New trends emerge frequently as the world of business evolves. Each new trend can have a significant impact on your business if you’re not prepared to manage the risks they pose.
Emergent trends often carry the risk of being too niche or failing to sustain their demand. As such, you need to have a plan in place that enables you to identify, assess, and respond to these trends in a way that won’t put your financial stability at risk. Read on to discover four ways how trends affect your business finances.
What is a Trend?
A trend is a pattern of change that occurs over some time, typically as a result of social, political, or economic conditions.
Trends are often cyclical, occurring in response to a new development that sparks a sudden change in demand for a product or service.
Trends have the potential to have a significant impact on your business if you’re not prepared for them. For instance, a sudden surge in the popularity of RTA cabinets will lead to an increase in demand for wood from wood suppliers, who are then likely to request a higher price for their produce due to its sudden scarcity.
The Ways Trends Affect Your Business Finances
A trend that becomes a sustainable fixture in the marketplace is likely to have a positive impact on your business finances. However, many emerging trends are so niche or new that they’re unlikely to last.
If a trend fails to gain traction in the market, it can hurt your business finances by creating a false demand for a product or service that no one wants.
On the other hand, if you’re able to identify a trend early on and respond to it in a meaningful way, you can position your business to benefit from the associated demand.
How to Prepare for Emerging Trends?
The best way for you to be prepared for the risk that an emerging trend will have a negative impact on your business finances is to be proactive. Make a list of emerging trends that you feel could have a significant impact on your business, and create a plan for each one that enables you to effectively manage the associated risk.
For example, if you feel that the increasing popularity of teeth whitening is likely to have a negative impact on your profits, you could create a plan to respond by lowering the price of your teeth-whitening product or including teeth-whitening strips in your hair dye boxes at no extra cost.