Online Business Planning: Monitor Industry Changes Year-Round
Change can take many forms and will almost always impact your business plan. More often than not, more than one change driver shapes a company’s fate. Take into consideration today’s solar energy industry. Rapid technological advances have made solar panels more efficient and less expensive.
At the same time, regulatory incentives from federal to state agencies have made installing solar panels far more attractive for many households. Add to that regulations designed to lower carbon emissions, and you have at least three distinct drivers of change.
Big industries aren’t the only ones affected by change. Small businesses can find themselves in the midst of disruptions, both good and bad. Consider the example of a self-employed artist. The economic downturn that began in 2009 meant that many people who might once have been willing to plop down a grand or more for a piece of original art were no longer in the market.
Galleries began to go out of business. Fewer places were open where artists could show their work. Yet at the same time, the growth of the Internet as a place to market and sell art offered new opportunities for reaching customers. And for savvy artists, entirely new markets were emerging.
The aging Baby Boom generation began to create a new market — hobbyists willing to plunk down money for instructional videos and books about painting and drawing. Many artists found themselves subsidizing their art by producing videos or running educational workshops. Artists who spotted the trends early, and planned accordingly, have been able to weather the turbulent economy and continue to pursue their work.
Federal budgets teeter on the edge of fiscal cliffs. International markets ride a rollercoaster of ups and downs. Even at the local level, shops and restaurants come and go as customer tastes change. Economic and business uncertainty has always been a fact of life, but lately the bubbles and busts seem to be bigger than ever.
Some analysts believe that uncertainty can be a drag on overall economic growth, both nationally and internationally. Certainly for small businesses large and small, economic uncertainty adds to the challenge of planning.
Anticipating what the economic future holds will always be a guessing game. By doing a little research, however, you can arrive at informed guesses. Take a few minutes to think about which of the following four main drivers of economic change might affect your business.
Economic policy and regulatory changes: New regulations and taxes can dramatically change the economic position for companies. A dramatic adjustment in interest rates can make borrowing and expanding easier or much more difficult, for example. New environmental regulations can pose challenges for some companies and offer huge opportunities for others.
Consider renewable energy. Alternative energy rebates jumpstarted commercial solar power in recent years. Eventually, the growth of residential solar power will pose a challenge to traditional electric utilities.
Manufacturing and material costs: For companies dependent on materials and commodities, changing prices can have a big impact on the bottom line. When coffee prices soar, for example, chains like Starbuck’s and Peet’s have to figure out how to make a profit without raising their prices so high that customers balk.
Environmental disruptions: Mother Nature can overturn the best-laid plans. Today and for the foreseeable future, one issue that may confront many businesses around the world is global climate change. Increased flooding, more intense storms, and extended droughts can have significant economic consequences. Certain industries are more exposed than others. If yours is one of them, now is a good time to begin to plan how your business can respond.
Political instability: Whether you do business in the United States or around the world, you may have to deal with shifting political winds. A change in government, a new economic policy, or political unrest can all affect your ability to do business and make a profit.
Take time to identify key economic uncertainties that confront your business. After you identify key drivers, begin to think about how you can address potential changes proactively. For instance, a business with overseas operations can limit its liability to political instability by avoiding countries that represent a risk. Farmers concerned about reduced rainfall can choose crop varieties that require less water.
If your business faces significant economic uncertainties, your written plan should spell them out in detail. It should also describe your plans to address potential disruptions. Understanding the power and pitfalls of new technology
New technologies have opened up so many business opportunities in recent years that you can easily think technical advances are always good. They can be powerful, but they can also spell trouble.
Just ask the guy who used to run the successful video rental shop around the corner. The Internet enabled a startup called Netflix to offer a vast catalog of movies that could be ordered via computer and delivered by mail in a day or two. Some local video rental businesses hung on — until instant download streaming came along. Bricks-and-mortar video stores are fast becoming a vanishing species.
The challenge of staying a step ahead of evolving technologies never ends, it seems. Netflix may have made a killing from the evolution of entertainment technologies. But the company still has to be nimble to survive. Netflix has spent hundreds of millions to transition into streaming videos at the same time that it has maintained its DVD distribution systems.
The vast amount of computer power required to stream videos on demand continues to be a challenge for the company as it faces competition from other on-demand video companies.