SMES HAVE TO UNDERSTAND ‘THE BIGGER PICTURE’
As a small to medium-sized business, keeping your eye on the shift in the macroeconomics of the country isn’t always where your attention goes.
The impact of the Covid-19 pandemic is forcing SMEs to start taking a keen interest and understanding of the “big things” happening in the economy and the impact these changes will have on their businesses, writes Kojo Baffoe.
By nature, entrepreneurship involves a drilling down to the micro when it comes to understanding the relevant sector or industry, competitors, geographical location, individual customers, etc.
You started your business when you saw a gap in your immediate market and built your business around that, with considerations of scale coming after you were more established. Or even, despite an opportunity to scale up the business and tackle a broader market, you decided to keep the business focused. This has possibly had to change as you navigate an economy that is beginning to open up. You have an idea of the real challenges that face your business specifically but trying to make sense of the broader issues that are facing the country, particularly from an economics perspective, are a little harder to get a handle on.
Understanding the economic landscape
At a time when we are truly facing a global and a national challenge, unfortunately it means that we cannot simply stay focused on the micro. The macroeconomic landscape is having a significant impact on our ability to start and maintain our businesses. Merriam-Webster defines macroeconomics as “a study of economics in terms of whole systems especially with reference to general levels of output and income and to the interrelations among sectors of the economy.” Everything from minimum wages, monetary policy, financial sector regulation, and inflation to unemployment, business cycles and economic growth all have a real impact on business, regardless of size, whether we realise or like it or not.
When you look at the ability of consumers to spend, and buy your products and services, the growth rate of the economy, levels of unemployment, inflation, etc, indirectly and directly, affect how much money they have in their pockets and how far that money can go. It is about demand. In addition, it is also about how to stretch your own capital in being able to survive the challenges that Covid-19 has brought and be sustainable.
Evolving in uncertain times
The lockdown resulted in most economic activity being put on extreme hold. There have been various funds made available to business, but it is important to have an understanding of how that fits into the overall macroeconomic policy of the country, in addition to what it means on a micro level. Or, when you look at the regulations in place and the country’s monetary policy and how this affects both the ease of setting up and doing business, and the availability of capital to enable you to continue to build your business. The reality is, while we are revisiting our businesses, while we are going back to basics and pivoting, we do need to take macroeconomics into consideration. It can be overwhelming, but it is important that we, at times, take a bird’s eye view of the economic landscape.
This, combined with the creativity and innovation required to operate within these evolving and uncertain times, puts you in a stronger position to continue to build the business that you envisioned.