Crisis, Global Recession and Start-Ups for Small Businesses
Small businesses with less than 500 employees constitute half of American private employment and a staggering 43.5 percent of GDP, and yet they face an existential crisis in the wake of a spectacular fiscal tsunami triggered by a global recession. Despite public anxiety and mounting debts, business conditions don’t appear to be improving for the entrepreneurial class. The number of bankruptcies has reached an all-time high, business creditworthiness is declining and profit margins are shrinking. Nevertheless, the number of entrepreneurs still continues to rise, especially in hard-hit sectors like the internet, start-up services and personal electronics.
The future of business is intricately entwined with economics. If business is to prosper in today’s challenging environment, the driving force behind it must be the need for entrepreneurial solutions that provide an outlet for innovation and growth. And the key to unlock the economy’s hidden capacity lies in economics. Entrepreneurs must adopt three critical economic tenets in order to unleash the full potential of new businesses.
The first fundamental of economics is business finance. In this modern era, entrepreneurs must think about borrowing as a tool for expansion rather than as a liability. Since the business cycle is cyclical, it follows that over the long term, the value of capital will rise. This rise in value of capital means that entrepreneurs can obtain financial resources from either their own internal funds or from external sources like stock market companies or the government. While the latter two sources of funding are not always optimal, they provide a necessary base from which entrepreneurs can draw on. It is in these sources that a rising number of new businesses are drawing their resources.
The second fundamental of business economics is microeconomics. Microeconomics examines how a business affects the rest of the economy. For example, should a local business that is just starting up fail, will the local economy suffer? Many microeconomists consider such questions as the “Trouble in Finding a partner” in the business, as microeconomics studies the impact a new business will have on existing and future economies.
The third fundamental of business is macroeconomics, which looks at the big picture. A good example of a macroeconomic concept is Facebook. The business is obviously big, with hundreds of millions of users and a market that reach all markets, whether the business wants to. This makes Facebook a significant force on the business world, as businesses must carefully consider how their Facebook presence will impact not only their business today, but also of their business tomorrow and into the future.
Entrepreneurs should consider the impact of news on their business. The current global financial crisis is one of the most notable events in the recent history of business. It has created negative effects on almost every aspect of society, but especially on the business world. As the media reports continue to break, the effects on entrepreneurs become clear.
The fourth fundamental is social media. Social media such as Facebook and Twitter have become very important to entrepreneurs. These sites provide entrepreneurs with the ability to communicate with customers in real time, providing them with an immediate answer to their questions. However, many businesses fail to take the time to study the impact that social media can have on their business. This could be a fatal flaw for many businesses. If a business owner does not understand the impact that it can have on their business, they are more susceptible to making costly mistakes in their business operations.
Although the current global economy has been a major cause for concern, the business world has not completely caved in. In fact, many business experts believe that the current crisis is only a passing phase and that business can bounce back. If the business owner is willing to invest in proper resources, they stand to benefit from the current state of business in a positive way. In fact, a strong business may even emerge from this recession as a new business phenomenon that will change the face of the global economy.