Every experienced businessman knows that the health of the wider economy filters down to affect individual enterprises. Although your industry may be thriving, an event that negatively impacts other sectors can soon send out shockwaves that ripple across the nation, until many companies are touched by this chaos.
This is not always avoidable, and so it helps to understand how it works, in order to give yourself the best possible chance of surviving what’s thrown at you. To give you a head start, here are three key areas of impact that you need to be aware of…
#1: Imports
One of the first business sectors to be impacted by a failing economy is imports, and the reason for this is simple. The more an economy struggles, the higher the likelihood that its currency will decrease in value. Small fluctuations are frequent, and if you look at the charts created by companies you’ll see that they take place every day. When this trend continues for a long time, however, problems start to arise for the imports sector, as the relative worth of items being brought into the country increases. This can be bad news for businesses that haven’t prepared themselves, and is one of the reasons that those in the know will often choose to ‘fix’ an exchange rate for an extended period if they feel that trouble is on the horizon.
#2: Exports
You wouldn’t think that a struggling economy would have any silver linings, but the flipside to the problem of falling currency values is that the domestic export industry becomes more competitive. In the same way that the relative worth of imports increases, the relative value of exports decreases, and this makes other countries far more eager to buy them. This can be good news for those who supply overseas clients with raw materials and products, so it’s worth being aware of if the economy begins to nosedive.
#3: Lending
A third consequence that you should be aware of is the impact of major economic events on lending. When an economy is thriving, banks and other providers are far more willing to loan money to companies to help them expand, so this is the time to seize upon their generosity and start looking ahead. When the economic outlook is poor, however, a more conservative approach is taken, and you’ll find it harder to secure extra funds if you’re in need of them. This is one of the reasons why it’s so important to stockpile capital when things are going well, so that you give yourself a cushion in the event of the economy turning.
Now that you know a little more about how economic events impact your business, put this knowledge into practice and help it to thrive.
