World Economic Forum 2015: Is the Global Economic Tide Turning?
As the owner of a small business, it’s easy to get caught focusing on your next customer, your next order, your next delivery — and then to be surprised when the global tides slip away beneath your boat, or push you suddenly towards the rocks.
It happened to many businesses in 2007–2008. First you think, “Business has never been better, and our order book is full,” and then, within days or weeks, orders are suddenly canceled and business turned on a dime.
Most of our clients weathered that storm, and we’ll be here for clients again to help them weather the next one. Right now, global economic storm clouds are gathering. And it certainly helps to see these conditions approaching before they arrive.
It’s very exciting that we now have online access to many of the most important meetings at the World Economic Forum in Davos, Switzerland. Every year, many of the world’s leaders in government, business, non-profits and technology meet there to share perspectives and coordinate their work. This year, Bloomberg hosted an amazing panel of five influential financial leaders, including my old boss Ray Dalio.
In case you don’t have time to watch the full hour, or in case you’re not into macroeconomics, here are my personal take-aways and what I think they mean for small business:
- Global demand is flat. Fundamentally, consumers in the most important economies simply aren’t buying more stuff or services, so it’s very hard to grow GDP, let alone grow your own small business. China has dramatically cut its imports, Europe is in a long-term ongoing depression, and while the US continues to grow, even there consumer demand growth is the weakest of any recovery on record.
What does this mean for you? As always, focus on sales, sales, sales — find new ways to add value for clients and take over more of what they used to do in-house. And on the back-end, now’s a good time to go over your expenses with a fine-tooth comb. Are there any fixed costs you can make variable? Can you build your rainy-day fund?
- Banks will struggle to lend. Everyone on the panel agreed that the European banking system is “clogged” — every time a bank raises more money through deposits or shares, they use it to pay down debt, not to lend out. This is called “deleveraging.” In the US and Canada, small-business lending is growing slowly. But the global headwinds will affect our banking markets, too. This is not a good time to count on banks for your growth.
What does this mean for you? Look for creative ways to take new orders — ask for deposits or pre-payments and have your customers buy key supplies directly that you use for them, such as parking lot salt or computer equipment. And where those approaches won’t work, look for flexible, non-traditional ways to finance your growth — such as our FundThrough line of credit.
- Opportunity lies in waiting. Finally, every riptide is a chance to surf, if you know what you’re doing. Look for the opportunities! For our Canadian clients, the value of our dollar is tied to commodity demand, especially oil. We can probably expect a relatively weak Canadian dollar for some time to come. What markets can that open up for you? How can you use that to your advantage?
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