• Economics and Small business

    The term economics refers to the study of the movement of money at the population level.  Economics looks at the aggregate of all the grocery shopping (for instance) by everyone and makes inferences and predictions based on how much, how often or how little we spend as a group.

    What does that have to do with our small businesses?

    There are 2 things that concern us about the way money moves.  One is the availability of credit; the other is the behavior of consumers.

    Availability of Credit

    Governments use interest rates to control inflation.  As interest rates go up, money becomes more expensive to borrow and we tend to borrow less, expand or invest in our business less and take less risk.

    When the economic climate becomes unstable, banks don’t like to take as much risk and they tighten up their loan requirements.

    Both of these affect our access to and supply of money.

     

    The way people behave about money

    When the economic climate becomes unstable people buy less – people being our customers.  People, business and governments start taking longer to pay.  This leaves our businesses starved for cash meaning we are less likely to spend and so the system cycles ever downward.

    These times also offer great opportunities.  Businesses that focus on helping people save money or make more money will do well.  When your competitors are hunkering down, you can step up to get noticed more easily.

    How can you help your customers save money or make more money?

    What can you do to outshine the others in your industry?

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