You will be surprised how your business strategy and it success or failure is based on some simple economic indicators. The economy is an essential part of doing business in any part of the world. The economy affects the day to day operations of your business be it directly or indirectly.
There are two known economic systems. There is the Macroeconomy which is the world economy and the Microeconomy which is the economy of your country. I will add my third economic system which has either not been studied extensively or not mainstream yet which is the Minieconomy. If you want to know more about it you can ask me.
Economic indicators are to be factored into business strategies be it long term or short term. I think every entrepreneur or CEO should know about these indicators. We are going to look at a few of these indicators but you can find more and if not all the indicators in the video below by Ray Dalio.
Every Entrepreneur should know about:
Their Sector or Minieconomy
As an entrepreneur it is imperative to know about your economy and most importantly the sector in which you are doing business and how the sector is doing in contrast to the entire economy. By knowing this indicators, you will be making better economic decisions that affect the long and short term growth of your company.
Short-term and long-term economic cycles
It use to be that to increase one’s cash-flow they would have to increase their productivity. But times have changed where by credit has become part of the cash-flow system. Therefore as an entrepreneur, it is important to take note of the debt cycle in the Macro,Micro but more importantly the Mini economy in which you operate.
Inflation and deflationary factors
The economy is like your body. When it has the right amount of food in it, you will function fine and well, but when you overeat, you will get sick or generate a temperature. Like the body, inflation is over eating and when you are hungry, you will get sick and can’t move which is deflation. The Central Bank controls interest rates which controls how much food is put in the body and in this case the economy by changing the interest rate.
Recession and Deleveraging.
When the short-term debt cycle increases, we get a recession which is two consecutive economic downturns. But when a recession last long, we get a depression. In the 1930s the US suffered a depression and in 2008 there was the great recession. Normally recession can take a soft-landing or a hard-landing. Recessions can end on a soft and hard landing. When there is a soft-landing based on the economic policies implemented by the Central bank and the government the pain is less. When there is a hard-landing like Austerity, it can be a long and painful recovery.
In this short article, I have mentioned a few keywords which I have italicized. The video also explains every one of these keywords.
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