Economic Factors Affecting Startups!

Access to credit

One important factor to consider is access to finance or credit. While enough owners’ equity is an important source of capital, credit is often a more viable source of funds for expansion and further investment. Various studies and surveys reveal that access to credit is one of the biggest problems faced by small and medium businesses because many startups do not have substantial fixed assets and cannot afford to take out loans. To assure access to credit, startups should maintain sound finance and invest in assets that can be collateralized. Low-interest rates, low cost and ease of obtaining credit, and availability of credit institutions are some of the favourable conditions for startups in terms of access to finance.

Access to resources

Fledgling businesses must take into account the availability of resources. The term “resources” covers a wide range of materials essential for a business’s operation. For instance, fuel, raw materials, and technology. Ideally, these inputs should be easily obtainable at affordable prices. Business owners also need to anticipate and prepare for potential supply disruptions before entering a particular region.

Demand for products and services

Demand for products and services naturally plays a role in business owners’ calculations. Demand is largely determined by the needs and preferences of consumers in specific markets. For example, an entrepreneur doing business in a university town should consider what appeals to students. Students are known to love affordable housing, public transportation, and affordable access to food and beverages, apart from the study materials and the basic need for clothes. A business that addresses these needs stands a good chance of succeeding.

Economic conditions abroad

Entrepreneurs must also consider economic conditions abroad, regardless of whether or not they have business interests abroad. Those who export their products should watch out for sudden downturns in demand in their target destinations. This may occur during wars, economic crises, or the emergence of more appealing alternative products. Those who import resources and inputs should keep an eye out for developments that could obstruct their supply chain. Furthermore, supply chain natural disasters, fluctuations in shipping costs, or changes in international trade regulations could also trigger such developments. The factors discussed in this article affect both startups and well-established businesses. Young businesses, however, are particularly vulnerable to circumstances beyond their control. Many budding businesses can fail even if their executives are business savvy and market high-quality products. It is essential that entrepreneurs recognize the importance of both internal and external business catalysts and develop a strategy accordingly.

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