Many business people wonder how they will survive the current economic climate. Although the economy is recovering, fears of political instability and a possible recession still seem to have struck many small business owners. An alarming 38 percent fall in the stock market and a 13 percent decline in the new business opening rate indicate that business entrepreneurs are looking for a fundamental back to basics’ strategy. This may be especially true among the entrepreneurs with a limited business background and experience. A return to basic may help small business owners to weather the storm of uncertainty.
Why should small business entrepreneurs focus on economics? Small business planning should include a fundamental understanding of the basic principles of the economy. Economics offers insight into how markets work, why they tend to behave in certain ways, what causes them to change, and what type of changes tend to affect them. The knowledge of how markets operate and why they are likely to react in certain ways can be the key to realizing the type of advantage small business owners seek. Economic forecasting and business strategy also play an important role in helping small business owners survive the economic storm.
The basic principle of economics is supply and demand. This is also the rule of the economy in most countries. When supply is high, prices are low. Conversely, when the supply is low, prices are high. Economists study these principles in depth to determine the course of national economic growth and activity. They use basic economic theory and data to forecast the growth and inflation in specific industries, predicting changes in interest rates, consumer spending, investment and growth in other areas as well.
Entrepreneurship is a growing sector and ranks near the top of the list of preferred professions. It provides ample opportunities to employees and graduates from top business schools. Many entrepreneurial leaders started out as employees of large corporations. They found creative ways to improve the business or apply simple techniques to make the company more profitable. As more entrepreneurial minds become successful, smaller firms are creating new entrepreneurial opportunities for graduates interested in entrepreneurship as a career.
Entrepreneurship creates new jobs for people with a wide range of skills. Because small business is a crucial piece to a strong economy, there are plenty of positions open in the labor force. As the entrepreneurial spirit grows, more people with skill sets relevant to entrepreneurial businesses find suitable positions. That translates into more job opportunities, which leads to higher wages for everyone in these businesses, and it leads to more people living in employment. That creates a thriving economy.
Another way that entrepreneurship is vital to the strength of the American economy is through finance. Just like other countries with strong entrepreneurial cultures, most companies in the United States invest their money in areas other than basic research and development. They use their profits to buy up businesses in other countries, create new products, and fund innovative research and development. These are all efforts to position the business in an area that increases the profitability of the venture. When done well, this strategy can generate enough income to support a country’s social security system, keep the business in America open during recessions, and provide jobs to everyone in America.
Another way that business is essential to a strong economy is through central economic planning. The process of central economic planning, which includes business studies and the analysis of how different aspects of business affect the national economy, is important for entrepreneurs to understand. Because business firms must compete with other business firms, they need a solid understanding of how each aspect of the business affects the rest. In a highly competitive business environment, it is essential for business firms to be able to predict their competition and adjust accordingly. Central economic planning helps business owners reduce their risks, because the precise numbers and patterns of business are well known, and can be used to take preemptive action when competitors are trying to steal business.
Finally, entrepreneurialism is not just about the business. Entrepreneurs take their ideas and capital and transform them into new products, new processes, and new services that improve the lives of people. This sort of philanthropy not only makes good business sense; it also makes good human sense. By starting a business that improves the world, by creating new solutions to people’s problems, or simply by being an inspiration to others, business firms are making the world a better place. There is really no limit to the good that can come from entrepreneurship.