Inflation Nation – higher costs bring big opportunities for the brave

Times are tough for business owners as inflation threatens profits and customers tighten their belts. But this is when the foundations of future fortunes are built. Entrepreneurs assemble!

Why is inflation so high?

Inflation is a simple concept in a complex world where the laws of supply and demand rule.

Currently, there is lots of demand as the global economy recovers from the pandemic and businesses are back to thinking about growth. 

However, supply has been restricted because it has taken time to get the global engine of commerce started again. Logistical challenges need to be overcome from so much needing to be produced and moved so quickly. Even as goods arrive, cargo ships have ended up queuing outside the world’s ports waiting to unload.

This feeds through to shortages of goods and materials, which creates more competition, so prices rise. This inflation means the pound in your pocket doesn’t buy as much. People cut back spending to afford the necessities and you end up in recession – from boom to bust.

For the UK, there was additional Brexit-related border disruption, and then came the horrors of Ukraine and massive upheaval in energy supplies, which took a bad situation and made it hundreds of times worse.

So, there is more demand than supply, and more economic activity creates more competition for goods, leading to growing production shortages, logistics delays and price rises, topped off by an energy crisis. It makes lockdown seem like the good old days.

Why is inflation bad for the economy?

As inflation eats away at the purchasing power of money, it “destroys savings, impedes planning, and discourages investment; [it] means less productivity and a lower standard of living”, according to US politician Kevin Brady.

There is more to come, with UK inflation predictions for 2023 ranging between 5-9%, which is down from over 11% last year, but still higher than most advanced economies (see graphic).

Higher prices risk recession, as everyone cuts back to afford the essentials.

Workers are unhappy as inflation eats away at the value of their earnings, with higher food, fuel and housing costs leaving little left at the end of each month.

There are worldwide strikes, not just in the UK, where there is some of the biggest industrial action in a generation. There are walkouts from Belgium and France to the US and especially in countries with eye-watering inflation rates such as Argentina (76%), Venezuela (195%), and Zimbabwe (204%).

Entrepreneurs assemble

Many companies are cutting back in the face of falling profits from reducing demand or higher costs, with millions laid off worldwide, including major job losses in the UK.

But keeping a clear head is critical in business as there are always opportunities, even when times are tough. Financial guru Warren Buffett says it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful”.

Businesses founded in a recession and difficult economic times include Airbnb (2008), Netflix (1997), Microsoft (1975), Burger King (1963), Revlon (1932), GM (1908) and GE (1876).

With the right mindset, a challenging economy can be the time when icons are born.

There is a bigger pool of talent looking for work

Global layoffs have left some of the most talented workers in the world looking for new positions and partnerships. Now is the time to secure expertise that can drive future growth and innovation.

People are searching for new suppliers and ideas

As costs rise, it is forcing companies and executives to question the status quo and consider new options when it comes to suppliers. Consumers are also on the lookout for innovative ideas. Entrepreneurs thrive in this environment, investing wisely to secure future growth.

Competitors are inward-looking rather than innovative

It’s hard to take risks and have good ideas when your job is on the line. During tough economic times, many established businesses become insular as employees protect their jobs and boardrooms worry more about short-term profits than long-term strategy. Entrepreneurs spot opportunities that rivals fail to see.

This is a time to be brave in business and grab opportunities that change fortunes.

I mention the personal lesson I learned in this area in a recent blog on ‘Five life lessons to make a success in business’, when I bounced back from a company failure to build a successful global brand.

The biggest difference between those who are successful or unsuccessful, in any walk of life, is, very often, simply whether they take action.

When things are uncertain, the default response is often to do nothing, but that is just a way to guarantee that things won’t change.

Taking action may feel like taking a risk, but in a changing world, it’s just as dangerous to stand still. This is a landscape where entrepreneurs can thrive, sow the seeds of business success and potentially earn millions.

Inflation may be making the world more expensive, but the biggest cost you will face is missing an opportunity that could have reshaped your future – and maybe changed the world.

If you want to discuss your next business idea, how to fund it, or just how to get started, get in touch and work with me to help.