Thought Leaders

Preparing Your Business For Macroeconomic Trends

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Businesses often focus more on day-to-day operations than contingency planning and strategising, which can be a fatal approach in the long term.

Macroeconomic trends may seem a world away and inconsequential, but they can flip your business upside down if you are not thoroughly prepared.

Macroeconomic factors are significant events or trends that impact a regional or national economy. Macroeconomic trends can be shaped by a number of economic, environmental, geopolitical and sociocultural events.

For example, a recession is a period of economic decline which largely arises when spending in an economy decreases for whatever reason.

It is important to remember that macroeconomic trends can be both positive and negative, so understanding how your business can capitalise on both is essential.

Your contingency plan doesn’t need to be complicated. Identifying upcoming influential events or forecasting macroeconomic shifts can be done with just a bit of research and industry insight, no matter the size of your business.

Much like traders use an economic calendar to anticipate market changes, you can prepare your business for all eventualities and safeguard its future.

Of course, some events that impact macroeconomic trends aren’t easy to foresee. However, the important thing is to have contingencies and strategies already planned to allow your business to be more proactive, rather than reactive. Here are a few things to consider.

Plan ahead

Trends appear suddenly and are difficult to predict. When you are panicked and forming a plan quickly, you’re likely to lose perspective clear judgement.

So, considering all possibilities as far in advance as possible will dramatically increase your reaction time and performance. A team is far more likely to execute a strategy or contingency plan if they are familiar with the steps.

Outline future threats and opportunities 

When you are planning, make sure to identify specific threats, goals, opportunities and weaknesses. Educate yourself and your team on what macroeconomic trends like a recession would entail and how they would impact business operations.

The consequences might be an increase in unemployment, a reduction in consumer spending and a drop in interest rates.

Opportunities may arise in times like these as well, so outlining how you plan to make the best of a bad situation will stand you in good stead.

Financial safety net 

Perhaps the most essential thing you can do to prepare for any macroeconomic trend is creating or reinforcing a financial safety net. Financial sustainability and cash flow are perhaps the most important assets a business can have in any economic climate.

Watch out for inflation rates and costs rising as a sign of an incoming negative trend. Be sure to understand where you can realistically cut costs further during an economic down-turn, to preserve profitability.

For small businesses in particular, preparing an emergency fund can be a lifeline in the event of sudden changes that impact fundamental business operations. Set a target balance determined by your industry and business volatility, revenue and margins.

Diversifying

If all your eggs are in one basket, then it is absolutely essential that you diversify. Expand your customer base, explore other markets and increase your marketing budget if needed.

Alternative revenue streams can provide a safety net and back-up income if your primary revenue stream falls through. Macroeconomic trends often impact your customers and clients before they impact your business, so having a secondary revenue stream will ease your nerves if you see alarming signs in your primary market.

Plan for positive trends 

Planning for economic growth and prosperity is just as important as for negative macroeconomic trends. As an economy grows, so does the opportunity for the growth of your enterprise.

Consider setting up a monitoring system to identify these positive trends and plan how you can invest in the right areas of your business and at the right time to maximise your prosperity moving forward. Any rise in demand for goods and services is a positive trend that will trickle all the way down the supply chain. Therefore, this is something that you should be looking to tap into.

PM Today Contributor
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