Monitor the Changing Environment for Your Small Business
Change is an inevitable part of business planning for the economic landscape. And change is coming faster than it used to, especially for small businesses. Big companies are like luxury ocean liners. When they encounter a little squall, the passengers barely feel it. Large firms, in other words, can weather economic downturns or changes in the marketplace.
However, small businesses are like small boats. The winds of change can bounce them around pretty hard and, sometimes, capsize them completely.
To succeed over the long haul, you have to navigate your small business through all the changes that are bound to happen. How? First, keep an eye on the horizon, watching out for what may be coming along. Second, be ready to change course or shift position to avoid trouble or to take advantage of good winds and strong currents.
Now shift from the nautical metaphors to the real world of business, where change is most likely to happen in one of these five main areas:
The economy: Economic change is usually measured in terms of the ups or downs of interest rates or inflation, or changes in the value of one currency in relation to another. The recent recession proved how important the economic environment can be to small businesses. Firms that were in good shape have survived; those that were shaky to begin with are history.
Technology: Changes in technology may mean the introduction of a brand-new technology or new ways of using an old technology. It may also lead to process improvements — better ways of manufacturing a product or delivering a service or new ways to better serve customers. The sudden introduction of a new technology — think e-books — can completely change the competitive landscape. That’s why it’s so important to be looking ahead.
Business trends: Changes in the business climate may result from new competitors coming into an industry or area or companies getting out. Business trends may open new markets and close off others.
Cultural change: Everything from changes in the demographics of an area — changes in the age, income, marital status, education level, or other factual characteristics of people — to social and lifestyle changes can affect industries and markets. Although these changes are often gradual, they can be extremely powerful and almost impossible for your company to escape.
Some experts think the global recession could signal a long-term change in Americans’ buying habits, for example. If they’re right, that could spell trouble for some companies — automobile makers, for example — and good news for others, such as car repair companies.
Government affairs: The government’s influence over business often takes the form of new regulations, legislation, or court rulings that may reflect longer term shifts in federal, state, or local political agendas.
In the first section of your business plan, where you describe your business environment, make sure that you address looming changes that may affect how your company operates. Identify the trends and changes that are most likely to affect your business and describe how you will watch and respond to each of the specific issues and events that could play a significant role in the future of your small business.
Such trends and changes may include a pending legal case, an emerging technology, or an upcoming regulatory decision.