There are lots of factors that can determine the growth and success of your business. Amongst these various factors, the financial market seems to be the most obvious. Over the years, experts have been able to explain that economic market happenings do have a lot of impacts on business activities.
The primary aim of this post is to highlight some of these impacts. You will learn the various ways through which the financial market can influence your business activities. These are variables that may sound unimportant. However, there is no doubt that they have the potentials of how your business will grow over time, most especially when not adequately addressed.
1 Decrease in Consumer Spending
Whether you want to admit it or not, the truth is that your business depends on how consumers demand your product over a given period. So, the stock will be influencing it to a great extent. A consumer who seems to have a low-value portfolio will not have enough to spend. With reducing the spending power of your customers, your business will be adversely affected.
2 Influence in Business Operations
Perhaps this is another way through which the financial market can influence your business. To go beyond what it is currently, you will need to make some investments in stock. Thus, this is the form of currency used once you’ve got plans of expanding. Businesses engage in the raising of capital by issuing shares. Your money will increase when more people seem to be buying the stock and vice versa. Please note that prices are always higher in bull markets.
3 It Influences Economic Growth
It is very difficult for experts to make predictions about the direction of the economy. That is to say; sometimes they don’t know if there is a recession or improvement over a given period. Even when predictions are made, they aren’t very accurate. However, events in the financial market are perfect of yardstick by which experts can tell whether the economy is healthy or not. For instance, this happened after the stock market experienced a decline in the 1930s due to the economic recession.
4 Adjusting of Business Decisions
Here is another aspect that the financial market can affect your business over time. It makes you tweak your decisions and policies in your business to make all the necessary adjustments. For instance, once customer demand reduces, you will need to ensure that your scale of operation is cut down. And this can be an attempt to reduce the number of employees to avoid the situation of being overstaffed.
5 Higher Interest Rates
Also, it is another visible impact of the financial market on companies. It is true that your business can be financed through the capital as stated above. However, there are risks involved in this. For instance, banks may likely charge higher interest rates when they discover that the chances are increasing. This strategy they usually use in reducing losses which, in turn, may have some adverse effects on the cost of your operations. It will limit your chances of maximizing profits.
6 Access to Credit
Financial markets all over the world seem to be going through some troubled times, and this has led to significant concern about lending. This doesn’t only have to do with small businesses as established brands can’t seem to get the amount of capital that will ensure the smooth running of their daily activities. Banks don’t want to be in a position to lose money. Once this happens, business owners will be affected as they may struggle to grow their businesses beyond where they are at the moment. You can use friends and other means to raise capital.
7 Bad Debt
It is the debt that can no longer be recovered. There are lots of businesses which feel the pressure as customers aren’t able to pay their dues. This development must be the result of unfavorable conditions in the financial market. For instance, once your customers become active investors in this market, they may face the risk of having a portfolio which will depreciate from time to time. If you decide to give them goods on credit, they may not be able to pay back at such times. There is something you can do here which is trying to ensure that you have a limit for which goods are given to customers over a given period.
8 Investor Mentality
Just as you search for ways to grow your business via investment in the financial market, prospective customers look for investments that will maximize profits in the future. There will be little cash available to your potential customers to spend once they invest in stocks and bonds. So, this will affect your business performances over a given period. You can make them offers that they will find difficult to resist.
9 Hindered Business Growth
Most experts talk about the potential of your business growth in financial markets by raising capital and issuance of stock for investors. However, they haven’t considered the implications of low stock values on your business. When this takes place, it will be difficult for you to grow your business as your stock will depreciate regarding price. You can avoid all of these risks by raising capital outside the financial market.
10 Unfavorable Policies
There are many ways that the financial market may prove unstable, which can adversely affect your business over time. For instance, the financial market is controlled by government policies and banks as well. When these policies are formulated and implemented, they can have some significant impacts on your business. These could come in the form of monetary and financial systems.