Using economic indicators for your small business strategy

small business strategy

A small business strategy can be developed in different ways but the key element in all cases is data. Whether it is your internal sales data, market research information on your region, competitive analysis charts or economic indicators, they all are sources of information that can assist your decision making.

Economic indicators are a great foundation for your decisions because at the same time they can show you historic records and future trends, using data analytics and data visualization techniques for a user-friendly experience.

Take as an example the June 2020 monthly survey conducted by John Burns Real Estate Consulting that shows a 55% increase in newly built homes compared to the same period last year.

The first step is to understand the reason for this number. With the coronavirus pandemic, many workers, particularly in the technology segment, proved they can work efficiently from home, thus, enabling a move from small apartments close to their offices in large cities to bigger houses in suburb areas where they have better schools and quality of life for their children. Add to that the lowest mortgage rates in years and you have the perfect recipe for high- and middle-class workers to change their lifestyle and buy a new home.

For small businesses, this information is extremely helpful. If they are located in suburban areas, it becomes a great opportunity in the coming months to optimize their social media strategies and expand their customer base. On the other hand, if they are in a large city and their niche was more focused on families, they may need to change gears and focus their marketing campaigns on younger couples without children and single people. In other words, adapt your small business strategy according to where the money goes.

 

Economic indicators examples

 

There are so many indicators that can effectively help businesses and online investors, and so little time to analyze them. If you don’t subscribe to a monthly service that provides economic indicator analysis, you must focus on the primary macroeconomic indicators that will give you a broad picture of the country’s economic scenario.

The unemployment rate is a key indicator to assess economic strength and potential revenue for your small business. It will probably take a long time until we get back to the 3.5% rate we had last year, so following the unemployment numbers is imperative to understand your consumer purchasing power.

In addition to housing starts that we mentioned above, it is also important to follow the number of foreclosures and bankruptcies as their increase is an obvious sign of a weaker economy.

More insights can be extracted from 3 extremely important economic indicators: Consumer Spending, Personal Income and Personal Savings Rate. These data points provided monthly by the U.S Bureau of Economic Analysis should be analyzed together in depth and can provide rich insights.

Information on the financial situation of consumers also can be gathered by indicators such as Credit Availability, Debt Balance, Flow into Delinquency, and many others. Use all the data you can access and combine the information from different indicators to have a complete overview of the economy and how it impacts your small business and your customers.

 

Small business strategy tips

 

Remember that data without actions is just data. You need to understand, analyze, and implement an action plan to see the value of this information. If large corporations and investment funds do this, you can also do it in your SMB.

For example, if you see a trend of double-digit unemployment rate combined with a low consumer confidence index, potential customers will be more willing to save than to spend right now. Then, you need to put on your boxing gloves and fight for the reduced level of disposable income available in the market. Daily specials for restaurants, seasonal promotions for apparel stores, free delivery for most small businesses. These are all actions that reduce profit margin but can generate revenue to survive during these troubled times.

Consider empathetic social media content that speaks directly to consumers that maybe cannot buy now but will keep your brand in mind when they are back on their feet. Also, encouraging emotional purchases that both balance your inventory levels for slow-moving products and provide customers with a great deal is another great way to use the information you collected from the indicators to improve your bottom line.

Finally, let’s go back to a home improvement small business located in the suburbs that identified the opportunity based on the newly built homes indicator. They can get ahead of the curve and start generating social media content for people moving to that area and offer exclusive services that can establish a loyal customer for the coming years.

 

The Number: 55%

The Action: Business owners must follow what larger companies have been doing for decades and use the power of economic indicators in their data analysis and optimize their small business strategy, especially during a K-shaped economic recovery.

One Comment

  1. Why are economic indicators crucial for small businesses?

    20 Jul 2020 16:12:56

    […] Check out below some of the reasons why you should add this analysis to your business strategy. […]

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