Stock Market Volatility: Is Your New Business At Risk?

Almost anyone you ask can probably recall at least several major stock market downturns that affected businesses across the world to varying degrees. Some people are so concerned about the performance of the stock market they anxiously check the statistics as soon as they wake up, and if the news is bad, bite their nails all day, anxiously hoping for even small improvements.

And, that is sometimes simply true when people’s retirement years are heavily dependent on the stock market. Things could arguably be even worse if you’re involved in a new business and using some of your investments to finance your entrepreneurial efforts. There are several ways your business could be adversely affected by a volatile market, but the more aware you are, the easier it is to plan ahead before a stock market crash.

Consumers Spend Less During Unstable Market Conditions

As mentioned above, many people are tied up in stock market performance trends. In addition to hoping good stock market conditions will finance their retirement dreams, many people also have plans to use their stock market investments to pay for their children’s college education. With these commitments in mind, you need to be aware that customers may not be as eager to buy from your company if they’re worried about their financial futures.

However, depending on the products or services you offer, it may just be a case of reminding consumers why your company provides products or services they can’t live without. When changing spending habits, people usually cut out the things they perceive as luxury items first, and only do without the essentials if absolutely necessary. Therefore, consider changing the way you market your business and focusing on why the things you sell are so integral to your customer’s lives.

Banks Aren’t As Willing to Lend Money

When the stock market is down or unstable, banks usually aren’t as eager to lend money to startup businesses. That’s because lending criteria is often based on perceived risk. An entrepreneur who comes to a bank to request a loan for a startup company but doesn’t have a business plan will probably get turned away because the bank representatives feel it’s too risky to lend money to that individual.

However, lending willingness isn’t just based on the readiness and history of the person requesting a loan. Market conditions also weigh into a lender’s decision. A volatile market is usually riskier than one that’s stable, and banks are often more stingy with their available funds when the stock market is erratic.

Even though the market conditions are presently calm, there are several reasons to be concerned. For example, interest rates are already as low as they can go, and the upcoming presidential election in the United States is taking its toll on the stock market as the candidates shift into debate season.

Differentiating a Business in the Market is Especially Important

You’ve already learned how consumer spending tends to drop when the stock market constantly fluctuates. In addition, formerly loyal customers may be more likely to take their business elsewhere, especially if they can’t clearly define why your business deserves their patronage. It’s already been mentioned that customers need to feel they cannot do without your products or services. However, they also must believe a competitor could not easily match the other positive aspects of your company.

An example is Ken Fisher, who is the founder of Fisher Investments, an investment advisory firm that’s been around for several decades and is a leader in the investment advisor industry.. One of Ken Fisher’s business building essentials relates to differentiation.

He asserts it’s crucial to regularly remind clients what makes a company different from their other options. Otherwise, competitors who present special offers, discounts, or other perks for new customers could quickly lure customers and take away your business. If you work hard to excel in all aspects of your work and have the mindset there’s always room for improvement, it’s more likely customers will feel valued and stick with you regardless of how the stock market conditions change.

Although you should not live in fear of an erratic stock market, it’s smart to understand how a shifting market could impact your business. Keep the information above in mind and you’ll be just fine.