Why Should Entrepreneurs Worry about Inflation?

If you've been following the global financial markets, you'll have caught one of the most interesting few weeks of the year. From China's stock dip, to constant news from the Federal Reserve on interest rates, the restructuring of Google into Alphabet, the markets have been up and down - and the trends have started to have some palpable impacts on entrepreneurs and business owners. In the worst case, clients have lost liquidity, making sales more challenging; in the best case, founders have been able to ride out the dip by staying scrappy and maintaining low market exposure. You can create a business that thrives in any economy. However, it will take focus and strategy if you want to hedge against loss in these challenging economic times.

But first, you should understand that what happens in the markets has direct impact on your business. 

Let's dig into one force affecting all businesses: interest rates. According to Reuters, John Williams of the Federal Reserve of San Francisco says the debate about raising interest rates is balanced on both sides. Williams explains that the Federal Reserve is facing pressure as concerns grow about the stability and health of the global economy. He feels that given the strength of our economy an interest rate hike is imminent. However, will the change truly be in the best interest of the global economy?

Interest Rates impact Wall Street - as well as Your Business

Investors reacted to the news from the Federal Reserve with caution and the markets immediately went into a dip. Many investors feel that a rate hike is inevitable and it will most likely come at the beginning of 2016. The Federal Reserve meets again in January and it is a 50% probability that interest rates will go up after that meeting. However, we still have no way of determining how the markets will react to that decision.

Also, we have to really consider if the market is as strong as we think. Just a few weeks ago we saw a 1,000 point drop. Global pressures and concerns continue to be at the forefront of investors’ minds.

Why is this important? Interest rates influence buying habits and decisions, as well as the availability and cost of loans and capital your business is able to receive.

Raising Interest Rates Creates Challenges for Business Owners

Thankfully the markets rallied, but is the worst really over or should we be bracing ourselves for more economic challenges? My own analysis: investor confidence is extremely low and with the global economy off balance due to China's stock tumult and Europe's debt woes, I do not see confidence surging any time soon. Reuters reports that at the moment the Dow is up 48%, S&P 500 is up 42% and NASDAQ is up 58%. Hopefully the markets continue to experience gains. One premature decision can collapse the global economy. 

Remain Informed and Hedge Against Loss

I believe that one of the most important things you can do as an entrepreneur in the new economy is find ways to hedge against loss. Find differentiate your product or service, making your offering defended against budget cuts. You'll want to get rid of all the money leaks in your business to ride out grave market dips. The more valuable your company becomes the less vulnerable you are to the economic environment around you. It is vital that you stay relevant, build strong relationships and strategically revolutionize your industry so your business can become indestructible.