How does economics affect your business? That might seem a rather interesting question and it does affect your business. If you think that federal or state politics has no effect on the business, that is not so. New legislation, for example, may alter things that affect your business. The other major consideration when it comes to economics are those that affect your business such as inflation and unemployment.
With the job keeper payments coming to an end at the end of March 2021, there may be many people unemployed as a result. This will directly affect all businesses. One of the key drivers when it comes to business is their confidence in the federal treasurer’s ability to manage the economy. Confidence in the state treasurer is also a factor. However the main factor of the federal treasurer’s ability to manage things such as inflation, interest rates, trade, and many other economic factors.
Obviously, we have a new economic world because of the pandemic (Covid– 19). We are less likely to want to travel internationally and will travel within our own country to a much larger extent. This is actually a good thing for many businesses such as in the tourist industry. It is quite obvious now that overseas factors are major drivers of our businesses directly or indirectly. China’s so-called trade wars mean that we cannot sell many of our products to China because of their high tariffs. This has a flow-on effect throughout all of the economy. How is this? It is because is less money within our own economic environment that will work its way through the entire community directly or indirectly.
Another major changes are that of technology. It wasn’t all that long ago when the mobile phone that we have now would not have even been comprehended. These days it is quite obvious that almost everyone has a mobile phone and depends to a large degree on it for communication, texting, reading emails, updating with news, and other things. Technology in the use of computers to do a lot of tedious work such as in the accounting field are commonplace. Technology-driven entertainment such as computer games has changed the world forever. So what? It means that you have to be innovative and think ahead of how your business can utilize technology.
The major factor is that of the environmental issues. Becoming relatively “green” will become the new norm. You will notice that a major bank has withdrawn business from a shipping terminal because they will be shipping coal. The important thing to learn as you need to look ahead at what the future holds and adjust your business to become more environmentally friendly and be seen to be so.
Another major consideration is whether or not, you are competitive. This usually means the contractor wants the least cost. Yet the contractor will want the same quality as the highest bidder. This is a real dilemma. Do you cut your margins so that you get the job and make virtually nothing out of the deal? The problem is once you do that, the contractor will expect that forever.
Another issue with this undercutting to get the job is that it is expected by your supplier to whom you are contracting to continually keep your prices set wafer thin margins. Following on from that, it must be noted that if you are dependent on one contract, you are in a position like Australia when it comes to dealing with China. Lending institutions are reluctant to lend substantial amounts of capital (money) if you are dependent on one contract.
It is easy to say “diversify” but you may not be in a position to do so. However, you must make an effort to diversify, even if it is only in a moderate way so that you do not become totally dependent on the one contract. Should that contract fall over, you have enough diversification so that it does not cripple your business.
