As most business-owners and entrepreneurs will know, it’s supply and demand that dictates the price of goods and raw materials. This was best embodied by the recent housing market in the UK, with a reduced supply of housing and listed properties sending prices rising incrementally in recent years.
We’ve observed similar patterns in the price of oil, with an excess of global supply triggering a gradual decline in the value of the asset between 2014 and 2016 (this trend has continued during the last five years too).
Supply and demand is one of several economic factors that fluctuate on a daily and weekly basis, each of which provides businesses with a unique opportunity to capitalise on the subsequent volatility. Here’s how:
Making the Most of the Volatile Economy
As we’ve already touched on, prices and similar metrics fluctuate wildly on a daily basis and across a variety of industry niches, while such movements are often tracked by organisations such as the Bureau of Labour Statistics and various economic calendars.
Not only do these allow you to track prices directly, but they also offer a wider insight into how the wider economy is likely to perform in the near-term.
For example, you can monitor oil prices by using an oil price chart, with this established as a common raw material that’s indicative of demand, economic sentiment and the value of linked assets such as currency.
So, we’d recommend that you pledge to track and monitor such metrics over time, as this may help to inform specific buying decisions and help you to time precisely when to exchange alternative currencies (if you own and operate an international venture).
Conserving During a Strong Economy
With a solid foundation of knowledge, you can also look to capitalise on different economic climates, with the most well-known being economic booms and recessions.
During a sustained period of economic growth, for example, a sensible strategy is to accumulate wealth and cash assets and look to conserve these resources for future ‘rainy days’, this is especially important for start-up businesses and small to medium sized enterprises who will need to increase their initial cash reserves.
This wealth can subsequently be used during periods of recession and austerity, in order to provide a financial safety net and allow for continued growth and investment in new equipment or facilities.
This should also enable you to provide incentives to your employees and retain a viable workforce during harder times, which can prove crucial if you’re to remain competitive in your chosen marketplace.
Optimising During a Recession
Conversely, recessions and periods of economic contraction provide a unique opportunity to inexpensively launch a new venture or expand into exciting markets.
Remember, recessions are characterized by the failure of less-prepared businesses that will have had their inventory or assets sadly liquidated, affording surviving brands the chance to invest in equipment or products at a fraction of their normal cost.
The cost of lending is also reduced during a recession, which makes it more affordable to borrow capital and repay this as a way of funding increased activity.
Of course, it’s important that you have the resources to support such a loan as a business-owner, but there’s no doubt that austerity can create opportunities in this respect.
Over time, you can also look to prepare for periods of economic growth and recession, by creating a viable commercial structure that pre-empts specific shifts and allows for the monitoring of supply and demand across a wide range of niches, expanding and structuring your business in this way will help your business to thrive during times of both growth and recession.