having to call stakeholder meetings to agree upon changes to the business strategy, you can pivot in a matter of days or even hours. Whether that means changing your branding, workforce, products, or strategy, you’ll be empowered to change course in whatever areas are necessary to keep your vessel afloat.