As a small business owner, you know that forecasting is an integral part of successful business planning. Past performance, customer trends and supplier relationships are inputs that you can access and help you manage resources. In addition to this information, here are three areas to track that will provide insight and planning perspective for you on a macro basis:
The Small Business Optimism Index
The National Federation of Independent Business (NFIB) regularly reports on the optimism levels of small business owners. Looking at this data, and data like it, can give business owners a good read on the emotional state of small business in specific areas. For example, the personal services sector recently showed the greatest optimism, where 100 percent of auto repair, salon, dry cleaning and related business owners said they feel good about the future of their business. On the flip-side, business owners recently showed significant concern with the employment pool, with 47% reporting few or no qualified applicants for positions they were trying to fill. Such industry specific information can help you gauge the confidence levels of those in your industry and see the level at which your challenges and concerns are shared.
Overall consumer spending is arguably one of the most important small business economic indicators for many reasons, one of those being the effect it has on other economic indicators. For example, if consumer spending is on the rise, the demand in certain areas of the economy, such as manufacturing, will often improve. Consumer spending is also tied to corporate profits, which in turn affect the stock market. You get the idea. Understanding consumer spending can have big implications on the accuracy of your small business forecasting. One easy way to keep up with consumer spending trends is to go to the Department of Commerce website and sign up to receive emails linking to the Bureau of Economic Analysis blogs.
Many experts recommend small business owners pay more attention to the year-over-year reports rather than those released monthly and quarterly. This is due largely to the fact that the more frequent reports for many small businesses can become a tedious way to keep up with the economy and can change quickly, making it difficult to know what information will directly impact your business and industry and when to react. A report or chart that reports years of trends can be a much quicker and more efficient way to keep your finger on the pulse of small business trends. Consider watching and comparing year-over-year unemployment trends, real Gross Domestic Product (GDP) growth, wage growth, and the shifts in small business optimism. You can find a lot of this information on the Bureau of Economic Analysis website.
With all of the data available to us today, it can be difficult to decipher what’s accurate, important and the effect it will have on your business. However, by paying attention to patterns and changes in the year-to-year data, knowing the level of optimism in your industry, and understanding consumer spending, you will be able to make more effective business decisions, with minimal encroachment on your already busy work schedule.
1 NFIB Small Business Economic Trends Report, February 2015.