Embracing innovation
No business can maintain its profitability and see consistent growth without the ability to adapt and strategize based on the economic climate. For small startups and entrepreneurs new to their niche, knowing how to keep up with the constant fluctuations in consumer spending habits can be tough.
To help break it down, here’s how to consider the economic climate in your business strategies.
Identify influencing factors
There are lots of factors that can influence the profitability of your business. In order to develop and implement the right strategy, you first have to analyse the current economic climate. You’ll need to consider the effects of inflation, as well as the current status of the job market, government policies, and anything else that would impact consumer spending.
For example, both high inflation rates and high rates of unemployment could mean your consumers are spending less. Actions of the government could also influence how people are using their money, for example through raising or cutting taxes.
Reassessing your target market
Once you understand the influences affecting the economic climate, you’ll be able to reassess your target market. If you see a need to go in a different direction, you can then refocus your offerings and marketing efforts. You’ll want to think about who is spending the most in the current climate, as well as the kind of products or services they’ll be looking for.
For example, a report shared that entertainment and eating out, food and groceries, and general merchandise ranked as the top three spending priorities for respondents in 2024. With food and groceries ranked at number one, it would make sense that any business looking to develop a strategy in the current climate would look to break into this market.
Consumer needs are ever-changing, so by keeping up with them, you’re solidifying your place in the market no matter the economic climate. Being an innovative business is all about adapting to suit the consumer, and by staying on top of current and future trends you’ll always be equipped to offer the next best thing that’ll keep your business growing.
When the economic climate isn’t favourable, people will look to focus their spending on the necessities – they’ll be unlikely to consider purchasing any products outside of the essentials that aren’t totally one-of-a-kind and innovative. So, business owners would be wise to ensure they have something special (or essential) to offer whenever a recession hits.
Financial planning and risk management
Ensuring you’re offering the right product or service in an unstable economic climate is important, but it shouldn’t be your only priority. Businesses should ensure they have a certain level of financial security to weather these tougher financial periods and stay afloat.
This is where financial planning and risk management are key. By adopting a risk strategy, businesses can ensure they’re protected against strategic, compliance, operational and reputational risks, as well as influencing factors that include the economic climate and consumer spending habits.
Equipped for success
Taking the economic climate into account is imperative when developing your business strategies – it could mean the difference between staying afloat or going under in times of financial crises. By focusing on your business’s stability and security, you can ensure it’s equipped to withstand a recession and will flourish during an economic boom.