What economic and environmental factors can impact your business?

Economic and environmental factors are an essential part of running any business. These factors can help you to evaluate revenue streams, competitors, growth and much more. Economic and environmental factors can influence the forex market and different trading pairs, as they impact GDP and trading between different countries.

If you are a business owner, make sure to research and educate the environmental and economic factors that are likely to impact your business. Here are the most common factors that influence companies and the effect they can have.

Interest rates and inflation

If you have taken out large loans, you need to pay attention to interest rates. An interest rate is an amount a lender charges you to borrow money. Small businesses often rely on loans to get their business up and running. However, higher interest rates can increase your expenses and take a big cut out of your budget. Companies need to keep an eye on their interest rates and adjust their financial strategy accordingly.

On the other hand, inflation looks at the rate at which prices are rising in the economy. Rising inflation rates can change the cost of your rent, resources, utilities and must more. Higher inflation rates are likely to make you raise the price of your products to maintain a healthy profit.

Employment

The economy goes through ebbs and flows. When the economy is deteriorating, employment rates tend to plummet along with consumer spending. Employment rates can impact your business profits and consumer behaviour. Consumer confidence is a good indicator of the state of the economy. As a rule of thumb, confident consumers spend more and create new businesses in the market.

Recession

An economic recession can change consumer behaviour entirely and put your company at risk. There’s likely to be less money invested into your company and fewer people buying your products or services in a recession.

Weather

Weather is an unpredictable environmental factor that can wreak havoc on businesses. Natural disasters, extreme weather and global warming can impact your client base and profit margins.

Expenses

You may need to reserve some money for technology upgrades or retrofits to make your business eco-friendlier. Businesses worldwide are beginning to invest in greener practices, like using renewable energy for company processes and travelling less. However, installing these new eco-friendly devices costs money that will come out of your expenses. The initial cost may be significant, but eco-conscious items should save you money on energy bills in the future.

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