How can startups make sense of economic indicators in turbulent times and then make sound business decisions?

As long as you keep your focus on doing right by your business, you can continue to gain support while the economic storm carries on around you, says Stefano Maifreni

When you plan to open a startup, funding is always one of the biggest concerns. Obtaining funds means not only having a great idea but also taking the time to be able to sell it to investors. While many startups find effective ways to do this under normal circumstances, times of economic upheaval can make it more of a challenge. An unstable economy tends to make people think twice before investing or purchasing, but that doesn’t mean that you won’t be able to find funding.

It is merely a matter of assessing the situation and making effective business decisions to continue to win over customers.

Identifying economic indicators

The markets have always abhorred uncertainty in all of its forms. From an investment perspective, the risk is a nightmare. When markets are uncertain, it is sometimes impossible to tell up from down. Given the recent spike in markets rising and falling, investors have been on a rollercoaster ride trying to make sense of the changing tides. Since failing to do so means losing money, many people struggle with making decisions in this sort of state. Fortunately, there are ways to navigate this.

As a startup, there are specific economic indicators that you must look for if you want to navigate shifting markets with your business effectively. When you can read the market, you will have a better understanding of the climate so that you can make effective decisions to boost the company. These decisions will help you to do what is right for your business as well as any stakeholders, but more importantly, understanding where the economy is at will help you to do right by your customers.

When it comes to an understanding of the economy, there are a few key indicators to look out for. Uncertainty tends to frighten many people, but contrary to popular belief, it doesn’t come out of nowhere. Generally, there are specific economic indicators that precede uncertainty, or that tend to grow when change starts to become a real problem.

The first consideration in any economy no matter what business you are in should be unemployment rates. As companies struggle, they tend to layoff employees. These layoffs will increase the unemployment rate. While some employees might be able to find jobs quickly, there is a tendency for several companies across industries to lay employees off around the same time. The result of this is a variety of people looking for employment with a distinct lack of open jobs present. This is relevant for your business decisions because high unemployment numbers might influence how you evaluate risk. If you are in recreational consumer goods, a high unemployment rate might mean that there will be fewer people to buy your products. If you are planning on expanding, this might be something to consider.

An obvious point of focus for anyone working on forecasting is to consider the stock market. There are two sides to this. On the one hand, you want to find the market surrounding the industry that your startup is in. Looking into this can tell you what is working and what isn’t, and it can help you to navigate it effectively. Take time to consider the rationale behind the changes in your industry and try to navigate the mistakes that other companies made. Use what people already know about them to help your business to achieve gains.

In addition to the market that you are operating in, you want to look at the markets outside of your bubble. Every industry relies on a variety of other sectors to get things done, so take the time to figure out where everyone else is at. Generally, when significant market changes are coming, you can see it rippling through various industries from a distance. A small problem can have major implications later, and that can dramatically influence your business and several others. It is essential to be aware of what is happening on a broader level. Being informed will help you to know when it is time to jump and when it is time to sit back instead. There are several different economic indicators to look out for, so read the news and stay informed when you can.

Navigating change and making business decisions

It is incredibly common for the owners of startups to begin panicking when they see uncertainty in the markets. Sometimes operating a startup can feel a bit like travelling uncertain seas in a tiny boat, but that doesn’t lead automatically to troubles when you see choppy seas in the distance. Many people worry about the future of their business and find themselves paralysed when it comes to making decisions. While it is understandable why the majority of people would assume that a small company would be in more trouble than a larger one, startups operate from an extraordinary place that gives them a few key benefits other companies of their size might not receive.

The first thing to consider when it comes to startups is how they operate. While it is understandable to think that investors might be less interested in a startup when things are uncertain because it seems less likely to yield a positive outcome, you can prove them wrong. Startups are unique because of their modern status. These companies are formed around a very specific relevant need that offers something unique to a customer. It is the relevancy of a startup that makes them able to navigate some of the economic indicators at play effectively. Unlike bigger businesses that are stuck in their ways, a startup can change their business model quickly to keep their focus in the right place.

When a startup is made, it is with a customer in mind. While some circumstances might influence the success of your business, the fact remains that a startup is new enough to still stand a chance. As long as startups focus on serving their customers, none of the economic indicators will genuinely matter for forecasting. They can plug along and continue to focus on their business model, which is what you will be selling to investors. Since startups are new, there are no guaranteed macroeconomic rules to apply to them. You are not selling investors or customers on your success, because you likely haven’t had any yet; rather, on your business model and what you have to offer. As long as you keep your focus on doing right by your business, you can continue to gain support while the economic storm carries on around you.

Conclusion

Time and time again, I see companies that lose faith in themselves the moment they see trouble in the economy as if concern for an established company means that they don’t stand a chance. Making effective business decisions is a matter of knowing your business, remaining informed about your industry, and understanding the common pitfalls that come with starting up a new business. I am incredibly passionate about helping companies to navigate these choppy waters, and I look forward to helping many more in the future.

Stefano Maifreni helps small UK companies with business strategy and expansion in his role as Founder and Director of Eggcelerate

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